Axcelis Q2 2025 slides: Margins improve despite revenue decline, shares surge

Introduction & Market Context

Axcelis Technologies Inc (NASDAQ:ACLS) released its Q2 2025 earnings presentation on August 5, 2025, revealing improved gross margins despite a year-over-year revenue decline. The semiconductor equipment manufacturer’s stock jumped 8.89% in premarket trading to $77.18, reflecting investor confidence in the company’s performance and outlook.

The results come amid a challenging period for the semiconductor equipment sector, with Axcelis demonstrating resilience through strategic focus on high-margin segments and prudent cost management. The company’s strong position in Silicon Carbide (SiC) applications continues to be a key growth driver, particularly in the Chinese market.

Quarterly Performance Highlights

Axcelis reported Q2 2025 revenue of $194.5 million, down from $256.5 million in the same period last year but showing a slight sequential improvement from Q1 2025’s $193 million. Despite the revenue decline, the company delivered GAAP diluted earnings per share of $0.98 and non-GAAP diluted EPS of $1.13.

As shown in the following quarterly highlights:

The company’s gross margins improved year-over-year to 44.9% (GAAP) and 45.2% (non-GAAP), compared to 43.8% and 44.3% respectively in Q2 2024. This margin expansion, despite lower revenue, demonstrates Axcelis’s ability to maintain profitability through favorable product mix and cost control measures.

A detailed comparison of financial measures reveals the extent of the company’s performance:

Segment Performance Analysis

Axcelis’s revenue continues to be dominated by the Mature Process Technology segment, which accounted for 97% of total shipped system revenue in Q2 2025. Within this category, Silicon Carbide (SiC) Power applications represented 40% of shipped system revenue, highlighting the company’s strong position in this growing market.

The following chart illustrates the revenue distribution across segments:

The company noted continued firm demand in China for 150mm and 200mm SiC applications, while rest-of-world customers are slowing engagement to prepare for next-generation transitions. Declining SiC wafer prices are driving broader adoption, which bodes well for Axcelis’s long-term prospects in this segment.

In the General Mature segment (43% of shipped system revenue), Axcelis secured a meaningful order for High Energy and High Current tools in the 28nm node from a China-based customer, despite experiencing a slight sequential decline as customers manage capacity.

Memory contributed only 3% of shipped system revenue, with DRAM securing a new High Current order, while NAND customers are prioritizing layer count scaling via deposition and etch processes, limiting near-term implant demand.

Geographic Revenue Distribution

China remains Axcelis’s largest market, accounting for 55% of total revenue in Q2 2025, followed by the United States at 18% and South Korea at 13%. This geographic concentration underscores the importance of the Chinese semiconductor market to Axcelis’s business.

The detailed revenue breakdown by geography and segment provides valuable insights into the company’s market exposure:

The company’s historical geographic revenue distribution shows some fluctuation in China’s contribution, which was 38% in Q1 2025 but increased significantly to 55% in Q2 2025. This shift highlights both the opportunity and potential risk associated with Axcelis’s exposure to the Chinese market.

Cash Position and Capital Allocation

Axcelis maintained a strong financial position with $581 million in cash, cash equivalents, and marketable securities as of Q2 2025, up from $548.3 million in Q2 2024. The company generated $39.7 million in cash from operations and $37.7 million in free cash flow during the quarter.

The following slide details the company’s cash flow and balance sheet:

Notably, Axcelis significantly increased its share repurchase activity to $45.3 million in Q2 2025, up from $18.2 million in Q1 2025 and $15 million in Q2 2024. This acceleration in buybacks signals management’s confidence in the company’s valuation and future prospects.

Forward Outlook

Looking ahead, Axcelis provided guidance for Q3 2025, projecting revenue of approximately $200 million and non-GAAP diluted EPS of around $1.00. The company expects Q4 2025 revenue and non-GAAP gross margins to remain relatively similar to Q3 levels, with a slight increase in operating expenses.

The detailed outlook is presented in the following slide:

This guidance suggests a stabilization in Axcelis’s business with modest sequential growth, which appears to have resonated positively with investors given the strong premarket stock reaction.

Axcelis’s strategy for navigating the current market environment focuses on innovation, customer engagement, and prudent cost management. The company’s Customer Solutions & Innovation (CS&I) remains a foundational pillar of its customer experience, contributing $61.3 million to Q2 2025 revenue.

Despite challenges in certain end markets, Axcelis continues to leverage its strong position in Silicon Carbide applications and its significant presence in China to deliver solid financial results. The improved gross margins, strong cash generation, and increased share repurchases demonstrate management’s ability to create shareholder value even in a challenging revenue environment.

Full presentation:

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