Q2 2025 Financial Performance - Total revenue for Q2 2025 was $591 million, a decrease of 37% year-over-year[59] - ATS development revenue in Q2 2025 was $526 million, a 15% decrease year-over-year[59] - Wafer Services revenue in Q2 2025 was $54 million, a 6% decrease year-over-year[59] - Tools revenue in Q2 2025 was $11 million, a 96% decrease year-over-year[59] - GAAP gross margin for Q2 2025 was 185%, a 20 basis points increase year-over-year[62] - Non-GAAP gross margin for Q2 2025 was 195%, a 60 basis points increase year-over-year[62] - Adjusted EBITDA for Q2 2025 was $23 million, a 72% decrease year-over-year[63] Fab 25 Acquisition and Outlook - The acquisition of Infineon's Fab 25 in Austin, TX was completed on June 30, funded by a $350 million credit facility[11] - The final purchase price of Fab 25 was approximately $93 million, including cash payment and working capital adjustment[11] - Fab 25 is expected to approximately double the company's annual revenue and adjusted EBITDA[11] - Q3 2025 Wafer Services revenue from Texas (Fab 25) is forecasted to be $75 million to $80 million[56]

[Executive Summary & Business Highlights](index=1&type=section&id=1.%20Executive%20Summary%20%26%20Business%20Highlights) The company highlights the transformative Fab 25 acquisition and strong momentum in emerging technologies despite potential DOD funding delays [CEO Commentary](index=1&type=section&id=1.1%20CEO%20Commentary) The CEO highlights strong Q2 results, the transformative Fab 25 acquisition, and future growth drivers despite potential DOD program delays - The Fab 25 acquisition is expected to contribute at least **$300 million in annual revenue** and generate strong adjusted EBITDA and free cash flow starting in Q3[2](index=2&type=chunk) - The timing of federal funding for certain DOD programs is likely to impact the expected return to ATS revenue growth in 2025[3](index=3&type=chunk) - Strong momentum in quantum computing and advanced packaging, combined with Fab 25's contribution, positions SkyWater for **strong growth in 2026**[3](index=3&type=chunk) [Recent Business Highlights](index=1&type=section&id=1.2%20Recent%20Business%20Highlights) Key developments include the fully funded Fab 25 acquisition, which is expected to double revenue, and progress in quantum computing and advanced packaging - The Fab 25 acquisition was completed on June 30, funded by a new senior secured revolving credit facility with up to **$350 million** in borrowing capacity[4](index=4&type=chunk) - The acquisition is backed by a projected greater-than **$1 billion multi-year supply agreement** and is expected to approximately double annual revenue and adjusted EBITDA[4](index=4&type=chunk) - The company is expanding its quantum computing capabilities and preparing for an expected **revenue ramp in advanced packaging in the second half of 2025**[4](index=4&type=chunk) [Financial Performance & Outlook](index=2&type=section&id=2.%20Financial%20Performance%20%26%20Outlook) The company reports a significant year-over-year revenue decline in Q2 2025 but projects a strong revenue rebound in Q3 driven by the Fab 25 acquisition [Q2 2025 Financial Summary](index=2&type=section&id=2.1%20Q2%202025%20Financial%20Summary) Q2 2025 saw a significant year-over-year decline in revenue and net income, primarily driven by a sharp decrease in Tools revenue Q2 2025 GAAP Financial Summary | In millions, except per share data | Q2 2025 | Q2 2024 | Y/Y * | Q1 2025 | Q/Q * | | :--- | :--- | :--- | :--- | :--- | :--- | | ATS development revenue | $52.6 | $61.7 | (15)% | $52.5 | —% | | Wafer Services revenue | $5.4 | $5.8 | (7)% | $7.5 | (28)% | | Combined ATS development and Wafer Services revenue | $58.0 | $67.4 | (14)% | $60.1 | (3)% | | Tools revenue | $1.1 | $25.9 | (96)% | $1.2 | (8)% | | Total revenue | $59.1 | $93.3 | (37)% | $61.3 | (4)% | | Gross profit | $10.9 | $17.1 | (36)% | $14.3 | (24)% | | Gross margin | 18.5% | 18.3% | 20 bps | 23.3% | (480) bps | | Net loss to shareholders | $(10.0) | $(1.9) | (426)% | $(7.3) | (37)% | | Basic and diluted loss per share | $(0.21) | $(0.04) | (425)% | $(0.15) | (40)% | | Net income (loss) margin to shareholders | (16.9)% | (2.0)% | (1,490) bps | (12.0)% | (490) bps | Q2 2025 Non-GAAP Financial Summary | In millions, except per share data | Q2 2025 | Q2 2024 | Y/Y * | Q1 2025 | Q/Q * | | :--- | :--- | :--- | :--- | :--- | :--- | | Non-GAAP gross profit | $11.5 | $17.6 | (35)% | $14.8 | (22)% | | Non-GAAP gross margin | 19.5% | 18.9% | 60 bps | 24.2% | (470) bps | | Non-GAAP net income (loss) to shareholders | $(5.5) | $0.8 | (675)% | $(3.7) | 49% | | Non-GAAP basic income (loss) per share | $(0.11) | $0.02 | (600)% | $(0.08) | 38% | | Non-GAAP diluted income (loss) per share | $(0.11) | $0.02 | (600)% | $(0.08) | 38% | | Adjusted EBITDA | $2.3 | $8.1 | (72)% | $4.0 | (43)% | | Adjusted EBITDA margin | 3.9% | 8.7% | (480) bps | 6.6% | (270) bps | [Q2 2025 Results Analysis](index=2&type=section&id=2.2%20Q2%202025%20Results%20Analysis) Q2 revenue fell 37% year-over-year to $59.1 million due to a drop in Tools revenue, leading to a wider net loss and lower Adjusted EBITDA - Total revenue was **$59.1 million**, a decrease of **(37)%** year-over-year, primarily due to a **(96)%** decline in Tools revenue[7](index=7&type=chunk) - GAAP gross profit decreased **(36)%** to **$10.9 million**, representing a gross margin of **18.5%**[7](index=7&type=chunk) - GAAP net loss to shareholders widened to **$10.0 million**, and Adjusted EBITDA decreased **(72)%** to **$2.3 million**[7](index=7&type=chunk)[8](index=8&type=chunk) [Q3 2025 Financial Outlook](index=3&type=section&id=2.3%20Q3%202025%20Financial%20Outlook) The company projects a significant Q3 revenue increase to $130-$141 million, driven by the Fab 25 acquisition's contribution to Wafer Services Q3 2025 Financial Outlook (in thousands) | Metric | Low-End | High-End | | :--- | :--- | :--- | | Wafer Services revenue (MN) | $5,000 | $6,000 | | Wafer Services revenue (TX) | $75,000 | $80,000 | | Total Wafer Services revenue | $80,000 | $86,000 | | ATS development revenue | $48,000 | $52,000 | | Combined ATS development and Wafer Services revenue | $128,000 | $138,000 | | Tools revenue | $2,000 | $3,000 | | Total revenue | $130,000 | $141,000 | | GAAP Gross Margin % | 10.5% | 13.5% | | Non-GAAP Gross Margin % | 11.0% | 14.0% | | GAAP Operating Expenses | $21,500 | $23,500 | | Non-GAAP Operating Expenses | $18,000 | $20,000 | | GAAP diluted loss per share | $(0.28) | $(0.22) | | Non-GAAP diluted loss per share | $(0.20) | $(0.14) | - The non-GAAP outlook excludes approximately **$2.3 million** in equity-based compensation and **$2.0 million** in transaction costs[8](index=8&type=chunk) [Company Information & Disclosures](index=3&type=section&id=3.%20Company%20Information%20%26%20Disclosures) This section provides an overview of the company's business, cautionary statements regarding forward-looking information, and contact details [About SkyWater Technology](index=3&type=section&id=3.1%20About%20SkyWater%20Technology) SkyWater is a U.S.-based, trusted semiconductor supplier operating a Technology as a Service model for critical domestic markets - The company is a U.S.-based semiconductor manufacturer and **DMEA-accredited Category 1A Trusted Supplier**[10](index=10&type=chunk) - It operates on a **Technology as a Service (TaaS)** model, offering development, high-volume production, and integration solutions[10](index=10&type=chunk) - Key markets served include aerospace & defense, automotive, biomedical, industrial, and quantum computing[10](index=10&type=chunk) [Cautionary & Forward-Looking Statements](index=3&type=section&id=3.2%20Cautionary%20%26%20Forward-Looking%20Statements) The report contains preliminary, unaudited results and forward-looking statements subject to risks and uncertainties detailed in SEC filings - The Company's Q2 2025 results are **preliminary, unaudited**, and subject to finalization[11](index=11&type=chunk) - This press release