ACM Research (Nasdaq: ACMR) delivered record third-quarter 2025 revenue of $269.2 million, up 32% year over year, as AI and data-center-driven wafer-fab-equipment spending broadened demand across its portfolio. However, profitability compressed sharply: gross margin fell to the low end of the 42%-48% target at 42.1% (from 51.6%), hurt by roughly 200 basis points of unfavorable mix from smaller, lower-margin front-end tools and roughly 300 basis points of higher inventory provisions, while operating expenses rose 56.3%. Operating income declined 35% to $36.5 million (13.6% margin versus 27.5%) and net income attributable to ACM Research fell to $24.8 million, or $0.36 diluted EPS, from $42.4 million and $0.63. The balance sheet strengthened dramatically after ACM Shanghai completed a second capital raise for approximately $623 million net, lifting net cash to $811 million (about $12 per share) from $205.8 million a quarter earlier, though ACM Research's ownership of ACM Shanghai declined to 74.6% from 81.1%. Segment growth was led by ECP, furnace and other technologies (+73%, a record ECP front-end quarter) and advanced packaging excluding ECP (+231%), with traditional single-wafer cleaning up 13%. Management narrowed full-year 2025 revenue guidance to $875-$925 million (still about 15% growth) but flagged a shipment inflection - Q4 shipments down sequentially and full-year shipments down year over year for the first time in many years - driven by a tough 2024 comparison, customer push-outs into Q1 2026 and parts shortages, with a rebound expected in 2026 as new products (high-temperature SPM, furnace, panel-level horizontal plating, PECVD and Track) begin to ramp. ACM shipped its first high-throughput KrF Track tool, reached single-digit particle counts at 19 nm on its high-temperature SPM platform, brought its Lingang center (up to $3 billion annual capacity) to full operation, and reiterated a differentiated, IP-protected strategy to win share in China and expand with global customers.
Good day everyone. Thank you for joining us to discuss third quarter 2025 results which we released before the U.S. market opened today. The release is available on our website as well as from newswire services. There is also a supplemental slide deck posted to the Investor section of our website that we will reference during our prepared remarks on the call. With me today, our CEO, Dr. David Wang, our CFO Mark McKechnie, and Lisa Feng, our CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to slide 2. Let me remind you that the remarks made during this call may include predictions, estimates, or other information that might be considered forward looking. These forward looking statements represent ACM Research's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially.
Those risks are described under Risk Factors and elsewhere in ACM Research's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements which reflect ACM Research's opinions only as of the date of this call. ACM Research is not obliged to update you on any revisions to these forward looking statements. Certain financial results that we provide on this call will be on a Non-GAAP basis which excludes stock-based compensation and unrealized gains and losses on short-term investments. For our GAAP results and reconciliation between GAAP and Non-GAAP amounts, you should refer to our earnings release which is posted on the IR section of our website and on slide 13. Also, unless otherwise noted, the following figures refer to the third quarter of 2025 and comparisons are with the third quarter of 2024.
With that, I will now turn the call over to David Wang.
David, thanks, Stephen. Hello everyone, and welcome to ACM Research third quarter earning conference call. I'm very pleased to report another strong quarter for ACM Research. Revenue grew 32% year-over-year to a new quarterly record, reflecting broader demand across our innovation product portfolio. Across industry, AI and data center investment are accelerating semiconductor and wafer fab equipment spending. AI is also demanding new innovations, many of which have yet to be developed. We believe these trends are driving the market toward us. ACM Research's strategy remains a focus on building a multi-product portfolio of world-class tools that expand our service market and play a critical role in enabling the next generation of chipmaking. Our differentiated technology continues to raise the performance bar across both front end and advanced packaging applications.
For example, in advanced packaging we are seeing strong global customer engagement in our proprietary horizontal plating technology for panel level packaging and we plan to ship our first system in the fourth quarter. In cleaning, our high temperature SPM platform is reaching industry leading performance as our proprietary nozzle design achieving performance at 19 nanoparticle size down to single digit particle counts. We believe this will lead to higher product yield for our customers. Further, with no need to clean the outer chamber, the tool requires significantly lower maintenance.
This is a truly world class tool and our team has roadmap to even lower particle size down to 70 nano, 50 nano and 30 nano to support the next few generation technology nodes. In track, we shipped our first KR4 high throughput track platform this quarter, further broaden our reach into lithography adjacent applications which demonstrate ACM the ability to grow into new product categories together with innovations such as nitrogen bubbling cleaning and etchers and a high temperature furnace discussed last quarter. This advancement reflect ACM commitment to continuous innovation and the tangible performance improvement we are delivering to customer. In September, our ACM Shanghai subsidiary completed its second capital raising on stock market raising net proceed approximately $623 million.
