Amkor Technology Reports Strong Q2 2025 Results, Driven by AI and Advanced Packaging Demand

Amkor Reports 3 Percent Q2 Revenue Gain | The Motley Fool

- Gross margin for Q2 2025 fell to 12.0%, continuing year-ago margin pressure from Q1 to Q2 2025. Amkor Technology (NASDAQ:AMKR), a major provider of semiconductor packaging and test services, released its second quarter 2025 results on July 28, 2025. The main headline was a substantial GAAP revenue and earnings beat for Q2 2025. The company delivered $1.51 billion in GAAP revenue. Although profits and revenue both improved from the prior quarter, gross margin (GAAP) contracted from a year ago, reflecting ongoing industry cost pressures. Overall, it was a solid quarter for Amkor as it saw broad-based sequential improvements, highlighted by strong demand in advanced packaging for high-performance and AI applications. Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report. Amkor Technology provides outsourced semiconductor assembly and testing services to chipmakers around the world. The company works with leading customers in mobile devices, computing, automotive, consumer electronics, and industrial applications. Its business centers on advanced packaging -- technology that allows more powerful and energy-efficient chips to be produced by combining multiple semiconductor components in a single package. Amkor's recent focus has been on expanding its advanced packaging capabilities, developing new facilities across the globe, and deepening customer partnerships in artificial intelligence, automotive, and high-performance computing. Key success factors include its investments in research and development, continual improvement of manufacturing processes, and its diverse geographic footprint, which allows it to offer flexibility for customers in managing supply chain risks. This quarter, Amkor reported GAAP revenue of $1.51 billion, $88 million above consensus and up 3.4% compared to Q2 2024. Communications remained the largest market at 40% of sales, but declined from 48% a year ago, while the computing and consumer segments grew in both percentage and dollar terms. GAAP EPS of $0.22 was $0.06 ahead of estimates, but down from $0.27 last year. Gross margin, which measures how much of each sales dollar is left after production costs, slipped to 12.0%, down from 14.5% in Q2 2024. While margins were flat compared to the first quarter, they remain below historical levels. A one-time benefit of $32 million tied to a contingency payment from the 2017 Nanium acquisition helped boost operating income and EBITDA. The net effect on EPS was $0.07. Stripping this out, operational profitability would have grown more modestly versus the prior quarter. Operating income (GAAP) jumped to $92 million from $82 million a year ago. In advanced products -- such as flip chip packages, wafer-level processing, and 2.5D system-in-package (SiP) technologies -- sales reached $1,228 million, up 15% from the prior quarter and 4% from a year ago. These technologies are critical for chips powering artificial intelligence, data centers, and automotive features like advanced driver assistance systems (ADAS). Amkor ramped new design wins in areas like redistributed layer (RDL) technology and co-packaged optics, with several more customer programs moving into qualification for later periods. Amkor continues to emphasize leadership in advanced chip packaging, devoting $42 million to research and development in Q2 2025 and $87.66 million for the six months ended June 30, 2025, compared with $77.74 million for the six months ended June 30, 2024. The first phase of a new expanded chip test facility in Korea is on track to open by late 2025. Geographic diversification is another main focus. Amkor operates major manufacturing locations in Vietnam, Korea, Portugal, and is planning a large advanced packaging plant in Arizona, set to begin construction in the back half of the year. The company points to flexibility in its supply chain as a way to manage evolving global tariffs and export controls, with management describing its manufacturing footprint as an advantage for mitigating risk and partnering with customers through disruptions. Amkor also noted that TSMC's expansion in the U.S. could be a growth opportunity, reflecting confidence in its collaborative model within the broader semiconductor supply chain. The company's business remains heavily tied to its largest customers, with the top ten accounting for 72% of revenue. Named customers include Apple and Qualcomm. While these deep relationships anchor revenue and provide stability, they also mean Amkor is sensitive to the timing and scale of new product launches or changes in customer procurement patterns. Management cited strong, ongoing communication with these accounts to handle any supply chain changes or cost shifts prompted by trade policy or shifting production needs. Gross margin and inventory trends remain important areas to watch. Inventory increased to $375 million from $311 million at year end. Total debt (GAAP) rose to $1.57 billion at June 30, 2025, up from $1.16 billion at December 31, 2024. The company's cost structure, which involves a high ratio of fixed manufacturing costs, makes profitability especially sensitive to swings in end demand. Management provided guidance for Q3 2025, expecting net sales in the range of $1.88 billion to $1.98 billion. The midpoint points to around 27% sequential growth from Q2 to Q3 2025. Gross margin is forecast to rebound slightly, returning to a range of 13.0% to 14.5%. Net income (GAAP) guidance is $85 million to $120 million, with EPS projected between $0.34 and $0.48. Planned capital expenditures (CapEx) remain at $850 million for FY2025, with 5% to 10% estimated for the new advanced packaging facility in Arizona. The company cited new customer programs in communications and compute as likely drivers for the second half. Amkor remains cautious about macroeconomic and trade risks, but anticipates some margin recovery as utilization improves. Key watch areas for future quarters include margin progression, inventory management, project execution at new sites, and ongoing developments in global trade policy. The quarterly dividend was held steady at $0.08269 per share, paid on June 25, 2025.

