Amtech (ASYS)

Semiconductor production equipment provider Amtech Systems (NASDAQ:ASYS) reported Q3 CY2025 results topping the market’s revenue expectations, but sales fell by 17.7% year on year to $19.84 million. On the other hand, next quarter’s revenue guidance of $19 million was less impressive, coming in 2.6% below analysts’ estimates. Its non-GAAP profit of $0.10 per share was significantly above analysts’ consensus estimates.

Company Overview

Focusing on the silicon carbide and power semiconductor sectors, Amtech Systems (NASDAQ:ASYS) produces the machinery and related chemicals needed for manufacturing semiconductors.

Companies offering competing semiconductor production equipment include Centrotherm, CVD Equipment (NASDAQ:CVV), Vitronics Soltec, and Rehm Thermal Systems.

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Amtech’s sales grew at a mediocre 3.9% compounded annual growth rate over the last five years. This fell short of our benchmark for the semiconductor sector and is a poor baseline for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Amtech’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 16.3% annually.

This quarter, Amtech’s revenue fell by 17.7% year on year to $19.84 million but beat Wall Street’s estimates by 16.7%. Despite the beat, the drop in sales could mean that the current downcycle is deepening. Company management is currently guiding for a 22.1% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 9.9% over the next 12 months. While this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, Amtech’s DIO came in at 155, which is 1 more days than its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are slightly above the long-term average.

Gross profit margin is a key metric to track because it shows how much money a semiconductor company gets to keep after paying for its raw materials, manufacturing, and other input costs.

Amtech’s gross margin is one of the worst in the semiconductor industry, signaling it operates in a competitive market and lacks pricing power. As you can see below, it averaged a 35.5% gross margin over the last two years. That means Amtech paid its suppliers a lot of money ($64.52 for every $100 in revenue) to run its business.

This quarter, Amtech’s gross profit margin was 44.4%, up 3.8 percentage points year on year. Zooming out, however, Amtech’s full-year margin has been trending down over the past 12 months, decreasing by 2.6 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Although Amtech was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 3.1% over the last two years. Unprofitable semiconductor companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, Amtech’s operating margin decreased by 10.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Amtech’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Amtech generated an operating margin profit margin of 9.3%, up 9.2 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Amtech’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, Amtech reported adjusted EPS of $0.10, up from $0 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Amtech’s full-year EPS of $0.06 to grow 300%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Amtech has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 6.6%, lousy for a semiconductor business.

Taking a step back, an encouraging sign is that Amtech’s margin expanded by 19.3 percentage points over the last five years. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Amtech’s free cash flow clocked in at $2.02 million in Q3, equivalent to a 10.2% margin. This result was good as its margin was 4.8 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Amtech’s five-year average ROIC was negative 1.9%, meaning management lost money while trying to expand the business. Its returns were among the worst in the semiconductor sector.

Amtech reported $17.9 million of cash and $19.51 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $5.38 million of EBITDA over the last 12 months, we view Amtech’s 0.3× net-debt-to-EBITDA ratio as safe. We also see its $213,000 of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Amtech beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its revenue guidance for next quarter missed. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 5.8% to $9.98 immediately following the results.

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Amtech’s business quality ultimately falls short of our standards. To kick things off, its revenue growth was mediocre over the last five years. And while its rising cash profitability gives it more optionality, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its operating margins reveal poor profitability compared to other semiconductor companies.

Amtech’s P/E ratio based on the next 12 months is 38.9x. This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $6 on the company (compared to the current share price of $9.98), implying they don’t see much short-term potential in Amtech.