contains **forward-looking statements** about future business and financial performance, which are not guarantees[12](index=12&type=chunk) - These statements are subject to various **risks and uncertainties**, including Fab 25 integration, supply chain, and market demand, as discussed in SEC filings[13](index=13&type=chunk) [Investor & Media Contacts](index=4&type=section&id=3.3%20Investor%20%26%20Media%20Contacts) Contact information for investor relations and media inquiries for SkyWater Technology is provided - Investor Contact: Claire McAdams | Claire@HeadgatePartners.com[14](index=14&type=chunk) - Media Contact: Tammy Swanson | Tammy.Swanson@SkyWaterTechnology.com[14](index=14&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=4.%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated balance sheets, statements of operations, and statements of cash flows [Condensed Consolidated Balance Sheets](index=5&type=section&id=4.1%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 29, 2025, shows increased total assets and liabilities compared to the end of fiscal year 2024 Condensed Consolidated Balance Sheets (Unaudited, in thousands) | | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $49,373 | $18,844 | | Accounts receivable (net) | $32,016 | $54,332 | | Total current assets | $155,938 | $132,077 | | Property and equipment, net | $161,582 | $165,431 | | Total assets | $334,693 | $313,775 | | **Liabilities and shareholders' equity** | | | | Current portion of long-term debt | $6,752 | $5,073 | | Accounts payable | $15,353 | $29,590 | | Total current liabilities | $147,596 | $154,327 | | Long-term debt, less current portion | $35,316 | $34,704 | | Total liabilities | $282,727 | $250,285 | | Total shareholders' equity | $51,966 | $63,490 | | Total liabilities and shareholders' equity | $334,693 | $313,775 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=4.2%20Condensed%20Consolidated%20Statements%20of%20Operations) The statement of operations for Q2 2025 reflects lower revenue and gross profit, resulting in a significantly wider net loss year-over-year Condensed Consolidated Statements of Operations (Unaudited, in thousands) | | Three-Month Period Ended June 29, 2025 | Three-Month Period Ended June 30, 2024 | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $59,063 | $93,329 | $120,359 | $172,965 | | Cost of revenue | $48,164 | $76,215 | $95,203 | $142,871 | | Gross profit | $10,899 | $17,114 | $25,156 | $30,094 | | Operating income (loss) | $(6,478) | $1,400 | $(10,499) | $(802) | | Net income (loss) | $(8,857) | $(955) | $(15,075) | $(5,587) | | Net loss attributable to SkyWater Technology, Inc. | $(9,978) | $(1,897) | $(17,323) | $(7,626) | | Net loss per share, basic and diluted | $(0.21) | $(0.04) | $(0.36) | $(0.16) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=4.3%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash from operating activities increased significantly, boosting the company's cash position Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | | Six-Month Period Ended June 29, 2025 | Six-Month Period Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $54,300 | $5,423 | | Net cash used in investing activities | $(18,773) | $(3,218) | | Net cash used in financing activities | $(4,998) | $(2,225) | | Net change in cash and cash equivalents | $30,529 | $(20) | | Cash and cash equivalents, end of period | $49,373 | $18,362 | [Supplemental Financial Information](index=8&type=section&id=5.