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SkyWater Technology, Inc (SKYT)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was a record revenue quarter at $150.7M, with GAAP gross margin 24.0% and Non-GAAP gross margin 24.6%; Non-GAAP diluted EPS was $0.24 while GAAP diluted EPS was $2.95, the latter inflated by a preliminary $110.8M bargain purchase gain and a $27.5M tax valuation allowance release .
  • Results meaningfully beat Wall Street consensus: revenue $150.7M vs $135.4M estimate*, EPS $0.24 vs -$0.17 estimate*, and EBITDA outperformed ($25.8M adj. vs $11.45M estimate*), driven by stronger-than-expected Texas (Fab 25) wafer services and ATS timing pull-ins .
  • Q4 2025 guidance raised on profitability: total revenue $155–$165M, Non-GAAP GM% 17–20% (up from prior 12–15%), adjusted EBITDA $16–$22M; tools revenue trimmed to $17–$18M and OpEx reset higher at $23–$24M .
  • Strategic catalysts: four new quantum customer engagements (including SQC and QuamCore), record quantum ATS revenues, and better-than-expected contribution from Texas strengthening confidence in the 2026 baseline of at least $600M revenue and $60M adjusted EBITDA .

What Went Well and What Went Wrong

What Went Well

  • Record consolidated revenue ($150.7M) with Texas wafer services contributing ~$86.6M; Non-GAAP gross margin improved 230 bps YoY to 24.6% and adjusted EBITDA reached $25.8M (17.1% margin) .
  • Quantum momentum: “We have signed four new quantum customers since the second quarter…on track to exceed 30% growth in our ATS revenues from quantum customers in fiscal 2025” — CEO Thomas Sonderman .
  • Texas (Fab 25) upside: “Texas operations contributed nearly $87 million of wafer services revenue… revenue upside flowed directly to gross profit” — CEO; CFO quantified recurring gross profit uplift and elements of one-time Q3 cost favorability .

What Went Wrong

  • Legacy tools revenue remained weak YoY ($3.7M vs $30.7M), continuing to weigh on mix; Legacy SkyWater total revenue down 32% YoY to $64.1M .
  • A&D ATS demand uncertainty: ~$4M pulled forward into Q3 and guidance reflects a sequential decline in ATS due to government funding delays/shutdown dynamics .
  • OpEx run-rate higher than previously modeled ($23–$24M/quarter) reflecting scale post-acquisition; potential inflation-related $5M tools overrun risk in Q4 if funding not secured .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$93.817 $59.063 $150.741
GAAP Gross Margin %21.6% 18.5% 24.0%
Non-GAAP Gross Margin %22.3% 19.5% 24.6%
GAAP Diluted EPS ($)$0.03 $(0.21) $2.95
Non-GAAP Diluted EPS ($)$0.08 $(0.11) $0.24
Adjusted EBITDA ($USD Millions)$10.990 $2.276 $25.791
Adjusted EBITDA Margin %11.7% 3.9% 17.1%

Segment revenue breakdown

SegmentQ3 2024Q2 2025Q3 2025
Legacy ATS development revenue ($M)$56.390 $52.605 $54.196
Legacy Wafer Services revenue ($M)$6.718 $5.411 $6.245
Legacy Tools revenue ($M)$30.709 $1.047 $3.686
Total Legacy SkyWater revenue ($M)$93.817 $59.063 $64.127
SkyWater Texas wafer services revenue ($M)——$86.614
Total consolidated revenue ($M)$93.817 $59.063 $150.741

KPIs

KPIQ3 2024Q2 2025Q3 2025
Gross Profit ($USD Millions)$20.235 $10.899 $36.221
GAAP Net Income to Common ($USD Millions)$1.512 $(9.978) $144.013
Net Income Margin (GAAP)1.6% (16.9)% 95.5%

Drivers and adjustments (context)

  • GAAP net income benefited from a preliminary $110.8M bargain purchase gain (Fab 25) and a $27.5M non‑cash DTA valuation allowance release; additional $4.3M tax benefit tied to post‑acquisition deferred tax assets .
  • CFO noted ~$12M of one‑time Q3 gross profit positives (near 100% margin revenue items; warranty accrual reversal due to higher yields; STI accrual reversal; lower-than-expected tariff exposure), plus ~$8M of recurring gross profit uplift expected to carry into Q4, then normalize to ~$5M/quarter .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total consolidated revenue ($M)Q4 2025Baseline run-rate ~$140M excl. tools; tools $20–$25M (implies ~$160–$165M with tools) $155–$165 Maintained/Refined range
Non-GAAP Gross Margin %Q4 202512%–15% 17%–20% Raised
Adjusted EBITDA ($M)Q4 2025~$14 $16–$22 Raised
Tools revenue ($M)Q4 2025$20–$25 $17–$18 Lowered; risk of tools charge ~$5M if funding gap persists
Non-GAAP OpEx ($M)Q4 2025$18–$20 (earlier run-rate expectations) $23–$24 Raised (post-acquisition scale)
GAAP diluted EPS ($)Q4 2025N/A$(0.21) – $(0.09) New disclosure
Texas wafer services revenue ($M)Q4 2025Mid‑$80s expected $84–$88 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3)Trend
Quantum computingQ2: Expect >30% FY25 quantum ATS growth; new platform and customer engagements . Q1: ATS ~$52.5M; tools low; quantum efforts building (limited public updates) .Four new quantum ATS engagements (SQC, QuamCore); record quantum revenue; momentum into 2026 .Accelerating
A&D funding/timingQ2: Continuing resolution delays; cautious ATS growth outlook .~$4M A&D pulled into Q3; Q4 ATS ~50M; govt shutdown impacts and delayed approvals .Uncertain near-term; structurally constructive medium-term
Texas (Fab 25) integrationQ2: Acquisition closed; Q3 TX wafer services $75–$80M expected .Actual ~$87M due to WIP/purchase accounting; recurring gross profit uplift; normalizing in 2026 .Better-than-expected
Advanced Packaging (Florida)Q2: Ramp ahead; most tools revenue in Q4; prototype availability targeted within ~1 year .Tool installs ramping; completion early‑2026; prototype builds expected later next year; risk of $5M tools overrun .Ramping with cost vigilance
Tariffs/macroQ2: Tariff uncertainties delayed installations; policy shift favoring domestic production .Lower-than-expected tariff exposure aided Q3 margins .Improving impact
Regulatory/accountingQ2: —Revision reduced beginning 2024 accumulated deficit by $1.970M (immaterial ATS revenue overstatements from 2022–2023) .Cleanup completed

