SQM's Lithium Pricing Power Gets Its First Real Test Since the Market Turned

Sociedad Quimica y Minera de Chile (SQM) reports first-quarter 2026 earnings on May 26, with analysts expecting a dramatic turnaround in profitability after four consecutive quarters of earnings misses. The central question is whether the lithium producer can capitalize on improving market conditions and tighter supply-demand dynamics that emerged in late 2025, or if pricing volatility and operational challenges will continue to weigh on results.

Part 1: Earnings Preview

SQM is a leading Chilean producer of specialty chemicals and minerals, with core operations in lithium extraction and processing, iodine production, and specialty plant nutrition products. The company plays a critical role in the global electric vehicle supply chain through its lithium operations in the Salar de Atacama and Australia.

SQM is scheduled to report first-quarter 2026 earnings after market close on May 26. Analysts expect earnings of $1.78 per share on the quarter ending March 31, 2026, representing a 270.83% increase compared to $0.48 reported in the same quarter last year. The most recent quarter (Q4 2025) delivered earnings of $0.64 per share, missing the $0.75 consensus estimate by 14.67%.

Three key themes define this earnings story:

Lithium Market Recovery: After reaching a trough in mid-2025, lithium prices began recovering in Q4 2025, with SQM's realized prices climbing to around $10/kg and management indicating Q1 2026 prices would be "substantially higher." The critical question is whether this pricing momentum sustained through the quarter and how much volume growth SQM captured at its Nova Andino Litio operations, which were running at full capacity. Management estimated 25% market growth for 2026, driven by electric vehicles and energy storage systems.

Operational Execution in Australia: SQM celebrated its first lithium hydroxide shipment from the Kwinana refinery in January 2026, marking a strategic milestone. However, the ramp-up has been affected by intermittent odor issues, creating uncertainty around production volumes. Investors will scrutinize whether SQM can deliver on its 2026 production guidance of 180,000-200,000 tons of lithium carbonate equivalent, particularly given the technical challenges at Kwinana.

Iodine Strength Offsetting Lithium Volatility: Iodine contributed approximately 42% of SQM's total gross profit in 2025, with record prices observed by year-end amid tight supply and strong demand from X-ray contrast media markets. With management projecting 3% iodine market growth in 2026 and the completion of a seawater pipeline project in the Tarapacá region expected to unlock incremental capacity, this segment could provide crucial earnings stability.

Analysts have dramatically raised their estimates for 2026, with the full-year consensus climbing to $6.62 per share from a prior $2.06, reflecting optimism about the lithium market recovery. However, SQM's track record of missing estimates in all four quarters of 2025 — by an average of 21.92% — has left some investors cautious about whether the company can finally deliver on elevated expectations.

Part 2: Historical Earnings Performance

SQM's recent earnings history reveals a consistent pattern of underperformance against analyst expectations. Over the past four quarters, the company missed estimates in every single report, with shortfalls ranging from 8.82% to 40.38%. The most severe miss came in Q2 2025, when SQM reported $0.31 per share against a $0.52 estimate — a 40.38% disappointment. The most recent quarter (Q4 2025) showed some improvement in the magnitude of the miss, coming in at $0.64 versus $0.75 expected, a 14.67% shortfall.

The year-over-year earnings trajectory tells a story of significant pressure followed by potential recovery. Comparing sequential quarters year-over-year: Q1 2025 earnings of $0.48 represented a substantial decline from prior periods, Q2's $0.31 marked the weakest performance in the series, Q3 improved to $0.62, and Q4 reached $0.64. This sequential improvement through the second half of 2025 suggests the business may have found a bottom, though the company still failed to meet analyst expectations in each instance.

The pattern of consistent misses, even as earnings showed sequential improvement, indicates analysts have struggled to calibrate their models to the volatile lithium market conditions. With estimates now calling for $1.78 in Q1 2026 — nearly four times the $0.48 reported in Q1 2025 — the bar has been set dramatically higher, raising the stakes for whether SQM can finally reverse its streak of disappointments.

Note: These figures reflect diluted GAAP earnings per share, reported before non-recurring items, and may differ from the non-GAAP figures used by some sources.

Part 2.1: Price Behavior Around Earnings

SQM typically reports earnings after market close, meaning Day 0 reflects anticipatory trading before results are released, while Day +1 captures the market's first full reaction to the actual numbers.

