SkyWater Technology SKYT shares have lost 37.7% in the trailing 12 months, underperforming the Zacks Computer and Technology sector and the S&P 500 index’s return of 5.4% and 9.5%, respectively. The stock has also underperformed the Zacks Electronics – Semiconductors industry’s growth of 0.9% in the same time frame.

The stock’s underperformance can be attributed to weaker sentiment around semiconductor stocks, as investors worry about how profitable and lasting the AI trend really is. Since SkyWater is part of this industry, it has been affected by the overall slowdown and falling interest in chip-related stocks. Additionally, its Wafer Services revenues declined 56% to $26.9 million in 2024, mainly due to continued weakness in the automotive and industrial sectors.  

To turn things around, the company is taking strategic steps to strengthen its core operations and drive future prospects. Let’s take a closer look at how SKYT is laying the foundation for sustained growth.

Strategic Moves to Drive Long-Term Growth in Wafer Services

SkyWater is making a significant move by acquiring Infineon’s Fab 25, a large-scale 200mm chip manufacturing plant in Austin, TX. The facility can produce more than 30,000 wafers each month and is expected to contribute around $300 million in annual Wafer Services revenues, helping SkyWater achieve a more balanced revenue mix between its Advanced Technology Services and Wafer Services segments.

SkyWater launched ThermaView Solutions to enter the rapidly growing thermal imaging market across defense, industrial and medical sectors. This initiative strengthens the company’s strategic focus on growth markets while driving opportunity for the long-term revenue expansion of its Wafer Services segment. In 2025, new products, including ThermaView and ATS-to-Wafer conversions, are expected to drive Wafer Services’ growth. The segment will shift from 90% legacy products and 10% new products in 2024 to 60% new products in 2025, with legacy products making up the remaining 40%.

SKYT’s Competition and How It Stays Ahead

The company faces competition from giants like Tower Semiconductor TSEM, GlobalFoundries GFS and ON Semiconductor ON. Tower Semiconductor specializes in manufacturing analog integrated circuits for semiconductor companies and GlobalFoundries manufactures integrated circuits on wafers for automotive and aerospace markets, among others. ON Semiconductor provides semiconductor solutions for automotive and industrial appliances. Shares of Tower Semiconductor, GlobalFoundries and ON Semiconductor have lost 3.2%, 32% and 48.7%, respectively, in the trailing 12 months.

SkyWater stays ahead of bigger rivals by focusing on specialized, high-value chip production rather than mass-market manufacturing. Additionally, as a Department of Defense-accredited trusted foundry, SkyWater benefits from government contracts and defense projects that competitors without this status cannot access.

SKYT’s Q1 2025 Guidance

SKYT expects non-GAAP loss per share in the range of 10-16 cents and revenues in the band of $59-$63 million in the first quarter of 2025.

The Zacks Consensus Estimate for SKYT’s first-quarter 2025 loss is currently pegged at 13 cents per share, which has remained unchanged over the past 30 days. The estimate suggests year-over-year decline of 62.5%. The consensus mark for revenues is pegged at $61.05 million, indicating a year-over-year decline of 23.34%.

SKYT beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once, with the average surprise being 179.29%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar

Here’s Why You Should Buy SKYT Stock Now

SkyWater Technology’s strategic moves like the Fab 25 acquisition and the launch of ThermaView highlight its sharp focus on growth, innovation and diversification. While larger rivals face broader market challenges, SkyWater is carving a path through specialization and strategic partnerships with companies like Quantum-Si Incorporated, NanoDx and Multibeam Corp. Its unique positioning in high-value, defense-aligned markets and support from the CHIPS Act further reinforce its long-term potential in a shifting semiconductor landscape.

SKYT currently sports a Zacks Rank #1 (Strong Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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