PDF Solutions (PDFS) Q2 2025: Analytics Revenue Jumps 28% as AI-Driven Supply Chain Orchestration Gains Traction

August 7, 2025 | By EarningsIQ Research

PDF Solutions delivered record Q2 results, led by analytics revenue growth and expanding adoption of its AI-enabled supply chain orchestration platform. The company’s SecureWise and Sapiens offerings are seeing increased enterprise-wide deployments, while margin performance exceeded long-term targets. PDFS reaffirmed its full-year growth outlook, with bookings and backlog momentum positioning the business for continued outperformance in advanced semiconductor manufacturing connectivity.

Summary

  • AI-Driven Platform Adoption Accelerates: PDFS is capitalizing on demand for secure, integrated manufacturing analytics across the semiconductor value chain.
  • Margin Expansion Outpaces Spending: Gross and operating margins both exceeded targets as revenue growth outstripped expense growth.
  • Backlog and Bookings Set Up Strong 2H: Robust backlog growth and enterprise contracts signal sustained momentum into year-end.

Performance Analysis

PDF Solutions delivered another record quarter, with total revenue up 24% year over year and analytics revenue, the company’s core software and data analytics business, up 28%. This segment now represents the vast majority of total revenue, underscoring the company’s pivot from legacy yield ramp services to scalable, recurring analytics solutions. The quarter benefited from a mix of new enterprise contracts, including the first full quarter of SecureWise, which addresses secure remote access and orchestration needs for fabs and OEMs, and new Sapiens Manufacturing Hub wins, which tie manufacturing operations to ERP systems for advanced supply chain visibility.

Margin performance stood out, with gross margin reaching 76%, above the company’s 75% long-term target, and operating margin expanding to 19%. Operating expenses increased, primarily in personnel, but at a slower rate than revenue, driving meaningful margin leverage. Backlog closed at $233 million, reflecting strong bookings momentum, though the company notes that future Symmetrix runtime licenses and gain share revenues are not included in this figure, suggesting further upside potential.

  • Analytics Revenue Mix Deepens: Analytics now dominates revenue, reflecting the company’s shift to scalable, high-margin software and data products.
  • Integrated Yield Ramp Declines: Yield ramp revenue fell, as engagements transition to gain share phases, marking a structural shift in business mix.
  • CAPEX Spike Tied to E-PROBE Demand: Capital expenditures rose to $8.5 million, driven by EPROM machine builds, but management expects spending to moderate in the second half.

Cash flow from operations was negative for the quarter but positive for the first half, with cash and equivalents at $40.4 million. Management’s disciplined spending and high-margin product mix are supporting both profitability and reinvestment capacity as PDFS scales its platform.

Executive Commentary

"We achieve record revenue in the quarter and establish groundwork for continued growth. Given our innovative products, which align well with the trends of 3D processing and advanced nodes, complex packaging and test flows, and increased use of AI to streamline operations, we anticipate revenue growth of 21 to 23 percent for the year reaffirming our guidance."

John Cabarian, President & Chief Executive Officer

"We reported gross margins of 76% for Q2, higher than the 75% long-term gross margin target we shared during our analyst day. On the operating expense side, our expenses for the quarter were up, however they grew at a lower rate than our revenue growth rates, primarily driven by personnel-related expenses. The controlled growth in spend allowed us to expand our operating margin to 19%, higher than both last quarter as well as the same quarter of year ago."

Adnan Raza, Chief Financial Officer

Strategic Positioning

1. Supply Chain Orchestration as Platform Differentiator

PDFS is positioning its platform as a critical layer for supply chain orchestration in semiconductor manufacturing, connecting fabs, OEMs, and fabless companies. SecureWise, which enables secure remote access to tools and data, and Sapiens, which bridges manufacturing operations to ERP systems, are increasingly being adopted in enterprise-wide contracts. This connectivity is essential for deploying AI at scale, as customers require automated data flows across organizational and geographic boundaries.

2. AI and Analytics Integration Drives Value

Advanced analytics and AI integration are becoming the core value proposition, as customers seek to improve yield, productivity, and agility in manufacturing. The company’s Accentio suite, including guide analytics and ML Ops (machine learning operations), is seeing expanded pilots and renewals, with customers leveraging AI to identify critical trends and optimize engineering focus. PDFS’ ability to connect test data, manufacturing flows, and enterprise systems is emerging as a key competitive advantage.