%20Supplemental%20Financial%20Information) This section provides preliminary balance sheet adjustments for the Fab 25 acquisition and a quarterly breakdown of revenue trends [Preliminary Supplemental Balance Sheet Information](index=8&type=section&id=5.1%20Preliminary%20Supplemental%20Balance%20Sheet%20Information) Preliminary adjustments for the Fab 25 acquisition show significant increases in property, equipment, and total debt Preliminary Supplemental Balance Sheet Information (Fab 25 Transaction Adjustments, in thousands) | | June 29, 2025 | Preliminary Transaction Adjustments | June 30, 2025 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $49,373 | $7,000 | $56,373 | | Property and equipment, net | $161,582 | $364,000 | $525,582 | | Short term financing, net of unamortized debt issuance costs | $23,614 | $113,400 | $137,014 | | Total debt | $65,730 | $113,400 | $179,130 | - Note: The preliminary transaction adjustment for property and equipment is based on an initial draft valuation and is subject to change[21](index=21&type=chunk) [Supplemental Financial Information by Quarter](index=8&type=section&id=5.2%20Supplemental%20Financial%20Information%20by%20Quarter) Quarterly data reveals a significant decline in Tools revenue over the past year, impacting overall financial performance Total Revenue by Quarter (in thousands) | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | ATS development revenue | $52,605 | $52,535 | $59,401 | $56,390 | $61,669 | $61,185 | | Wafer Services revenue | $5,411 | $7,527 | $4,371 | $6,718 | $5,780 | $9,992 | | Combined ATS development and Wafer Services revenue | $58,016 | $60,062 | $63,772 | $63,108 | $67,449 | $71,177 | | Tools revenue | $1,047 | $1,234 | $11,715 | $30,709 | $25,880 | $8,459 | | Total revenue | $59,063 | $61,296 | $75,487 | $93,817 | $93,329 | $79,636 | - **Tools revenue significantly decreased** from $30.7 million in Q3 2024 to $1.0 million in Q2 2025[25](index=25&type=chunk) - In Q3 2024, a **$5.6 million loss accrual was released**, which reduced cost of revenue and favorably impacted gross profit[24](index=24&type=chunk)[25](index=25&type=chunk) [Non-GAAP Financial Measures & Reconciliation](index=9&type=section&id=6.%20Non-GAAP%20Financial%20Measures%20%26%20Reconciliation) This section explains the company's use of non-GAAP measures and provides detailed reconciliations to their nearest GAAP equivalents [Non-GAAP Financial Measures Explanation](index=9&type=section&id=6.1%20Non-GAAP%20Financial%20Measures%20Explanation) The company uses non-GAAP measures to provide additional insight into core operating results, though they are not substitutes for GAAP - Non-GAAP measures are intended to **provide additional insight** to investors and are used by management for strategic planning and performance evaluation[26](index=26&type=chunk)[27](index=27&type=chunk) - These measures **should not be viewed as an alternative to GAAP results** and may not be comparable to those of other companies[26](index=26&type=chunk)[27](index=27&type=chunk) - **Adjusted EBITDA** is defined as net income (loss) before interest, taxes, depreciation, amortization, and other specified adjustments[27](index=27&type=chunk) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=10&type=section&id=6.2%20Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) Reconciliation tables detail adjustments for items like equity-based compensation and transaction costs from GAAP to non-GAAP figures GAAP to Non-GAAP Reconciliation (Three-Month Periods, in thousands) | | June 29, 2025 (GAAP) | June 29, 2025 (Non-GAAP) | March 30, 2025 (GAAP) | March 30, 2025 (Non-GAAP) | June 30, 2024 (GAAP) | June 30, 2024 (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cost of revenue | $48,164 | $47,538 | $47,039 | $46,472 | $76,215 | $75,711 | | Gross profit | $10,899 | $11,525 | $14,257 | $14,824 | $17,114 | $17,618 | | Gross margin | 18.5% | 19.5% | 23.3% | 24.2% | 18.3% | 18.9% | | Research and development expense | $3,368 | $3,255 | $3,249 | $3,166 | $3,382 | $3,292 | | Selling, general, and administrative expense | $14,009 | $10,295 | $15,030 | $11,991 | $12,332 | $10,246 | | Net loss to shareholders | $(9,978) | $(5,525) | $(7,345) | $(3,656) | $(1,897) | $783 | - Key adjustments for Q2 2025 net loss include **$2,282 thousand in equity-based compensation** and **$2,171 thousand in transaction costs**[31](index=31&type=chunk)[32](index=32&type=chunk) Net Loss Per Common Share Reconciliation (Three-Month Periods, in thousands, except per share