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GCT Semiconductor Holdings, Inc. reported a significant decline in its Q2 2025 revenue, noting a 19% decrease from the same quarter last year. The company’s gross margin also faced a sharp drop, with a decrease from 63% to 32%. According to InvestingPro data, the company’s revenue decline has been even more pronounced over the last twelve months, showing a 60.82% decrease, while maintaining an overall WEAK financial health score. Despite these challenges, GCT remains optimistic about its future, highlighting advancements in 5G technology and strategic partnerships. The stock showed a 2.21% increase in aftermarket trading, reflecting investor interest in the company’s forward-looking strategies.
Key Takeaways
- GCT’s Q2 2025 revenue fell by 19% compared to Q2 2024.
- The gross margin decreased significantly from 63% to 32%.
- The company is preparing for 5G chipset production, expected to commence in Q3 2025.
- Strategic partnerships with major companies like Iridium Communications and Airspan Networks were announced.
- Stock increased by 2.21% in aftermarket trading, signaling positive investor sentiment.
Company Performance
GCT Semiconductor’s performance in Q2 2025 was marked by a notable decline in revenue and gross margin compared to the previous year. The company reported net revenues of $1.2 million, a 19% decrease from Q2 2024, while the gross margin fell to 32% from 63%. InvestingPro analysis reveals concerning trends, with the company quickly burning through cash and carrying a significant debt burden of $50.88 million. This decline is attributed to challenges in the transition from 4G to 5G technologies, a shift that the company is actively pursuing to capitalize on future growth opportunities. InvestingPro subscribers have access to 10 additional key insights about GCT’s financial position.
Financial Highlights
- Revenue: $1.2 million, down 19% year-over-year
- Gross Margin: 32%, down from 63% in Q2 2024
- Service Business Gross Margin: 71.3%
- Product Sales Gross Margin: -42.6%
- Cash and Cash Equivalents: $1.3 million
Market Reaction
Following the earnings report, GCT Semiconductor’s stock experienced a 2.21% increase in aftermarket trading, closing at $1.39. This movement suggests that investors are responding positively to the company’s future prospects in the 5G market, despite the current financial setbacks. The stock has fallen 60% over the past year, trading significantly below its 52-week high of $3.98. InvestingPro’s Fair Value analysis indicates that the stock is currently undervalued, potentially presenting an opportunity for investors willing to accept the risks associated with the company’s weak financial position.
Outlook & Guidance
GCT anticipates a stronger financial performance in the latter half of 2025, driven by the commencement of 5G chipset production in Q3 and volume production planned for Q4. The company projects significant growth in revenue as it expands its presence in the IoT and connectivity markets, with 5G chipsets expected to be priced at four times the traditional 4G products.
Executive Commentary
CEO John Schleifer emphasized the transformative potential of 2025 for GCT, stating, "GCT is on the verge of a meaningful inflection." CFO Edmund Ching highlighted the pricing strategy, noting, "The average selling price of this 5G chipset is expected to be roughly four times that of our traditional 4G products."
Risks and Challenges
- Transition to 5G technology: The shift from 4G to 5G presents both opportunities and risks, including potential delays in production and market adoption.
- Supply chain readiness: Ensuring a robust supply chain for 5G chipsets is critical to meet production and delivery timelines.
- Competitive landscape: GCT faces competition from established players in the semiconductor industry, which could impact market share and pricing strategies.
- Economic conditions: Macroeconomic factors, such as inflation and interest rates, could affect consumer demand and investment in new technologies.
GCT Semiconductor’s focus on innovation and strategic partnerships positions it well for future growth, but the company must navigate several challenges to achieve its ambitious goals in the evolving 5G landscape.
Full transcript - GCT Semiconductor Holding Inc (GCTS) Q2 2025:
Conference Operator: Good afternoon. Thank you for attending GCT Semiconductor Holdings, Inc. Second Quarter twenty twenty five Financial Results Call. All lines will be muted during the presentation portion of the call with an opportunity for questions at the end. Joining the call today are John Schleifer, GTC’s Chief Executive Officer and Edmund Ching, CFO, to discuss our second quarter twenty twenty five results.
During the call, certain statements we make will be forward looking. These statements are subject to risks and uncertainties, including those set forth in our safe harbor provision for forward looking statements that can be found at the end of our earnings press release and also in our Form 10 Q that will be filed today, which provide further detail about the risks related to our business. Additionally, except as required by law, we undertake no obligation to update any forward looking statements. I will now turn the call over to John Slaver.
John Schleifer, Chief Executive Officer, GCT Semiconductor Holdings, Inc.: Thank you, and thanks for everyone for joining us today for our second quarter twenty twenty five earnings call. I’ll focus my remarks on the exciting progress we’ve made as part of our 2025 GCT year of five gs program, and Edmund, our CFO, will provide details for our second quarter financial disclosure. This quarter marked another significant milestone in what we’ve debuted as the 2025 GCT year of five gs. Our team has worked relentlessly to ensure the five g chipset performance, stability, and integration readiness. I’m thrilled to share that we have officially delivered the initial samples of our five g chipset to lead customers, including Orbit North America and Airspan networks with successful testing already underway.
