SkyWater Q1 2025 slides: Wafer Services growth offsets ATS softness, maintains outlook

Introduction & Market Context

SkyWater Technology (NASDAQ:SKYT) reported its Q1 2025 earnings on May 7, 2025, posting revenue of $61.3 million, slightly above the midpoint of its guidance range. The semiconductor foundry’s shares traded at $7.05 in after-hours trading, down 2.76% following the results announcement. Despite a year-over-year revenue decline of 23%, the company maintained its full-year guidance, pointing to expected stronger performance in the second half of 2025.

Quarterly Performance Highlights

SkyWater’s Q1 2025 results revealed mixed performance across its business segments. Total (EPA:TTEF) revenue of $61.3 million represented a 19% decrease from Q4 2024’s $75.5 million and a 23% decline from Q1 2024’s $79.6 million. However, Wafer Services revenue showed impressive sequential growth of 72%, reaching $7.5 million, while ATS (Advanced Technology Services) development revenue declined 12% quarter-over-quarter to $52.5 million.

As shown in the following revenue trend chart, the company’s quarterly performance has fluctuated over the past two years, with Q1 2025 showing the lowest total revenue in the period displayed:

The company’s non-GAAP gross margin exceeded expectations at 24.2%, representing a significant improvement of 733 basis points year-over-year. This performance benefited from a favorable warranty reversal of approximately $2 million. Adjusted EBITDA came in at $4.0 million or 6.6% of total revenue, stronger than forecast due to favorable gross margin and lower operating expenses.

The detailed gross margin summary shows the positive year-over-year trend despite the sequential decline:

Strategic Initiatives

SkyWater highlighted several strategic developments during the quarter. The company’s ThermaView platform demonstrated strong demand, with over half of Q1 Wafer Services revenue coming from new products, including ThermaView sales to two leading U.S. defense prime customers.

The ThermaView platform strengthens SkyWater’s position in the thermal imaging market, as illustrated in the following slide:

Progress continues on the acquisition of Infineon (OTC:IFNNY)’s Fab 25 in Austin, Texas, supported by a $1 billion-plus supply agreement. This acquisition is positioned to address critical market needs across various sectors:

The company also highlighted its partnership with quantum computing company D-Wave, which recently demonstrated quantum supremacy in simulation. This collaboration underscores SkyWater’s role in enabling advanced quantum technologies:

SkyWater’s customer-funded capital expenditure model continues to provide significant benefits, enabling facility improvements and capacity expansion with minimal company investment. The company expects total funding from 2020 to 2026 of approximately $322 million, with potential additional outside funding announced in December 2024.

As shown in the following slide, this model yields multiple benefits:

Detailed Financial Analysis

SkyWater’s Q1 2025 financial performance showed some challenges but also areas of strength. The revenue summary below provides a detailed breakdown of performance by segment:

The company’s Adjusted EBITDA of $4.0 million was down from $10.2 million in Q4 2024 and $4.9 million in Q1 2024. Non-GAAP net loss was $3.7 million, matching the loss from Q1 2024 but down from a profit of $1.9 million in Q4 2024.

The following chart illustrates the trend in Adjusted EBITDA and Non-GAAP Net Income (Loss) over recent quarters:

Forward-Looking Statements

Despite the challenges in Q1, SkyWater maintained its full-year 2025 guidance of approximately 5% revenue growth (±2%) for the combined ATS and Wafer Services business. The company expects Tools revenue to be approximately $30 million for the year, with a stronger second half.

For Q2 2025, SkyWater provided the following guidance:

• Total revenue: $55-60 million
• ATS development revenue: $49-53 million
• Wafer Services revenue: $5-6 million
• Tools revenue: Just under $1 million
• Expected GAAP loss per share: $(0.26) to $(0.20)
• Expected non-GAAP loss per share: $(0.22) to $(0.16)

The company cited prolonged U.S. federal budget negotiations as a challenge for its ATS business but expressed confidence that increased program funding will drive solid ATS growth beginning in Q3. Additionally, the Advanced Packaging (NYSE:PKG) platform development in Florida is expected to contribute to ATS revenue in the second half of 2025.

As detailed in the business outlook slide:

SkyWater’s management remains confident in achieving profitable results and slightly positive EPS for the full year, despite the anticipated weaker first half. The company’s strategic positioning in U.S. semiconductor sovereignty, combined with its focus on high-growth markets like thermal imaging and quantum computing, provides a foundation for potential recovery in the latter part of 2025.

Full presentation:

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