data) | | June 29, 2025 (GAAP) | June 29, 2025 (Non-GAAP) | March 30, 2025 (GAAP) | March 30, 2025 (Non-GAAP) | June 30, 2024 (GAAP) | June 30, 2024 (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net loss attributable to SkyWater Technology, Inc. | $(9,978) | $(5,525) | $(7,345) | $(3,656) | $(1,897) | $783 | | Weighted-average common shares outstanding | 48,091 | 48,091 | 47,791 | 47,791 | 47,395 | 47,395 | | Net loss per common share, basic and diluted | $(0.21) | $(0.11) | $(0.15) | $(0.08) | $(0.04) | $0.02 | [Adjusted EBITDA Reconciliation](index=13&type=section&id=6.3%20Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA for Q2 2025 was $2.3 million, a significant decrease from Q2 2024, with reconciliations provided from GAAP net loss Adjusted EBITDA Reconciliation (Three-Month Periods, in thousands) | | June 29, 2025 | March 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Net loss to shareholders (GAAP) | $(9,978) | $(7,345) | $(1,897) | | Interest expense | $1,637 | $1,812 | $2,482 | | Income tax expense (benefit) | $742 | $384 | $(127) | | Depreciation and amortization, net | $4,301 | $4,358 | $4,064 | | EBITDA | $(3,298) | $(791) | $4,522 | | Equity-based compensation expense | $2,282 | $1,879 | $2,016 | | Management transition expense | — | — | $664 | | Transaction costs | $2,171 | $1,810 | — | | Net income attributable to noncontrolling interests | $1,121 | $1,127 | $942 | | Adjusted EBITDA | $2,276 | $4,025 | $8,144 | | Adjusted EBITDA margin | 3.9% | 6.6% | 8.7% | - Transaction costs of **$2,171 thousand in Q2 2025** are associated with the acquisition of Fab 25[35](index=35&type=chunk)[36](index=36&type=chunk) - Net income attributable to noncontrolling interests is added back to align with the add-back of interest expense in the Adjusted EBITDA calculation[35](index=35&type=chunk)[37](index=37&type=chunk)

Core Viewpoint - SkyWater Technology (SKYT) is expected to report second-quarter 2025 results on August 6, with anticipated revenues between $55 million and $60 million and a loss per share between 16 and 22 cents [1][8]. Revenue Expectations - The Zacks Consensus Estimate for second-quarter revenues is $57.3 million, reflecting a 38.6% decrease from the previous year [2]. - Advanced Technology Services (ATS) revenues are projected to be in the range of $49 million to $53 million, while Wafer Services revenues are expected to be between $5 million and $6 million [1][4]. Earnings Performance - The consensus estimate for loss is 17 cents per share, unchanged over the past 30 days, compared to earnings of 2 cents in the same quarter last year [2]. - SkyWater has consistently beaten earnings estimates in the past four quarters, with an average earnings surprise of 203.9% [2]. Market and Competitive Position - SkyWater shares have declined 36.4% year-to-date, underperforming the broader Zacks Computer and Technology sector, which has returned 9.1% [6]. - The company is trading below its 50-day and 200-day moving averages, indicating a bearish trend [10]. Product and Market Developments - The strong adoption of the ThermaView platform is expected to support Wafer Services, contributing significantly to revenues [4][8]. - The ATS segment is anticipated to face challenges due to budget delays and sluggish federal spending, but a recovery is expected in the second half of 2025 [5][18]. Strategic Acquisitions - The acquisition of Fab 25 is expected to enhance SkyWater's capabilities, adding approximately 400,000 wafer starts annually and generating immediate revenues supported by a four-year supply agreement valued at over $1 billion [19][18]. Future Growth Potential - SkyWater's prospects are bolstered by its strong portfolio and growing presence in the quantum computing market, with over 90% of revenues from advanced computing related to quantum technology development [17]. - The company aims to capture a significant share of the projected $9 billion global thermal imaging market by 2027, driven by the ThermaView platform [16].

