SkyWater's Q3 2025: Contradictions Emerge on Quantum Revenue Growth, Fab 25 Capacity, 2026 Financials, and Infineon's Role

Date of Call: November 5, 2025

Financials Results

• Revenue: $150.7M, record Q3 (nearly $151M); more than $9M above the high end of prior guidance
• EPS: $0.24 per share; includes ~$0.09 per share benefit from recognition of deferred tax assets
• Gross Margin: 24.6% in Q3; ~$20M of gross profit upside in quarter (estimated ~$8M to continue into Q4); Q4 guidance 17%–20%; company raised 2026 gross margin outlook to mid‑to‑upper teens (~+200 bps vs prior view)

Guidance:

• Q4 revenue expected $155M–$165M (ATS $48M–$52M; Texas wafer services $84M–$88M; Minnesota wafer services $6M–$7M; tools $17M–$18M; full‑year tools now $23M–$24M).
• Q4 non‑GAAP gross margin 17%–20%; expect mid‑to‑upper‑teens gross margin in 2026 (~+200 bps vs prior view).
• Q4 OpEx expected $23M–$24M; net interest ~$5.5M; tax provision ~$0.5M; VIE $1M.
• Q4 adjusted EBITDA $16M–$22M; Q4 EPS guidance -$0.08 to $0.04.
• Initial 2026 baseline: at least $600M revenue and at least $60M adjusted EBITDA; company states this baseline is likely conservative.

Business Commentary:

• Record Revenue and ATS Performance:
• SkyWater Technology reported record revenue of $150.7 million for Q3, exceeding the high-end guidance by $9 million.

• This was mainly due to strong performance in ATS revenues, which reached over $54 million, and Fab 25 contributions.

• Quantum Computing Growth:

• SkyWater's quantum computing-related revenue set a new record, positioning the company to exceed 30% growth in Quantum customer revenues in fiscal 2025.

• The growth was driven by new customer engagements and momentum in the Quantum ecosystem.

• Fab 25 Financial Contribution:

• Texas wafer services revenue from Fab 25 was $87 million, surpassing expectations and contributing positively to SkyWater's financial performance.

• This was attributed to a higher level of work-in-process wafers during the immediate post-acquisition phase and purchase accounting determinations.

• Profitability and Gross Margin Improvement:

• SkyWater reported a strong gross margin of 24.6% in Q3, with nearly all revenue upside flowing directly to gross profit.
• This improvement was due to favorable purchase accounting items, lower warranty accruals, and non-recurring cost savings.

Sentiment Analysis:

Overall Tone: Positive

• "We are pleased to report today third quarter results, which exceeded our expectations across all metrics." CEO: said the company has "strong confidence" and that the initial 2026 baseline of at least $600M revenue and $60M adjusted EBITDA "will prove to be conservative." CFO: "Record third quarter revenue of $150.7 million" and materially better-than-expected adjusted EBITDA.

Q&A:

• Question from Brian Chin (Stifel): Congratulations on the good results here. Maybe to start with, the fourth quarter non-GAAP gross margin of 17% to 20%, understanding that there's like a 200-basis point impact from the tools revenue in the quarter. Is that comparable -- that's comparable to the prior 12% to 15%, right? And can you kind of flesh out what ex tool revenue, what the kind of normalized gross margin kind of would be into kind of Q1? Does this assume kind of constant revenue into Q1? And can you also further explain -- I think I heard something about some revenue was recognized at 100% gross profit during 3Q. If you could just kind of unpack some of those gross margin questions, that would be helpful.
  Response: Q3 margin benefited from pass‑through revenue and one‑time cost reversals; Q4 guide is 17%–20% and the company expects mid‑to‑upper‑teens gross margin in 2026 once one‑offs normalize.

• Question from Brian Chin (Stifel): Appreciate that. And maybe for my follow-up question, a very strong update in terms of the new Quantum customers that you signed up during the quarter. And if I heard correctly, you expect to sustain maybe a revenue CAGR in that segment at above 30% next year. I guess maybe one question, is that higher than when you originally kind of set that $600 million revenue forecast for next year? And just curious, in ATS, is that quantum compute revenue stream with the new customer contracts, is that typically kind of average -- corporate average profitability? Or is that sometimes higher than average for ATS?
  Response: Expect ~30% quantum revenue growth again next year; company won't disclose contract‑level margins but says ATS model and demand bode well for attractive quantum economics.