ACM has the technology, the customers, the capacity and global reach and now additional capital to pursue our mission to become a key supplier to major global semiconductor producers. This fund strengthens our balance sheet and will be used for additional investment in our Lingang Mini line and to expand our global production capacity. We also plan to accelerate our R&D investment. This will advance our existing cleaning and electroplating tool for next generation process. It will also speed up the development for our new product categories including furnace, PCVD track and panel level packaging tools and we're also investing in new products that we have not announced yet. ACM is committed to world class product for both China and global customers. Our tools enable next generation device architecture and help solve our customers' complex process challenges across front and back end applications.
We have a world-class technology and a strong IT position. Customers around the world come to us for our technology rather than for low price. We believe this is the right combination to grow our business and maintain our gross margin targets. We feel that ACM is now at an inflection point in which innovation will win the game and drive a significant shift in the market share. Now on to our business results. Please turn to Slide 3. For the third quarter of 2025 we delivered revenue of $269 million, up 32% year-over-year. Shipments were $263 million, up 1% year-over-year. Gross margin was 42.1%. This was at the low end of our target due in part to product mix, inventory provision, and other adjustments. There is no change to our target model range of 42%-48%.
We ended the quarter with a net cash $811 million versus $206 million last quarter and $2,059 million at the year end of 2024. Now I will provide detail on product. Please turn to slide 4. Revenue from single wafer cleaning, Tahoe, and semi-critical cleaning tool grew 13% and represent 68% of total revenue. We believe our top and bottom cleaning portfolio is world class and put us in a strong position to gain additional share both in China and to expand into a global market. The 13% year-over-year growth was mainly from our traditional cleaning product. The contribution from our newer cleaning line, including single wafer, SPM, Tahoe, and supercritical CO2, is still fairly small. We expect this new platform, especially SPM, to contribute more revenue in 2026 and beyond.
We estimate an incremental opportunity of more than $1 billion for those new cleaning products from the mainland China market alone. We remain confident in our target for 60% market share in China market and we expect higher growth rates for cleaning next year and beyond. Revenue for ECP, furnace, and other technology grew 73% and represent 22% of total revenue. We had a record revenue quarter for ECP Front End tool, which represent about 60% of the mix for this group. This group, including our MAPP ECP3D and ECP G3 production, all of which grew from last year. ECP backend tools were about 40% of the mix for the quarter. Revenue from furnace was small for the quarter and year to date. That said, we are making good technical progress across a range of customers and multiple product offerings.
This including ultra high temperature anneal furnace which operates at more than 1250 degrees Celsius, our LPCVD oxidation and ALD for both thermal and plasma. We continue to focus on qualification at key customers and we anticipate incremental revenue contribution from furnace in 2026. As I noted earlier, we are seeing very strong interest in our panel level plating tool for advanced packaging from both China and the global customers. We will ship our first panel level packaging tool in Q4. Revenue for advanced packaging, which excludes ECP but including service and spell, was up 231% and represent 10% of revenue. About two-thirds of this group for this quarter is small tools for advanced packaging. This including coder, developer, etcher, stripper, and wafer level packaging tool that run around $500,000-$1,000,000 each. We had a good contribution this quarter from a handful of different customers.
Although we include plating product for advanced packaging in the ECP group and the combination is very powerful, it provides ACM invaluable insight into the challenges of next generation packaging as AI drives industry towards 2.5D and 3D integration stacking die with through silicon via TSV and integrated memory and logic in a single packaging. We also shipped advanced packaging tool in Q3 to two new customers in the U.S. and we expect installation and then tool acceptance in next couple of quarters. We are making good progress with our new Track and PCVD platforms. I already mentioned the shipment of our first KR4 Track tool. We believe our high throughput design positions this platform to compete effectively with the incumbent supplier. Our proprietary PCVD platform with three chucks per chamber gives the flexibility to support a wide range of processes with the same hardware.
We feel good about our positioning as the team continue to work through the technical detail with a field tool. Our Lingang Mini Lab running wafer test and the EVA tools plan to ship in the near term to close on product. ACM's culture of innovation continue to deliver industrial leading performance across the broader portfolio. Customer engagement is deepening as chip makers look for partner that can enable their next generation processes. Please turn to Slide 6. Global WFE demand continues to be fueled by investment in AI and data center infrastructure particularly in advanced logic and memory. While China market in our view remains stable, last quarter we increased our long term revenue target to $4 billion supported by an estimate $2.5 billion contribute from China and $1.5 billion from global markets. Next let me provide an update on our production facility. First is Lingang.