Company Performance - SkyWater Technology, Inc. (SKYT) closed at $10.26, reflecting a -4.02% change from the previous day, underperforming the S&P 500's 0.06% gain [1] - The stock has increased by 17.86% over the past month, outperforming the Computer and Technology sector's gain of 9.6% and the S&P 500's gain of 5.88% [1] Upcoming Earnings - The upcoming earnings report for SkyWater Technology is scheduled for August 6, 2025, with an expected EPS of -$0.17, indicating a 950% decline compared to the same quarter last year [2] - Revenue is anticipated to be $57.3 million, down 38.6% from the prior-year quarter [2] Fiscal Year Projections - For the entire fiscal year, the Zacks Consensus Estimates project an EPS of -$0.01 and revenue of $307.15 million, representing changes of -116.67% and -10.26% respectively from the prior year [3] Analyst Estimates - Recent adjustments to analyst estimates for SkyWater Technology are noteworthy, as positive revisions are seen as a favorable indicator for business outlook [4] - The Zacks Rank system, which evaluates these estimate changes, currently ranks SkyWater Technology at 3 (Hold) [6] Industry Context - The Electronics - Semiconductors industry, part of the Computer and Technology sector, holds a Zacks Industry Rank of 58, placing it in the top 24% of over 250 industries [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Core Insights - SkyWater Technology (SKYT) and Semtech Corporation (SMTC) are positioned to benefit from the growing semiconductor market, particularly as the U.S. increases domestic chip production [1][2] - Semiconductor sales are projected to grow 11.2% year over year, reaching $700.9 billion in 2025 and $760.7 billion in 2026, driven by demand for AI hardware, electric vehicles, and industrial automation [2] SkyWater Technology (SKYT) - SkyWater is enhancing its market position through product innovation and expanded manufacturing capabilities, with a focus on its ThermaView platform for thermal imaging [4] - The company reported Q1 2025 revenues of $61.3 million and a gross margin of 24.2%, with advanced computing now accounting for 10% of total revenues [5] - The acquisition of Infineon's Fab 25 is expected to significantly increase SkyWater's capacity, adding approximately 400,000 wafer starts per year and making it the largest U.S.-based pure-play foundry service provider [6] Semtech Corporation (SMTC) - Semtech is experiencing growth in next-gen data center infrastructure, reporting record data center revenue of $51.6 million in Q1 fiscal 2026, a 143% increase year over year [7] - The CopperEdge product line offers over 90% power savings and is designed for high-density AI/ML data centers, with new ICs launched to support advanced connectivity [8] - Semtech's collaboration with major cloud platforms positions its technologies at the core of next-generation compute infrastructure, enhancing its growth potential in AI-centric markets [9][10] Market Performance and Valuation - Both SKYT and SMTC shares have declined year-to-date, with drops of 25.8% and 21.3% respectively, attributed to a challenging macroeconomic environment [11] - SMTC shares are currently overvalued with a Value Score of D, while SKYT holds a Value Score of B; SMTC's Price/Sales ratio is 3.87X compared to SKYT's 1.43X [13] - Earnings estimates indicate a projected loss of one cent per share for SKYT in 2025, while SMTC's earnings for fiscal 2026 are estimated at $1.66 per share, reflecting an 88.64% year-over-year increase [16] Conclusion - Both companies are well-positioned to capitalize on long-term growth trends in the semiconductor market, with SkyWater benefiting from its unique foundry status and Semtech showing stronger near-term visibility due to record data center performance [17][18]

