SkyWater Technology 2025 Q1 Earnings Misses Targets as Net Income Declines 34.2%

SkyWater Technology (SKYT) reported its fiscal 2025 Q1 earnings on May 08th, 2025. The company's revenue fell short of expectations, declining by 23% year-over-year to $61.30 million. Despite the revenue drop, SkyWater anticipates improvements in gross margin and adjusted EBITDA for fiscal 2025, contingent on resolving federal budget delays. The guidance suggests an optimistic outlook with potential record ATS revenue if funding issues are addressed. However, the company did not meet expectations for net income, reporting a wider GAAP net loss.

Revenue
SkyWater Technology's total revenue decreased by 23.0%, amounting to $61.30 million in 2025 Q1 compared to $79.64 million in the same quarter of the previous year. The ATS development segment contributed $52.53 million, while revenue from time-and-materials and cost-plus-fixed-fee contracts reached $37.08 million. Fixed-price contracts added $14.29 million, and other revenue streams accounted for $1.17 million. Wafer Services achieved $7.53 million, and Tools generated $1.23 million, culminating in a total revenue of $61.30 million.

Earnings/Net Income
SkyWater Technology's losses deepened to $0.15 per share in 2025 Q1 from a loss of $0.12 per share in 2024 Q1, marking a 25.0% wider loss. The company's net loss increased to $-6.22 million in 2025 Q1, representing a 34.2% rise from the $-4.63 million loss recorded in 2024 Q1. The sustained losses underscore ongoing financial challenges, indicating poor EPS performance.

Price Action
The stock price of SkyWater Technology climbed 4.97% during the latest trading day, increased 4.53% over the most recent full trading week, and surged 22.15% month-to-date.

Post-Earnings Price Action Review
Over the past five years, the strategy of buying SkyWater Technology shares after a revenue increase and holding for 30 days has yielded mixed results. While there were brief periods of positive returns, the strategy overall underperformed the market, with a total return of -4.76% compared to a 14.16% return for the S&P 500 during the same period. It exhibited volatility, showing significant losses in certain quarters, such as a 28.08% loss from May 2020 to May 2021, followed by a 31.82% gain from May 2021 to May 2022. However, it then declined by 13.95% from May 2022 to May 2023 and lost an additional 10.53% from May 2023 to May 2024. The strategy consistently underperformed the S&P 500, with only one quarter showing higher returns than the market. Its beta of 1.2 indicated moderate risk relative to the market, but the maximum drawdown of -34.42% highlighted the strategy's high risk during downturns. Overall, the strategy proved volatile and risky, particularly for risk-averse investors.

CEO Commentary
"We’re pleased to report that our financial results for the first quarter reflect modest upside to our expectations entering the year," commented Thomas Sonderman, CEO. The strong sequential growth in our Wafer Services business was driven by robust demand for the ThermaView platform. However, federal budget delays are softening our anticipated growth trajectory in Advanced Technology Services (ATS) following record revenues in 2024. We are confident in achieving another record ATS revenue year in 2025 if funding delays are resolved soon. We anticipate year-over-year revenue growth in both ATS and Wafer Services, along with improvements in gross margin and adjusted EBITDA.

Guidance
We believe we will achieve year-over-year revenue growth in both ATS and Wafer Services, an expansion of our gross margin profile, strong adjusted EBITDA, and non-GAAP positive EPS for fiscal 2025, provided that the requisite program funding proceeds as planned. We look forward to sharing details regarding our long-term strategic vision for the acquisition of Infineon’s Fab 25, anticipated to close in mid-2025.

Additional News
SkyWater Technology is actively pursuing strategic growth initiatives, including the acquisition of Infineon’s Austin Fab, scheduled to close mid-2025. This acquisition aims to bolster domestic foundry capacity and aligns with U.S. semiconductor supply chain goals. Moreover, the company recently appointed Dr. Percy Gilbert as Senior Vice President of Engineering, leveraging his extensive expertise to enhance engineering capabilities during this growth phase. Additionally, SkyWater expanded its Board of Directors with three new appointments, including Timothy Baxter, Tammy Miller, and Andy LaFrence, bringing diverse industry expertise to support ongoing business momentum