Historical price behavior around SQM's earnings releases shows moderate volatility with an average absolute Day 0 move of 1.88% and Day +1 move of 2.71%. The Day +1 reaction tends to be larger and more significant, which is consistent with after-hours reporting where the market has overnight to digest results before trading resumes.

The directional pattern has been mixed but slightly negative on Day 0, with the most recent report (February 2026) showing a 2.14% decline on Day 0 followed by a more modest 0.88% decline on Day +1. However, the November 2025 report demonstrated the potential for sharp reversals, with a minimal 0.12% Day 0 decline followed by a strong 6.23% rally on Day +1. The largest single-day reaction in the recent series was the 4.22% decline on Day 0 of the May 2025 report.

Intraday ranges have been substantial, averaging 3.87% on Day 0 and 4.23% on Day +1, indicating significant intraday volatility regardless of the closing direction. Investors should prepare for potential swings of 4-7% in either direction based on how results compare to the elevated expectations, with the Day +1 session likely providing the more definitive directional move.

Part 2.2: Options Market Expected Move

The options market is pricing an expected move of 11.28% (±$9.04) for the June 18 expiration, significantly higher than the average historical Day +1 move of 2.71%. This elevated implied volatility suggests options traders are anticipating a much larger reaction than typical, possibly reflecting the dramatic year-over-year earnings growth estimate of 270.83% and uncertainty about whether SQM can finally break its four-quarter streak of misses.

Part 3: What Analysts Are Saying

Analyst sentiment on SQM is mixed, with a consensus rating of 3.69 (between Hold and Buy) and an average price target of $80.77, essentially in line with the current price of $80.18. The analyst community is divided, with 5 Strong Buy ratings and 7 Hold ratings, while 1 analyst maintains a Moderate Sell rating. The wide range of price targets — from a low of $53.00 to a high of $106.00 — reflects significant disagreement about SQM's valuation and prospects.

The sentiment trend is classified as unchanged over the past month, with the rating breakdown holding steady at 5 Strong Buys, 0 Moderate Buys, 7 Holds, 1 Moderate Sell, and 0 Strong Sells. This stability suggests analysts are waiting for the Q1 2026 results to provide clarity before adjusting their views, particularly given the company's recent history of disappointing estimates.

The consensus price target of $80.77 implies essentially flat performance from current levels, offering minimal upside of just 0.74%. However, the high-end target of $106.00 suggests potential upside of 32.2% for bulls who believe the lithium market recovery will drive sustained earnings growth, while the low-end target of $53.00 implies downside risk of 33.9% if operational challenges persist or lithium prices weaken. The lack of meaningful implied upside in the consensus target reflects analyst caution despite the dramatic improvement in earnings estimates for 2026.

Part 4: Technical Picture

The Barchart Technical Opinion currently shows a 56% Buy signal, representing a significant deterioration from 80% Buy one week ago and 100% Buy one month ago. This weakening momentum heading into earnings suggests technical traders have grown more cautious as the report approaches.

Timeframe Analysis:

• Short-term (50% Buy): Moderate buy signal indicates near-term momentum has weakened considerably from recent strength
• Medium-term (50% Buy): Neutral-to-positive reading suggests the intermediate trend remains constructive but lacks conviction
• Long-term (100% Buy): Strong buy signal reflects solid support in the longer-term trend structure

Trend Characteristics: The technical environment shows Average strength with the Weakest directional momentum, indicating the stock is losing near-term momentum even as the longer-term uptrend remains intact — a cautionary setup heading into a high-stakes earnings release.

SQM is trading at $80.18, positioned below its 5-day ($80.79), 10-day ($85.47), 20-day ($88.50), and 50-day ($84.56) moving averages, but above its 100-day ($80.08) and 200-day ($65.38) moving averages. This configuration shows the stock has pulled back from recent highs near $88-89 in April, now testing support at the 100-day moving average. The deteriorating short-term technical picture, combined with the stock trading below all key short-term moving averages, creates a cautious setup heading into earnings. A strong beat could propel SQM back above the $85-88 resistance zone, while a miss risks breaking below the critical 100-day support level with potential downside toward the $71-75 range implied by the options market.