Eltek's Earnings Call: Contradictions in Capital Investment and Defense Sector Demand

Revenue Growth and Production Capacity Expansion:
- Eltek Ltd. reported revenue of $12.5 million for Q2 2025, marking a 20% increase compared to the same period last year and maintaining strong momentum from Q1 2025.
- This growth was driven by early signs of stabilization in production capacity and improved run rate, supported by accelerated investment in scaling installed production capacity to support $55 million to $65 million in annual revenue.

Improved Gross Margin and Profitability:
- Eltek's gross margin expanded to 24.1% in Q2 2025, up from 15.6% in Q2 2024, with a gross profit of $3 million, nearly double the results from the same quarter last year.
- The improvement was attributed to operational efficiencies and a more favorable product mix, resulting in a significant rise in operational income to $1.5 million, up from $0.4 million in Q2 2024.

Defense and Medical Market Performance:
- Eltek experienced strong demand in the defense sector, which accounted for 65% of its total revenues, alongside continued strong performance in the medical markets.
- The favorable demand trends in these markets were due to increasing military budgets and the company's strategic focus on expanding commercial sales with less production capacity constraints.

Capital Investment and Future Growth:
- Eltek's accelerated investment plan targets a balance of $6 million for 2025 and 2026, primarily allocated to the installation of new coating lines.
- These investments align with the company's roadmap to reach an annual revenue capacity of $55 million to $60 million upon full operationalization of the new 40-meter coating line by the end of 2025.