Highlighted by our partners Gogo in June and Airspan in July via their own press releases, this marks a major leap forward and allows us to begin the transition of our focus towards mass production and the imminent commercial launch of our five gs chipset. As it pertains to the highly anticipated next steps, we expect additional samples to be delivered in the coming weeks, expect to commence production of the finalized initial five gs chipset during the third quarter, and are preparing for volume production and shipments in the fourth quarter of this year. We are very pleased with the progress we are making with our five gs chipsets. In parallel, we continue to expand our customer ecosystem. We recently announced collaboration with Iridium Communications to integrate their NTN direct satellite service into our advanced GDM7243SL chipset.
This opens up a new dimension for our technology, enabling connectivity in remote and underserved regions and broadens our reach into the non terrestrial network space. We’ve also partnered with G plus D to deliver embedded eSIM solutions for IoT applications. These are early but critical building blocks that enhance the long term value of our five g platform and help define how GCT participates in the future of global connectivity. Looking forward, we remain laser focused on scaling our five gs platform, ensuring readiness across our supply chain, and executing against demand that we expect to materialize as our customers launch their own next generation products. And with that, I’ll turn the call over to Edmund to discuss our Q2 results.
Edmund?
Edmund Ching, Chief Financial Officer, GCT Semiconductor Holdings, Inc.: Thank you, John. We are encouraged by the operational progress made during the second quarter, especially as we prepare for the commercialization of our five gs chipset. While our financial results reflect the continued shift from four gs towards five gs, they are consistent with the transitional phase we are currently in. We anticipate a stronger end of the year as five gs chipset sales to commence soon. As I have mentioned before, the average selling price of this five gs chipset is expected to be roughly four times that of our traditional four gs products.
With that, I will now turn to our second quarter twenty twenty five financial results. Further details can be found in the 10 Q that will be on file with the SEC. Net revenues decreased by $300,000 or 19% from $1,500,000 for the three months ended 06/30/2024 to $1,200,000 for the three months ended 06/30/2025. The reduction was largely attributable to a decrease of $700,000 in service revenue, partially offset by an increase of $400,000 in product sales, which were driven by our four gs chipset sales. Cost of net revenues increased by $300,000 or 47% from $500,000 for the three months ended 06/30/2024 to 2,800,000.0 for the three months ended 06/30/2025.
This increase in the cost of net revenues was driven by product sales activity, partially offset by the lower costs associated with service products. Our gross margin decreased to 32% for the three months ended 06/30/2025, from 63% for the three months ended 06/30/2024. The gross margin of our service business and product sales were 71.3% and negative 42.6%, respectively. Our current gross margin, particularly for product sales, are still distorted by the lower product revenue, which makes it less indicative of the underlying profitability of our products when we transition to scale our new five gs product sales. We expect operational efficiencies to kick in as revenue increase, which will begin when five gs product sales start contributing to our overall revenue in the 2025, and particularly in Q4 this year.
Research and development expenses decreased by $700,000 or 16% from $4,200,000 for the three months ended 06/30/2024, to $3,500,000 for the three months ended 06/30/2025. The decrease was primarily attributable to a $900,000 reduction in professional services related to the design of five gs chip products and partially offset by a $300,000 increase in personnel related costs. Sales and marketing expenses remained consistent at $1,000,000 for both the three months ended June 2024. General and administrative expenses increased by $600,000 or 20% from $2,900,000 for the three months ended 06/30/2024 to $3,400,000 for the three months ended 06/30/2025. The increase was largely due to increases in expected credit loss estimate by $300,000 to $1,100,000 loss in Q2 twenty twenty five, compared to $800,000 in our expected credit loss estimate in the prior year period.
The increase was partially offset by lower professional services and other costs driven by reduced transactional activity during the 2025. We ended the quarter with cash and cash equivalent of $1,300,000 We also had net accounts receivable of $3,800,000 and net inventory of 3,000,000 During the quarter, we received 11,000,000 in gross proceeds from a registered direct offering, which was made under our shelf registration we filed in April. These funds were primarily used for five gs chipset sampling, debt retirement, and expanding the company’s financial flexibility. As a reminder, this shelf registration offers up to $200,000,000 in capacity, with $114,000,000 of remaining availability, excluding the $75,000,000 at the market facility. With this, I will turn the call back over to John.
John Schleifer, Chief Executive Officer, GCT Semiconductor Holdings, Inc.: Thanks, Edmund. To close, I want to emphasize just how far we’ve come this year alone. The delivery of our initial five gs chipsets to lead customers, the validation successes we’re seeing, and now the preparation for volume shipments all point to one thing, GCT is on the verge of a meaningful inflection. We expect this transition to become more visible in the coming quarters as customer announcements, production ramp ups, and initial five gs revenue begins to materialize. I want to thank again our employees for their commitment, our partners for their collaboration, and our shareholders for their continued support.
We’re incredibly proud of how far we’ve come and even more energized by what’s ahead. The 2025 is shaping up to be transformational for GCT, and we’re excited to have you with us. I will now turn the call back over to the operator who will assist us in taking your questions.
Conference Operator: Thank you. At this time, if you would like to ask a question, please press star on one on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, please press star on one again. We also ask that you wait for your name and company to be announced before proceeding with your questions.
One moment, please. At this time, I don’t see any questions in the queue. This concludes our meeting for today. Thank you all for joining the conference call. You may now
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