3. China Market Exposure Managed for Resilience

China remains a significant revenue contributor, with revenue nearly doubling year to date, driven by increased deployments of characterization vehicles and analytics infrastructure. Management emphasizes that its China operations are structurally bifurcated from the rest of the business, reducing geopolitical risk. Ongoing royalty and gain share streams from prior deployments provide a buffer against potential disruptions, while continued investment in trailing edge nodes in China supports future opportunity.

4. Strategic Partnerships and Ecosystem Expansion

Partnerships with SAP and Advent Test continue to be important, but SecureWise and Sapiens are taking center stage as customers encounter new orchestration challenges when deploying AI models at scale. The company’s ability to offer secure, double-encrypted channels for data transmission and software updates is resonating with both fabs and fabless customers, as supply chain security becomes a top concern.

Key Considerations

PDF Solutions’ Q2 reflects a business in transition from legacy services to a data-centric, platform model with recurring revenue and strategic relevance across the semiconductor ecosystem. The company’s execution in analytics, AI integration, and secure connectivity is driving both top-line growth and margin expansion.

Key Considerations:

  • Analytics-Led Growth: Sustained momentum in analytics bookings and renewals is critical to maintaining high-margin revenue growth.
  • CAPEX Discipline: Recent elevated capital spending for EPROM machines is expected to normalize, but future demand spikes could drive further investment.
  • China Revenue Sustainability: Elevated China revenue may moderate, but ongoing royalty streams and structural separation mitigate risk.
  • AI and ML Ops Adoption: Expansion of ML Ops and guide analytics pilots will be a key watchpoint for future platform stickiness and upsell potential.
  • Backlog Visibility: Exclusion of Symmetrix runtime and gain share from backlog suggests further upside not yet captured in reported pipeline.

Risks

Geopolitical uncertainty in China, while somewhat insulated by structural separation and royalty streams, remains a persistent risk given the region’s contribution to revenue. Execution risk around large-scale platform integration, especially with enterprise customers deploying SecureWise and Sapiens, could impact growth if adoption lags or integration challenges emerge. Elevated capital expenditures tied to customer demand spikes may pressure near-term cash flow if not matched by subsequent revenue conversion. Investors should also monitor competitive dynamics as AI-enabled manufacturing platforms become more crowded.

Forward Outlook

For Q3 2025, PDFS guided to:

  • Continued sequential revenue growth supported by backlog conversion and new enterprise bookings
  • Gross and operating margins at or above long-term targets as analytics mix increases

For full-year 2025, management reaffirmed guidance:

  • Revenue growth of 21% to 23% over 2024, with second-half growth expected to outpace first-half trends

Management highlighted several factors that support this outlook:

  • Strong bookings pipeline, with cross-selling opportunities across SecureWise, Sapiens, and Accentio
  • Ongoing backlog growth and high customer engagement in platform pilots and renewals

Takeaways

PDF Solutions’ Q2 results reinforce its transformation into an AI-driven, supply chain orchestration platform for the semiconductor industry. The company’s ability to drive analytics-led growth, expand margin, and secure enterprise-wide contracts positions it as a strategic enabler of next-generation manufacturing.

  • Platform Relevance Expands: SecureWise and Sapiens are gaining traction as critical infrastructure for secure, connected manufacturing, supporting future AI deployment and supply chain agility.
  • Margin and Backlog Upside: Gross and operating margins are outpacing targets, and backlog growth points to sustained momentum.
  • Watch for AI and ML Ops Adoption: Continued expansion of AI-enabled analytics and customer pilots will be a key indicator of future cross-sell and upsell success.

Conclusion

PDF Solutions is executing on its strategy to become the connective tissue of the semiconductor supply chain, leveraging analytics, AI, and secure orchestration to drive both financial and strategic outperformance. Sustained margin expansion, robust backlog, and deepening customer engagement set the stage for continued growth and platform relevance in an increasingly complex manufacturing landscape.

Industry Read-Through

The Q2 results from PDF Solutions highlight a growing industry imperative for secure, integrated data orchestration across the semiconductor manufacturing value chain. As fabs, OEMs, and fabless companies ramp AI deployment and advanced packaging, demand for platforms that bridge data, tools, and enterprise systems is rising sharply. Competitors and adjacent players in semiconductor software, analytics, and equipment integration should note the accelerating shift toward recurring, platform-based business models and the increasing customer focus on supply chain security and AI-driven optimization. These trends are likely to drive consolidation, ecosystem expansion, and a premium on differentiated connectivity solutions across the sector.

PDFS Technology Semiconductors AI Analytics Supply chain Platform China