Management Commentary

  • “Record Q3 revenues of nearly $151 million… majority of the upside was related to purchase accounting for FAB25’s revenue in Texas and ATS revenues… above the high end of our expectations at over $54 million.” — Thomas Sonderman, CEO .
  • “Texas operations contributed nearly $87 million… while we expect wafer services volumes in Texas will normalize… ongoing financial contribution from FAB25 is more favorable than we originally forecast.” — Thomas Sonderman .
  • “We have signed four new quantum customer engagements since Q2… positioning SkyWater to exceed 30% revenue growth with our quantum customers in fiscal 2025.” — Thomas Sonderman .
  • “Approximately $8 million of [gross profit] benefit to continue into the fourth quarter, after which we expect Texas WIP levels to normalize, resulting in a net ongoing gross profit upside from Texas of approximately $5 million per quarter… roughly $12 million reflects pure profit revenue upside and ~ $5 million of non-recurring cost savings.” — Steve Manko, CFO .

Q&A Highlights

  • Gross margin sustainability: CFO detailed Q3 one-time positives (near-100% margin revenue items, warranty accrual reversal, STI accrual reversal, lower tariff exposure) and updated FY26 margin outlook to “mid to upper teens” Non-GAAP .
  • Quantum pipeline: Management reiterated >30% FY25 quantum ATS growth and similar pace in 2026, with breadth across modalities (spin, superconducting, photonic, ion trap) and advantages from coupling front-end and advanced packaging .
  • Fab 25 performance/normalization: Better-than-expected initial quarter driven by elevated WIP and purchase accounting; visibility to low‑$80M/quarter wafer services run‑rate and recurring gross profit uplift .
  • A&D environment: Continued funding delays; some program acceleration pulled into Q3; management emphasized structural demand (DoD adoption of foundry model, drone-based systems) and platform progress (ThermaVue, RadHard, AP) .
  • Q4 tools risk: Potential net loss on tools (~$5M) if incremental funding not secured, not embedded in guidance ranges .

Estimates Context

Q3 2025 actuals vs consensus

MetricConsensus EstimateActualNotes
Revenue ($USD Millions)135.42*150.74 Beat (driven by TX WIP/purchase accounting and ATS timing)
Primary EPS (Non-GAAP, $)-0.17*0.24 Beat (mix + margin positives)
EBITDA ($USD Millions)11.45*25.79 (Adj.) Beat; SPGI “EBITDA” may differ from company “Adjusted EBITDA”

Q4 2025 guidance vs consensus

MetricConsensus EstimateCompany GuidanceNotes
Revenue ($USD Millions)160.05*155–165 In-line bracket; TX wafer services $84–$88
Primary EPS (Non-GAAP, $)-0.03*$(0.08) – $0.04 Range encompasses consensus

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Strong multi-faceted beat: Revenue, EPS, and EBITDA all materially exceeded consensus, powered by Texas wafer services and ATS timing; near-term margin uplift is partly one-time, but recurring TX gross profit supports Q4 and sets a better baseline for 2026 .
  • Guidance reset: Gross margin raised to 17–20% Non-GAAP for Q4 (from 12–15% previously), with adjusted EBITDA guided up to $16–$22M; tools revenue lowered and OpEx reset higher, reflecting scale post-acquisition .
  • Structural drivers: Quantum engagements (SQC, QuamCore) and advanced packaging ramp underpin ATS growth; TX Fab 25 expands scale and domestic positioning amid tariff and onshoring tailwinds .
  • Watch near-term risks: A&D ATS timing remains sensitive to Washington funding cycles; tools revenue variability and potential Q4 tools charge (~$5M) could add volatility .
  • 2026 baseline looks conservative: Management reaffirmed confidence in at least $600M revenue and $60M adjusted EBITDA for 2026, with TX normalization and ATS momentum providing visibility .
  • Trading implications: Positive surprise on profitability and raised margin outlook are likely stock catalysts; monitor Q4 execution against raised GM%/EBITDA and clarity on tools funding to gauge durability of margin expansion .
  • Longer-term thesis: SkyWater’s trusted U.S. foundry model at foundational nodes, expanding advanced packaging, and quantum ecosystem positioning create differentiated exposure to domestic semis infrastructure and defense demand .

Additional Notes and Cross-References

  • Q4 outlook details (ranges for ATS, wafer services, tools, margins, OpEx, EPS) published in the Q3 2025 8‑K/press release .
  • Balance sheet step-up (PP&E, debt) and cash: total debt increased to fund Fab 25; cash at quarter-end $30.9M .
  • Historical revision: accumulated deficit reduced by $1.970M due to immaterial ATS revenue overstatements in 2022–2023 .