• Question from Richard Shannon (Craig-Hallum): Hopefully, you can hear me. I apologize for the ambient noise. I'm in a cab getting to the airport here. Maybe just a couple of very quick questions here. The first one I have is really just to make sure I understand the dynamics under which you're talking about your prior guidance for next year of $600 million revenue, $60 million EBITDA that can prove conservative. I wonder if you can lay out the dynamics that are allowing you to do that. I think from the last answers to previous questions, you alluded to that on the margin side here, but maybe if you could also lay that out on the revenue side as well.
  Response: Fab 25 brought higher-than-expected WIP and take‑or‑pay gives an ~$80M/quarter baseline; current run‑rate and WIP outperformance make the $600M/$60M baseline conservative, though A&D timing risk remains.

• Question from Richard Shannon (Craig-Hallum): Fair enough. And my follow-on question is related to Quantum. Great to see some more customers coming in here. And Tom, I noted your comments about supporting a breadth of different modalities, which is quite interesting here. I may have missed the comments you made later in your prepared remarks about related to packaging here, but I'm going to question, which is to what degree is there value in having and being able to support more than one modality even for a singular quantum customer? And to what degree does also packaging help you to acquire those customers?
  Response: Supporting multiple quantum modalities plus integrated advanced packaging attracts diverse customers and accelerates their prototyping-to-production cadence under SkyWater's virtual IDM/ATS model.

• Question from Quinn Bolton (Needham & Company): This is [indiscernible] on for Quinn. Congrats on the solid execution. My first question is on Fab 25. It looks like the transition of ownership is going better than expected. So, I was just curious on if we can get the puts and takes for the better performance here. And maybe if there's anything that has surprised you guys in terms of running a new fab.
  Response: Fab 25 integration outperformed due to high WIP from the prior operator, immediate synergies across Texas and Minnesota, and protection from the take‑or‑pay agreement.

• Question from Quinn Bolton (Needham & Company): And then my follow-up is on quantum computing. Obviously, SkyWater is doing very well here, and it's an important growth vector. But I just want to get some color on what SkyWater views as the most important when bringing in new quantum computing customers to ATS and then ultimately converting them to wafer services revenue.
  Response: Key drivers are CMOS process compatibility, integrated packaging capability and ATS speed — these make it easy to convert prototyping ATS customers into wafer services as programs scale.

• Question from Robert Mertens (TD Cowen): This is Robert Mertens on the line for Krish. I guess the first one, just circling back, could you talk us a little bit more through your thoughts on the current aerospace and defense environment? I know you spelled out some benefits you saw in the quarter and December being a little bit down sequentially because of this. But maybe just looking into next year, how you think projects are trending if they're stuck in funding limbo? Or have there been more commitments or indications that spending patterns might pick up above last year 2024 levels?
  Response: A&D funding timing remains uncertain under continuing resolutions/government shutdowns; programs and platform development continue and SkyWater expects to benefit once funding clarity returns.

• Question from Robert Mertens (TD Cowen): And then my other one was just around quantum computing, but I guess we've talked about that quite a bit. Just maybe -- I know you have the technologies in supercomputing, photonics, but are there any sort of adjacent hardware technologies or areas such as ion trap that would benefit your business that you're looking to pursue? Or is it really more ramping current customers and onboarding additional ones with the technology in place?
  Response: Company supports all modalities (including ion trap); focus is both ramping current customers and onboarding additional customers using the same foundry+packaging/IP-protection model.

Contradiction Point 1

Quantum Revenue Growth Expectations

It involves differing expectations for revenue growth in the Quantum segment, which is a strategic area for the company's expansion.

