SQM's 1H26 net income soars 353% on lithium recovery

What happened

SQM reported net income of $1,024.7 million for the six months ended June 30, 2026, a 353.5% increase from $225.9 million in the prior-year period, driven by a rebound in lithium prices and higher sales volumes. The result far exceeds the depressed base of 1H 2025, when lithium prices were near cycle lows and gross margin compressed to 26.8%. The earnings jump validates the bull case outlined in the master report, which anticipated a possible recovery to >$25k/t lithium and >35% gross margins. While the press release lacks segment details, the magnitude of the profit increase suggests SQM's low-cost Atacama brine operations delivered significant operating leverage. The market reaction is not specified, but the stock likely re-rated given the improved earnings power, though structural risks from heavy capex and Chilean regulatory exposure remain.

Implication

The jump in profitability demonstrates SQM's operational leverage when lithium prices recover, supporting the master report's bull case scenario. However, the master report's base case expected gradual recovery, and this result suggests a more rapid improvement, which could compress the stock's forward P/E if current margins persist. Even so, the company still faces heavy capital spending, rising net debt, and state-majority JV structure that caps long-term economics, plus unresolved water and community issues. Investors should track sustainability of lithium prices and volume growth before adding positions, and consider trimming if the stock has already run above $90.

Thesis delta

The prior thesis rated SQM a potential sell at $79.58 due to rich valuation at 43.9x trailing P/E. The new earnings data implies a much lower forward P/E if current profitability is sustained, materially reducing the valuation overhang. However, the core risks—execution on capacity expansion, Chilean political/ESG uncertainty, and high state take after 2030—remain unchanged. Consequently, the thesis shifts from 'potential sell' to 'hold/reassess', with the attractive entry level likely moving higher.