Company Performance - SkyWater Technology, Inc. (SKYT) closed at $9.94, reflecting a -3.07% change from the previous day's closing price, underperforming the S&P 500 which lost 0.33% [1] - Over the past month, shares of SkyWater Technology gained 16.21%, outperforming the Computer and Technology sector's gain of 5.24% and the S&P 500's gain of 4.07% [1] Earnings Expectations - The upcoming earnings release is expected to show an EPS of -$0.17, indicating a 950% decline compared to the same quarter last year [2] - Revenue is projected at $57.3 million, reflecting a 38.6% decrease from the equivalent quarter last year [2] Fiscal Year Projections - For the entire fiscal year, the Zacks Consensus Estimates project earnings of -$0.01 per share and revenue of $307.15 million, representing changes of -116.67% and -10.26% respectively from the prior year [3] Analyst Estimates - Recent changes to analyst estimates for SkyWater Technology should be noted, as they reflect shifting dynamics in short-term business patterns [4] - Upbeat changes in estimates indicate analysts' favorable outlook on the business health and profitability [4] Zacks Rank System - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), has a track record of success, with 1 stocks delivering an average annual return of +25% since 1988 [6] - SkyWater Technology currently holds a Zacks Rank of 3 (Hold), with the Consensus EPS estimate remaining stagnant over the past month [6] Industry Overview - The Electronics - Semiconductors industry, part of the Computer and Technology sector, has a current Zacks Industry Rank of 87, placing it in the top 36% of all industries [7] - The Zacks Industry Rank assesses the vigor of specific industry groups, with top-rated industries outperforming the bottom half by a factor of 2 to 1 [7]

Core Insights - SkyWater Technology (SKYT) achieved a significant turnaround in profitability in Q1 2025, with non-GAAP gross profit increasing to $14.8 million from $13.4 million, resulting in a gross margin of 24.2%, a 730-basis-point improvement year over year [2][10] - The launch of ThermaView in January 2025 has driven a 70% sequential increase in Wafer Services revenues, reaching $7.5 million, indicating a shift in SkyWater's product mix towards new offerings [3][10] - Management anticipates continued growth in Wafer Services throughout 2025, supported by customer ramps and a growing innovation pipeline, alongside the recent acquisition of Fab 25 to expand manufacturing capacity [4][10] Financial Performance - SkyWater expects both GAAP and non-GAAP gross margins to remain in the 23%-27% range for the full year 2025, with potential for further upside due to improved cost control and a more disciplined tools mix [5][10] - The Zacks Consensus Estimate for 2025 revenues is projected at $307.15 million, reflecting a 10.26% decline from 2024, while the estimated loss is pegged at 1 cent per share, indicating a sharp decline of 116.67% year-over-year [12] Competitive Landscape - GlobalFoundries (GFS) reported $1.6 billion in Q1 2025, significantly outpacing SkyWater, with strengths in strategic partnerships and AI-related semiconductor manufacturing [6] - ON Semiconductor (ON) focuses on intelligent power and sensing solutions, leveraging a vertically integrated model that provides cost advantages, particularly in the growing EV market [7] Share Price and Valuation - SkyWater shares have declined 23.3% year to date, contrasting with a 7% return in the broader Zacks Computer and Technology sector and a 13.4% rise in the Electronics – Semiconductors industry [8] - Currently, SkyWater is trading at a forward 12-month Price/Sales ratio of 1.48X compared to the industry's 8.6X, with a Value Score of B [11]

Core Insights - SkyWater Technology (SKYT) shares are currently undervalued with a Value Score of B and a forward 12-month price/sales (P/S) ratio of 1.4X, significantly lower than the industry average of 8.5X [1][7] - The company has seen a strong performance in its newly launched ThermaView platform, which contributed to a 70% quarter-over-quarter increase in Wafer Services revenues, reaching $7.5 million in Q1 2025 [9][11] - The acquisition of Fab 25 enhances SkyWater's foundry capabilities, adding 400,000 wafer starts annually and generating over $1 billion in contracts, which is expected to boost revenues and cash flow immediately [13][14] Financial Performance - SkyWater's stock has outperformed the broader Zacks Computer and Technology sector, with an 11.9% increase over the past month compared to the sector's 6% and the industry's 7.1% growth [9] - For 2025, SkyWater expects a revenue growth range of 5% for combined Advanced Technology Services (ATS) and Wafer Services, with a consensus estimate of $307.15 