Please turn to Slide 8. Our new Lingang Production and R&D center is now fully up and running. The site's first building is already in volume production while the second is providing additional room for future expansion. Together the two buildings can support up to $3 billion in annual output. Positioning ACM to meet growing customer demand and support our long term growth plans, we plan to allocate part of the proceeds from ACM Shanghai's secondary capital raising to expand our MINI line at Lingang to strengthen our process development capability and enable on-site customer evaluation under fab-like conditions. This will accelerate product validation, shorten development cycle, and enhance collaboration with the key customer as we expand our portfolio of next generation tools. Turn to our Oregon site. Please turn to Slide 9.
This facility will allow customers to test wafer locally on ACM tool and will serve as our initial base for production and technology development in the United States. Our global customers are encouraged by our commitment which we believe will help them to choose ACM as a key supplier to scale production. Now I will provide our outlook for the full year 2025. Please turn to slide 10. We have narrowed our 2025 revenue outlook to a range of $875 million-$925 million versus prior range of $850 million-$950 million. This implies 15% year-over-year growth. At the middle point, we made greater progress with several major product lines this year including Single Wafer, SPM, Tahoe, Panel Level Plating, Furnace, Track, PCVD.
Thank you, David. Good day, everyone. Please turn to slide 11. Unless I note otherwise, I will refer to Non-GAAP financial measures, which exclude stock-based compensation, unrealized gain or loss on short-term investments. A reconciliation of these Non-GAAP measures to comparable GAAP measures is included in our earnings release. Unless otherwise noted, the following figures refer to the third quarter of 2025, and comparisons are with the third quarter of 2024. I'll now provide financial highlights. Revenue was $269.2 million, up 32%. Total shipments are $263.1 million, up 28% sequentially and up 0.7% year-over-year. Gross margin was 42.1% versus 51.6%. This is the low end of our target model. Adding color to David's earlier remarks, we attribute this to two key factors. First, product mix.
Our Q3 sales included a high number of smaller front end tools which had poor margins and that contributed about 200 basis points of the headwind to the gross margin. Second, we had a higher level of inventory provisions and other adjustments which hit our COGS for the quarter contributed about 300 basis points. Negative impact. I want to reiterate there's no change to our target model of 42%-48%. ACM is fully committed to developing world class tools that enable our customers to scale production of leading edge semiconductor devices. We believe this creates a healthy pricing environment for our tools which combined with an efficient cost structure results in good profitability. Operating expenses were $76.9 million up 56.3%. Our R&D was 14% of sales. Sales and marketing was 7.7% of sales and GNA was 6.9% of sales for 2025.
We continue to plan for R&D in the 14%-16% range, sales and marketing in the 8% range, and G&A in the 6% range. Operating income was $36.5 million, down 34.9%. Operating margin was 13.6% versus 27.5%. Income tax expense was $2.9 million versus $4 million for 2025. We now expect our effective tax range in the 7%-8% range. Net income attributable to ACM Research was $24.8 million versus $42.4 million. Net income per diluted share was $0.36 versus $0.63. Our Non-GAAP net income excluded $7.6 million in stock-based compensation expense for the third quarter and $18.7 million in unrealized gain investments. I remind the analysts that as a result of the second capital raise of $632 million net by our subsidiary ACM, ACM's ownership in ACM Shanghai is now 74.6% versus 81.1% at the end of last quarter.
I will now review selected balance sheet and cash flow items. Cash and cash equivalents, restricted cash, and time deposits were $1.1 billion at the end of the third quarter versus $483.9 million at the end of the second quarter. Net cash, which excludes the short term and long term debt, was $811 million or about $12 per share versus $205.8 million at the end of the second quarter. Total inventory net was $676.4 million versus $648.3 million at the end of the second quarter. Raw materials were $326.2 million, up $40.6 million. quarter-over-quarter, we made additional strategic purchases to support production plans and to mitigate any potential supply chain risk. Work in progress was $59.5 million, down $1.2 million quarter on quarter. Finished goods inventory was $290.7 million, down $11.3 million quarter-over-quarter.
Finished goods inventory primarily consists of first tools under evaluation at our customer sites along with finished goods located at ACM's facilities. Cash flow used by operations was $4.6 million for the third quarter and $44.4 million year to date. Capital expenditures were $43.2 million for the full year. We expect to spend about $60 million-$70 million in capital expenditures. That concludes our prepared remarks. Let's open the call for any questions that you may have. Operator, please open up the call for questions.