Transcript : Amkor Technology, Inc., Q2 2025 Earnings Call, Jul 28, 2025

We will make forward-looking statements today based on our current beliefs, assumptions and expectations. Such statements are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our press release and SEC filings for a discussion on the risk factors and uncertainties that may affect our future results. We assume no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this presentation, except as may be required by applicable law. Thank you, Jennifer. Good afternoon, everyone, and thank you for joining the call today. Amkor delivered second quarter revenue of $1.51 billion, an increase of 14% sequentially, well above expectations and with all end markets showing double-digit sequential growth. I'm pleased with the way the team adapted quickly to support customers amid complex global conditions. They showed the agility and flexibility by accelerating product transfers and volume increases, delivering strong revenue growth. At the same time, the environment in which we operate remains dynamic. We continue to monitor export controls and trade policies working closely with customers and suppliers to address potential impacts. Our factory operations, which are largely situated in the free trade zones remain resilient while supporting dynamic supply needs. Within our end markets, communications grew 15% sequentially driven by the iOS ecosystem. Android revenue remained flat sequentially and increased 7% year-on-year. We expect a strong third quarter, driven by the launch of the next-generation premium tier smartphones. As AI expands into edge devices, we are working closely with lead customers to assess future device needs and develop advanced packaging solutions to support these innovations. In computing, revenue increased 16% from the first quarter driven by new product ramps in personal computing as well as growth in memory. Looking ahead to the third quarter, we expect sequential revenue growth across data centers, infrastructure and personal computing. Demand for AI and high-performance computing applications continues to expand, and our project pipeline remains robust. Export control dynamics led to several supply challenges in the quarter. However, by working closely with our customers, we were able to rapidly respond to the changing demand environment. A major milestone in the quarter was the launch of the first high-density fan-out product in high-volume production for our lead customer. Besides our proven 2.5D technologies, high-density fan-out utilizing RDL interconnect technology is a critical enabler for growth in the compute domain. Revenue in the automotive and industrial markets grew 11% sequentially, driven by new product launches for ADAS applications across multiple customers. After 8 consecutive quarters of year-on-year declines, Q2 marked an inflection point with 6% year-on-year growth. For the third quarter, we expect modest sequential revenue growth. Engagements with lead customers in the automotive domain shows growing interest in advanced packaging technologies like 2.5D for next-generation solutions. Our presence in the computing market and our global manufacturing footprint position us well to capture these future automotive opportunities. Lastly, in consumer, revenue increased 16% sequentially on market share gains in wearables as well as broad-based demand improvement in traditional products. Next quarter, consumer revenue is expected to be flat. Looking ahead to the third quarter, we expect these positive trends to continue, supporting strong sequential growth and position us well for sustainable long-term success. Amkor's strategy focuses on delivering differentiating technology solutions, expanding our global footprint to support customer supply chains and collaborating with lead customers early in their product development. Last quarter, I discussed these strategic pillars. Today, I will highlight our technology differentiation and strong capability to deliver next-generation solutions for our computing customers. The accelerated development of AI is significantly changing the computing domain in terms of technology requirements, rate of innovation and regional requirements for manufacturing facilities. Amkor is expanding its strategic presence in this market. Following a record computing revenue in 2024, we sustained momentum in the first half of 2025 with 18% year-over-year growth. Our customers span the full compute ecosystem from CPUs, GPUs and AI accelerators to memory, networking and peripherals. We collaborate with industry leaders across these domains supporting advanced technologies like high-density fan-out, advanced flip chip and system and package. Our [ proof ] of 2.5D and high-density fan-out solutions excel for high-bandwidth memory integration and high-density interconnects while our flip chip and multichip module portfolio is preferred for other high-performance non-high bandwidth memory applications. Besides advanced packaging solutions, we continue to invest in the development of key enabling technologies, including advanced bonding and high conductive thermal materials to meet demanding performance and reliability requirements. As innovation accelerates, our role evolves from a trusted manufacturing partner to a collaborative development partner, enabling our customers' technology road maps and bringing next-generation solutions to markets. Along with advanced packaging, we are building a comprehensive test platform to provide turnkey solutions that address growing device complexity. We are upgrading our test fleet to support high-density digital pins and power supplies. We are investing in next-generation temperature stability handling systems as well as high-power burn-in and system-level tests. In parallel, we are upscaling our test engineering to meet the demands of AI and high-performance computing applications, offering a full turnkey solution for the computing market is a key part of our strategy and test revenue in this market grew approximately 50% year-over-year in the first half of 2025. We are expanding test operations in Korea with Phase 1 of the turnkey test expansion projected to be operational by the end of this year and Phase 2 following in the first half of 2027. We are planning to deploy these test solutions in our new Arizona facility to support a full turnkey U.S. supply chain. Our advanced packaging and test lines in Korea and Taiwan supporting computing are running at high levels of utilization and capacity expansions are a substantial part of our 2024 and '25 CapEx spend. Although investments are sizable, these lines generate margins above corporate average. Strong forecasted demand is driving continued capacity expansion in both of these locations. This comprehensive strategy positions us as a trusted partner to the world's largest semiconductor companies. With a clear strategic focus and distinct competitive advantages, we are well positioned for growth. With that, I will now turn the call over to Megan to provide more details on our second quarter performance and near-term outlook.