SkyWater Technology (SKYT 36.19%), a U.S.-based semiconductor manufacturer catering to defense, aerospace, and advanced computing sectors, reported financial results for Q2 2025 on August 6, 2025. The company’s GAAP revenue of $59.1 million slightly exceeded the analyst consensus of $57.5 million. Non-GAAP earnings per share (EPS) showed a loss of $(0.11), which was less negative than the $(0.18) analysts had anticipated. However, results reflected a steep year-over-year decline as the company continues to navigate lower demand for equipment tools and delayed government-funded projects. Management pointed to the recently closed Fab 25 acquisition on June 30, 2025, as a turning point for scale and future growth.
| Metric | Q2 2025 (Ended June 29, 2025) | Q2 2025 Estimate | Q2 2024 (Ended July 2, 2024) | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $(0.11) | $(0.18) | $0.02 | N/A |
| Revenue (GAAP) | $59.1 million | $57.46 million | $93.3 million | (37%) |
| Non-GAAP Gross Margin | 19.5 % | 18.9 % | 0.6 pp | |
| Adjusted EBITDA | $2.3 million | $8.1 million | (72%) | |
| Net Income (Loss) to Shareholders (GAAP) | $(10.0) million | $(1.9) million | (426%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Key Areas of Focus
SkyWater Technology is a U.S.-headquartered foundry providing semiconductor development and manufacturing under its Technology as a Service (TaaS) model. This approach helps customers in defense, aerospace, and bio-health transition their ideas from prototype to volume production within a secure, accredited facility. As a DMEA Category 1A Trusted foundry, SkyWater is a key partner for government clients requiring onshore, secure, and reliable chip supply.
In recent years, SkyWater has emphasized diversification and innovation. Its strategy centers on expanding capacity through acquisitions, such as the recent Fab 25 purchase completed in Q2 FY2025. The firm also aims to capture opportunities in emerging sectors like quantum computing components and advanced chip packaging. Its ability to secure U.S. government contracts, especially defense-related manufacturing, remains central to its competitive edge and growth plan.
Quarter in Review: Results, Segment Movements, and Major Events
The latest period was defined by a mix of operational execution and significant segment swings. Advanced Technology Services (ATS)—SkyWater’s development-oriented business, which includes contract research, process development, and custom manufacturing—produced $52.6 million in GAAP revenue, down 15% year-over-year. This contraction reflects continued delays in the release of U.S. government funding, especially from the Department of Defense. While this ATS figure (GAAP) matched internal expectations, management noted that “The federal budget for fiscal 2025 remains under a continuing resolution,” making the timing of new contracts unpredictable. Wafer Services, which covers contract wafer manufacturing, generated $5.4 million in GAAP revenue—a 7% drop compared to the prior year, and a 28% sequential decline in Wafer Services revenue from the previous quarter. Tools revenue (GAAP) fell sharply to $1.1 million from $25.9 million a year earlier, leading to a sizable headline drop in total company GAAP revenue.
Total GAAP revenue dropped 37% year-over-year, largely due to the collapse in Tools sales, with both ATS and Wafer Services below the year-ago run rate. However, the company performed at or above the high end of its internal guidance. Gross margin—a key indicator showing the proportion of sales remaining after the direct costs of goods sold—was 19.5% on a non-GAAP basis, up from 18.9% a year ago but down from 24.2% in Q1 2025. This occurred despite weaker overall volumes and reflected a lower mix of loss-making Tools revenue. Adjusted EBITDA, which stands for earnings before interest, taxes, depreciation, amortization, and some non-cash charges, fell to $2.3 million from $8.1 million a year ago, as overall profitability dropped due to lower revenue and slightly increased expenses.
The most significant event of the quarter was SkyWater’s completion of the Fab 25 acquisition in Austin, Texas. The acquisition closed on June 30, 2025, and was financed by a new revolving credit facility, drawing $113 million to fund the $93 million deal (cash and working capital combined). Fab 25 is expected to bring at least $300 million in annual revenue, starting in Q3 2025, backed by a projected multi-year supply agreement valued at over $1 billion. Management stated that Fab 25’s contribution should “approximately double our annual levels of revenue and adjusted EBITDA, and generate immediate positive free cash flow.” The company’s pro forma balance sheet at quarter-end shows cash of $56 million and total debt of $179 million, reflecting this large-scale investment.
From a product and market focus, SkyWater continued to report progress in strategic areas. The quantum computing business, now about 10% of company revenue as of Q1 2025, experienced continued customer and project momentum, driven by new developments in superconducting chip components and advanced packaging. The Florida-based advanced packaging business is ramping up investment and tooling, with leadership indicating that revenue from packaging services will increase in the back half of FY2025.
Looking Ahead: Management Guidance and Noteworthy Trends
SkyWater’s management provided detailed guidance for Q3 2025, now including a full run-rate from the newly acquired Fab 25 site. Total GAAP revenue is expected to rise to $130 million–$141 million, with $75 million–$80 million in GAAP Wafer Services revenue from Texas wafer manufacturing and $48 million–$52 million in GAAP ATS development revenue. However, management guided to non-GAAP gross margins between 11.0%–14.0%, anticipating that the initial Fab 25 contribution will be less accretive as integration begins. GAAP EPS loss is forecast to range from $(0.28) to $(0.22), with non-GAAP diluted loss per share between $(0.20) and $(0.14). No positive non-GAAP EPS is expected in the near term, as Q2 FY2025 non-GAAP diluted loss per share was $(0.11) and management guidance for the quarter was a non-GAAP diluted net loss per share in the range of $(0.16) to $(0.22), and the company did not initiate a dividend.
Looking to 2026, management stated that Fab 25 is expected to double annual revenue and provide a “strong growth year ahead.” However, much of the near-term recovery in both revenue and profits relies on successful integration of the Fab 25 acquisition, the ramp-up of new government contracts, and resumption of delayed project funding from the Department of Defense. Continued delays in public sector funding, lumpiness in private sector contracts, and integration risks may affect results in the coming periods.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
