Should You Buy, Sell, or Hold SkyWater Stock Before Q2 Earnings?

SkyWater Technology (SKYT) projects Q2 2025 revenues of $55M-$60M and a loss of $0.16-$0.22 per share, with consensus estimates indicating a 38.6% year-over-year revenue decline due to budget delays impacting its Advanced Technology Services (ATS) segment, despite strong ThermaView adoption in Wafer Services. SKYT shares have underperformed significantly year-to-date, down 36.4%, yet the stock appears undervalued at 1.22x forward Price/Sales compared to industry peers. The company's long-term outlook remains positive, driven by its robust portfolio in thermal imaging and quantum computing, and the strategic Fab 25 acquisition, which is expected to boost ATS revenues and overall capacity, leading to an anticipated recovery in the second half of 2025.

Analysis

SkyWater Technology (SKYT) faces a challenging near-term outlook ahead of its Q2 2025 earnings, with revenue guidance of $55-60 million representing a significant year-over-year decline of approximately 38.6% at the consensus estimate of $57.3 million. The company is also expected to report a loss between 16 and 22 cents per share, a stark reversal from the 2 cents per share profit in the prior-year quarter. This anticipated weakness is primarily driven by budget delays and sluggish federal spending impacting its core Advanced Technology Services (ATS) segment. In contrast, the Wafer Services division is a bright spot, benefiting from strong adoption of the new ThermaView platform. The market has priced in these headwinds, with SKYT's stock falling 36.4% year-to-date, substantially underperforming the semiconductor industry and trading below its 50-day and 200-day moving averages. Despite a history of positive earnings surprises, the current technical and fundamental picture is weak. However, the stock appears significantly undervalued, trading at a forward Price-to-Sales multiple of 1.22x, well below the industry average of 8.63x. The long-term thesis remains intact, supported by the strategic Fab 25 acquisition, which adds 400,000 wafer starts annually and a four-year supply agreement valued at over $1 billion. This, combined with a strong position in the quantum computing and thermal imaging markets, underpins expectations for a strong recovery in the second half of 2025.

Key Decisions for Investors

• Given the expected sharp revenue decline and negative stock momentum, investors should exercise caution in the near term, as the upcoming Q2 report may reinforce the current bearish sentiment.
• For value-oriented investors with a longer time horizon, the stock's discounted forward P/S multiple of 1.22x could represent an attractive entry point, but this thesis depends on a confirmed recovery in the ATS segment in the second half of 2025.
• Monitor the Q2 earnings call for specific guidance on the timing of the ATS recovery and tangible revenue contributions from the Fab 25 acquisition, as these are the key catalysts required to justify a long position.