million, indicating a 10.26% decline from 2024 [18] - The company anticipates second-quarter 2025 revenues between $55-$60 million, with ATS revenues projected at $49-$53 million, reflecting a 38.6% decline from the previous year [19] Market Position and Growth Drivers - The ThermaView platform is positioned in the growing advanced thermal imaging market, projected to reach $9 billion by 2027, indicating long-term growth potential across various sectors [11] - SkyWater's focus on quantum computing is significant, with over 90% of its advanced computing revenues in 2024 related to quantum technology development [15] - The company maintains a Zacks Rank 1 (Strong Buy) and a Growth Score of A, indicating a strong investment opportunity [22]

Financial Performance & Outlook - SkyWater reported Q1 2025 revenue of $613 million, exceeding the midpoint of their guidance[131] - The company anticipates approximately 5% revenue growth for the combined ATS and Wafer Services business in fiscal year 2025, with a potential variance of ± 2%[40] - SkyWater expects Tools revenue to be around $30 million, primarily concentrated in the second half of the year and related to the Florida operations[140] - For Q2 2025, SkyWater projects total revenues in the range of $55 million to $60 million, with ATS revenues between $49 million and $53 million, Wafer Services revenues between $5 million and $6 million, and Tools revenue just under $1 million[40] Strategic Initiatives - SkyWater announced the acquisition of Infineon's Austin Fab 25 for $110 million, which is expected to add approximately $300 million in annual revenue[104] - The company secured $120 million in DOD program funding for a 300mm wafer fan-out initiative, with initial ATS revenues anticipated in the second half of fiscal year 2025[96] - SkyWater's customer-funded CapEx model has resulted in expected total funding of approximately $322 million from 2020 to 2026[97] Market & Technology Focus - SkyWater is targeting a $9 billion thermal imaging market opportunity by 2027, leveraging its ThermaView platform[25] - The company is actively involved in enabling the quantum revolution, providing custom technology development and manufacturing for superconducting qubits and photonics qubits[36, 38, 143] - SkyWater is expanding its capabilities in advanced packaging, including fan-out wafer-level packaging and hybrid wafer bonding, to support AI processors and heterogeneous systems[95]

Core Insights - SkyWater Technology (SKYT) is set to acquire Fab-25 from Infineon Technologies, with the deal expected to close on June 30, 2025, which will enhance its position in U.S. semiconductor manufacturing and meet the rising demand for domestically sourced chips [1][3][8] Group 1: Acquisition Details - The acquisition of Fab-25 is backed by a four-year supply agreement exceeding $1 billion, anticipated to generate $300 million in incremental revenues for fiscal 2025 [2][8] - Fab-25 is a 200 mm CMOS facility that will expand SkyWater's foundry capabilities, supporting critical applications in automotive, industrial, and defense sectors [3][8] - The integration of Fab-25 aligns with national onshoring priorities, enhancing SkyWater's relevance in the evolving global supply chain [3][4] Group 2: Competitive Landscape - SkyWater faces competition from Tower Semiconductor, which specializes in analog and mixed-signal ICs and has a strategic partnership with Semtech to scale SiGe wafer production for AI and 5G applications [5] - GlobalFoundries is another competitor, offering scalable 200 mm and 300 mm wafer production, serving high-demand sectors like automotive and defense, and providing broader industry reach and advanced process diversity [6] Group 3: Financial Performance and Valuation - SkyWater's shares have declined by 34.3% year-to-date, contrasting with the Zacks Electronics – Semiconductors industry's return of 5.2% [7] - The company trades at a forward 12-month price-to-sales ratio of 1.28, significantly lower than the industry's average of 8.18, indicating potential value for investors [9] - The Zacks Consensus Estimate for SkyWater's 2025 loss is projected at 1 cent per share, unchanged over the past 30 days, while the company reported earnings of 6 cents per share in 2024 [10]