Is the expected 30%+ CAGR for the Quantum segment higher than the original $600 million revenue forecast? - Brian Chin (Stifel, Nicolaus & Company, Incorporated, Research Division)

2025Q3: The 30% growth we expect for Quantum is consistent with our initial expectations. - Thomas Sonderman(CEO)

Given Q2 met expectations, what are your expectations for Q3 and Q4, and how is the Quantum business expected to trend throughout 2025? - Kinney Chin (TD Cowen)

2025Q2: We're guiding to high teens exit rate on the quarter. For fiscal '26, should exit the year fiscal '26 in the low 20s. - Steve Manko(CFO)

Contradiction Point 2

Fab 25 Revenue and Capacity

It involves differing expectations for Fab 25's revenue contribution and capacity utilization, which are crucial for the company's growth strategy.

What does the revenue guidance imply for Fab 25's utilization, and what external customer capacity exists? - Kinney Chin (TD Cowen)

2025Q3: Fab is near its target utilization, but there's room for new customers with additional efficiencies and capabilities. - Thomas Sonderman(CEO)

Given Q2 met expectations, what are your expectations for Q3 and Q4, and how is the Quantum business expected to trend in 2025? - Kinney Chin (TD Cowen)

2025Q2: The Fab 25 acquisition will bring approximately $50 million in revenue in fiscal '25, exiting Q1 at $20 million with continued growth throughout '25, exiting the year at $85 million. - Steve Manko(CFO)

Contradiction Point 3

Revenue and Adjusted EBITDA Expectations for 2026

It involves changes in financial forecasts, specifically regarding revenue and adjusted EBITDA expectations for 2026, which are critical indicators for investors.

What factors support your confidence that your 2026 revenue/EBITDA guidance of at least $600M and $60M is conservative? - Richard Shannon(Craig-Hallum Capital Group LLC, Research Division)

2025Q3: We believe that the $600 million revenue and $60 million adjusted EBITDA expectations for 2026 are conservative based on the performance this quarter, the expected Texas operations, and our Quantum momentum. We expect to provide official 2026 guidance when we report our Q4 and fiscal year 2025 results in February. - Thomas Sonderman(CEO)

How confident are you that these programs and the budget will secure higher funding levels to support H2 recovery? - Quinn Bolton(Needham & Company)

2025Q1: We are positioned to deliver double-digit revenue growth in 2025 with adjusted EBITDA margins of approximately 10% and capital expenditures of approximately $125 million. - Thomas Sonderman(CEO)

Contradiction Point 4

Quantum Revenue Growth Expectations

It involves changes in expectations for revenue growth in the Quantum segment, which is a strategic focus area for the company.

Are you expecting a revenue CAGR above 30% in the Quantum segment next year, which would exceed the original $600 million forecast? - Brian Chin(Stifel, Nicolaus & Company, Incorporated, Research Division)

2025Q3: The 30% growth we expect for Quantum is consistent with our initial expectations. - Thomas Sonderman(CEO)

What kind of work are you doing with Si-Quantum? - Quinn Bolton(Needham & Company)

2025Q1: We are focused on growing our wafer services and advanced packaging capabilities, which we expect will be critical to achieving our goal of $1 billion of annual revenue by 2026. - Thomas Sonderman(CEO)

Contradiction Point 5

Infineon's Role and Wafer Services Revenue Mix

It involves differing expectations regarding the revenue mix between Wafer Services and ATS, especially in relation to Infineon's role, which is crucial for the company's growth strategy.

What will be the mix between ATS and Wafer Services next year? - Harsh Kumar (Piper Sandler)

2025Q3: Growth is expected in Minnesota, similar to last year's levels, focused on new platforms and higher ASPs. Fab 25 will add $300 million in revenue, with the mix expected to be more Wafer Services-heavy due to Infineon's volume. - Thomas Sonderman(CEO)

What products can Fab 25 produce for others, and what applications are possible? - Harsh Kumar (Piper Sandler)

2024Q4: Fab 25 has a 65-nanometer technology that can expand 200-millimeter foundry capabilities. Targeting ASICs, PMICs, microcontrollers, and NOR flash, the fab offers opportunities for new applications utilizing 65-nanometer technology. - Thomas Sonderman(CEO)