SkyWater Technology, Inc. (SKYT) Q2 2025 Earnings Call Transcript

SkyWater Technology reported Q2 2025 revenues of $59.1 million, at the upper end of guidance, with adjusted EBITDA of $2.3 million. The company's significant strategic move was the $93 million acquisition of Infineon's Fab 25, which closed in Q3, immediately doubling SkyWater's revenue scale and adjusted EBITDA and establishing it as the largest U.S.-based pure-play foundry with a 4x increase in 200mm capacity. Bolstered by a multi-year supply agreement with Infineon exceeding $1 billion, SkyWater projects Q3 consolidated Adjusted EBITDA of $10M-$12M (including Fab 25's $8M contribution) and anticipates at least $600 million in revenue and $60 million in Adjusted EBITDA for 2026, driven by the Fab 25 integration, quantum computing growth, and advanced packaging ramp-up, despite ongoing DoD funding delays.

Analysis

SkyWater Technology's Q2 2025 results, with revenue of $59.1 million at the high end of guidance and an adjusted EBITDA of $2.3 million, were overshadowed by the transformative acquisition of Infineon's Fab 25. This $93 million deal, which closed at the start of Q3, is set to immediately double the company's revenue scale and adjusted EBITDA, establishing SkyWater as the largest U.S.-based pure-play foundry and quadrupling its 200mm capacity. The acquisition is anchored by a multi-year, take-or-pay supply agreement with Infineon projected to exceed $1 billion, providing a stable revenue base of approximately $75-$80 million per quarter. Management has issued a preliminary 2026 outlook of at least $600 million in revenue and $60 million in adjusted EBITDA, signaling confidence in this new profile. However, investors must note the significant impact of purchase accounting; an estimated $30-$45 million in annual non-cash depreciation will compress reported gross margins, making adjusted EBITDA the more relevant metric for performance. While the acquisition provides scale and predictable cash flow, headwinds persist in the organic Advanced Technology Services (ATS) business, where government funding delays for Department of Defense programs are now expected to continue through 2025. This is offset by strong momentum in other growth areas, particularly quantum computing, which is forecast to grow over 30% in 2025.

Key Decisions for Investors

• Investors should prioritize adjusted EBITDA and free cash flow over reported gross margins when evaluating performance, as non-cash purchase accounting depreciation from the Fab 25 acquisition is expected to add a significant 500-700 basis point headwind to quarterly gross margin.
• The primary catalyst for upside beyond the baseline $600 million revenue forecast for 2026 will be the successful integration of higher-margin, non-Infineon business into Fab 25; monitor for new customer announcements and product transfers leveraging the newly licensed IP.
• Weigh the stability from the transformative Fab 25 acquisition against the persistent funding delays in the high-margin Department of Defense business, as any resolution to these government funding issues would represent a material upside to current forecasts.
• Look for progress in the company's high-growth organic initiatives, specifically the planned release of a new quantum computing platform and customer wins in advanced packaging, to validate the long-term growth story beyond the foundational foundry business.