We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
SKYT Gross Margin Rises on Wafer Services Rebound: Is it Sustainable?
Read MoreHide Full Article
Key Takeaways
SKYT's Q1 non-GAAP gross profit hit $14.8M, with margins up sharply on ThermaView's January 2025 launch.
Wafer Services revenues surged 70% sequentially, led by demand from two major U.S. defense contractors.
With Fab 25 online, SKYT forecasts full-year margin stability and sees upside from cost and product mix gains.
SkyWater Technology (SKYT - Free Report) delivered a significant turnaround in profitability in the first quarter of 2025. The company’s non-GAAP gross profit rose to $14.8 million from $13.4 million, lifting the gross margin to 24.2%, a sharp 730-basis-point improvement year over year. This impressive margin expansion was primarily driven by the launch of ThermaView in January 2025, SKYT’s first proprietary platform for thermal imaging applications.
ThermaView’s rapid market adoption, particularly by two leading U.S. defense contractors, catalyzed a 70% sequential increase in Wafer Services revenues, reaching $7.5 million. This shift also reflects a broader transformation in SkyWater’s product mix, as new offerings like ThermaView began to replace legacy flows, setting the stage for sustained growth in the quarters ahead.
Looking ahead, the sustainability of this momentum appears promising. Management anticipates continued sequential growth in Wafer Services throughout 2025, driven by customer ramps and a growing innovation pipeline. The recently completed Fab 25 acquisition will significantly expand SkyWater’s manufacturing capacity and Advanced Technology Services, positioning the company to meet rising demand for foundational semiconductor technologies.
SkyWater expects both GAAP and non-GAAP gross margins to remain in the 23%-27% range for full-year 2025. With improved cost control, warranty reversals and a more disciplined tools mix, management sees further upside potential, particularly in the second half of 2025.
Competitive Landscape Stiffens for SKYT
GlobalFoundries (GFS - Free Report) is a leading U.S.-based specialty foundry with $1.6 billion in the first quarter of 2025, significantly outpacing SkyWater. GFS competes directly in sectors like government, aerospace, automotive and industrial. GFS’ strength lies in its strategic partnerships and growing role in AI-related semiconductor manufacturing. Its large-scale global operations and strong capital base give it a clear competitive advantage.
ON Semiconductor (ON - Free Report) focuses on intelligent power and sensing solutions for the automotive and industrial sectors. Its vertically integrated design and manufacturing model offers cost and supply chain advantages. ON Semiconductor’s strong position in the EV market, driven by growth in ADAS, wireless charging and sensor demand, continues to fuel revenues. This scale and focus on high-growth applications give ON Semiconductor a competitive edge over SkyWater.
In terms of valuation, SKYT is currently trading at a forward 12-month Price/Sales of 1.48X compared with the industry’s 8.6X. SKYT has a Value Score of B.
SKYT's Forward 12-Month Price/Sales Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2025 revenues is pegged at $307.15 million, indicating a 10.26% decline from 2024’s reported figure.
The Zacks Consensus Estimate for SkyWater’s 2025 loss is pegged at 1 cent per share, which has been unchanged over the past 30 days and indicates a sharp decline of 116.67% on a year-over-year basis.
Image: Bigstock
SKYT Gross Margin Rises on Wafer Services Rebound: Is it Sustainable?
Key Takeaways
SkyWater Technology (SKYT - Free Report) delivered a significant turnaround in profitability in the first quarter of 2025. The company’s non-GAAP gross profit rose to $14.8 million from $13.4 million, lifting the gross margin to 24.2%, a sharp 730-basis-point improvement year over year. This impressive margin expansion was primarily driven by the launch of ThermaView in January 2025, SKYT’s first proprietary platform for thermal imaging applications.
ThermaView’s rapid market adoption, particularly by two leading U.S. defense contractors, catalyzed a 70% sequential increase in Wafer Services revenues, reaching $7.5 million. This shift also reflects a broader transformation in SkyWater’s product mix, as new offerings like ThermaView began to replace legacy flows, setting the stage for sustained growth in the quarters ahead.
Looking ahead, the sustainability of this momentum appears promising. Management anticipates continued sequential growth in Wafer Services throughout 2025, driven by customer ramps and a growing innovation pipeline. The recently completed Fab 25 acquisition will significantly expand SkyWater’s manufacturing capacity and Advanced Technology Services, positioning the company to meet rising demand for foundational semiconductor technologies.
SkyWater expects both GAAP and non-GAAP gross margins to remain in the 23%-27% range for full-year 2025. With improved cost control, warranty reversals and a more disciplined tools mix, management sees further upside potential, particularly in the second half of 2025.
Competitive Landscape Stiffens for SKYT
GlobalFoundries (GFS - Free Report) is a leading U.S.-based specialty foundry with $1.6 billion in the first quarter of 2025, significantly outpacing SkyWater. GFS competes directly in sectors like government, aerospace, automotive and industrial. GFS’ strength lies in its strategic partnerships and growing role in AI-related semiconductor manufacturing. Its large-scale global operations and strong capital base give it a clear competitive advantage.
ON Semiconductor (ON - Free Report) focuses on intelligent power and sensing solutions for the automotive and industrial sectors. Its vertically integrated design and manufacturing model offers cost and supply chain advantages. ON Semiconductor’s strong position in the EV market, driven by growth in ADAS, wireless charging and sensor demand, continues to fuel revenues. This scale and focus on high-growth applications give ON Semiconductor a competitive edge over SkyWater.
SkyWater’s Share Price Performance, Valuation & Estimates
SkyWater shares have declined 23.3% year to date, while the broader Zacks Computer and Technology sector has returned 7% and the Electronics – Semiconductors industry has risen 13.4%.
SKYT's YTD Price Return Performance
Image Source: Zacks Investment Research
In terms of valuation, SKYT is currently trading at a forward 12-month Price/Sales of 1.48X compared with the industry’s 8.6X. SKYT has a Value Score of B.
SKYT's Forward 12-Month Price/Sales Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2025 revenues is pegged at $307.15 million, indicating a 10.26% decline from 2024’s reported figure.
The Zacks Consensus Estimate for SkyWater’s 2025 loss is pegged at 1 cent per share, which has been unchanged over the past 30 days and indicates a sharp decline of 116.67% on a year-over-year basis.
Image Source: Zacks Investment Research
SkyWater currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.