Executive Summary / Key Takeaways

• Atomera Incorporated is pioneering a materials innovation cycle in semiconductors with its Mears Silicon Technology (MST), a proprietary thin-film silicon enhancement designed to boost transistor performance, reliability, and power efficiency across critical growth markets.
• Despite a recent setback with STMicroelectronics (STM)'s BCD110 platform, Atomera demonstrated significant technical prowess by developing a new MST implementation that resolves a critical performance-reliability trade-off, a differentiator now being actively marketed to other power device manufacturers.
• The company is aggressively pursuing opportunities in high-growth segments like Gate-All-Around (GAA) logic, advanced memory (DRAM/HBM), power devices, RF-SOI, and Gallium Nitride (GaN), supported by strategic partnerships and a record number of customer wafer runs.
• Atomera maintains a lean financial profile with recurring operating losses, but its cash and cash equivalents of $20.3 million as of September 30, 2025, are deemed sufficient for at least 12 months, supplemented by ongoing at-the-market (ATM) equity offerings.
• The investment thesis hinges on Atomera's ability to convert its extensive customer engagements and proven technological advantages into significant licensing revenues and royalties, particularly as the semiconductor industry increasingly relies on materials engineering to overcome conventional scaling limits.

The Dawn of a Materials-Driven Semiconductor Era

Atomera Incorporated (NASDAQ:ATOM) stands at the forefront of a pivotal shift in the semiconductor industry, where the limits of conventional scaling are giving way to a new era of materials innovation. As chip designers grapple with the escalating demands for performance, power efficiency, and reliability in an increasingly AI-driven world, Atomera's proprietary Mears Silicon Technology (MST) offers a compelling solution. The company, which evolved from Nanovis LLC in 2001 to Atomera Incorporated in 2016, has consistently focused its efforts on research, development, and the commercial licensing of its advanced semiconductor materials and software. This strategic focus positions Atomera as a critical enabler for next-generation integrated circuits, aiming to unlock performance gains that traditional lithographic scaling alone can no longer provide.

Atomera's business model is centered on licensing its MST technology and MSTcad software to foundries, integrated device manufacturers (IDMs), and fabless semiconductor manufacturers, earning license fees and royalties per wafer or device. This approach allows Atomera to maintain a lean operational footprint while leveraging the vast manufacturing capabilities of its partners. The company's journey has been marked by persistent R&D investment and strategic partnerships, including a significant collaboration with an unnamed major capital equipment provider to accelerate adoption in advanced nodes, and a partnership with Incize to advance Gallium Nitride (GaN) technology.

MST: The Atomic Advantage in Transistor Engineering

At the heart of Atomera's investment thesis is its Mears Silicon Technology (MST), a revolutionary thin film of reengineered silicon, typically 100 to 300 angstroms thick. This ultra-thin layer is designed as a transistor channel enhancement for CMOS-type transistors, offering a suite of benefits crucial for modern semiconductor devices. MST enables the creation of smaller transistors with increased speed, enhanced reliability, and superior power efficiency. Its additive and Epi-based nature makes it a low-cost solution that can be readily integrated into existing semiconductor manufacturing processes, often with machines already common in fabs.

The tangible benefits of MST are diverse and impactful across multiple market segments. In Gate-All-Around (GAA) logic, a critical architecture for 2-nanometer and below nodes, MST improves interface traps at the channel-gate interface, reduces contact resistance, enhances transistor variability, and decreases leakage in the source/drain area, including backside contacts. These are fundamental challenges in advanced logic, and MST provides a fast time-to-market material solution. For DRAM and High Bandwidth Memory (HBM), MST is leveraged to improve sense amplifiers, contributing to higher throughput and lower power consumption, which is vital given that memory accounts for approximately 40% of power consumed in hyperscalers. In power devices, MST-SP (for 5V) and MST-SPX (for 5-48V) aim to deliver breakthrough performance by enabling designs previously considered unimplementable due to reliability trade-offs. Atomera recently developed a new MST implementation that "doubled our performance improvement without the associated reduction in device lifetime," a significant differentiator for the power market. For RF-SOI applications, MST enhances RF power switches and significantly improves Low Noise Amplifiers (LNAs) by lowering circuit bias current and power consumption, addressing the increasing demands of 5G and 6G cellular technologies. Notably, both power switch and LNA benefits can be achieved with a single MST deposition, offering a compelling two-for-one solution.

Atomera's R&D pipeline extends beyond these core applications, exploring breakthrough materials enabled by MST for areas like quantum computing, AI server power, high-bandwidth memory architectures, piezoelectric devices, and optical networking. These initiatives, often pursued through commercial and university collaborations, underscore Atomera's commitment to long-term growth and its role in shaping future semiconductor technologies. The company's intellectual property portfolio, exceeding 400 issued and pending patents, reflects its continuous innovation and strategic efforts to build a robust competitive moat.

Competitive Dynamics in a Shifting Landscape

Atomera operates within a fiercely competitive semiconductor landscape, vying for adoption against established giants and specialized innovators. Direct competitors include integrated device manufacturers (IDMs) like Intel (NASDAQ:INTC) and major equipment and materials providers such as Applied Materials (NASDAQ:AMAT) and ASML Holding (NASDAQ:ASML). These companies possess immense scale, diversified product portfolios, and deep customer relationships.

Atomera's competitive positioning is rooted in its specialized technological differentiation. While Applied Materials offers a broad suite of manufacturing equipment and services, and ASML dominates in lithography, Atomera provides a targeted materials solution that enhances transistor performance at a fundamental level. Atomera's MST is designed to be an additive, low-cost solution, contrasting with the capital-intensive nature of some competitor offerings. For instance, in GAA architectures, where epitaxy is now more prevalent than lithography, MST's Epi-based nature lowers the barrier to entry and integration, offering a "notably more targeted solution" for efficiency compared to the broader equipment offerings of AMAT. Against Intel's integrated manufacturing model, Atomera's licensing approach offers flexibility and potentially "significantly greater efficiency" in power usage or performance for specific transistor enhancements, without the burden of direct fabrication.

However, Atomera faces inherent disadvantages due to its smaller scale. Its reliance on licensing deals can lead to uneven revenue streams and higher customer acquisition costs compared to larger, more established players. The company's ability to convert technical validation into commercial licenses is paramount. The stalled negotiation with a "transformative customer" in Q4 2024 highlighted the resistance to innovative, royalty-based models, even when MST offered "one and a half to two generations of performance improvement." This underscores the challenge of overcoming ingrained industry biases for internally developed solutions. Nevertheless, Atomera believes that "all of their competitors are struggling with the same issues," and that MST offers a path to improvements that would be "limited and would take much longer" through other means.

Strategic partnerships are crucial for Atomera to mitigate its scale disadvantage. The collaboration with a leading capital equipment provider, for example, allows Atomera to leverage its partner's extensive testing infrastructure and sales force, accelerating validation and market penetration in GAA and advanced memory. Similarly, partnerships with Sandia National Labs for GaN and Incize for RF GaN characterization provide access to specialized expertise and facilities, enhancing Atomera's ability to compete effectively in emerging segments.

Financial Performance and Liquidity: Investing in the Future

As an early-stage company focused on R&D and commercialization, Atomera has consistently incurred operating losses. For the nine months ended September 30, 2025, the company reported a net loss of $15.75 million, compared to $13.78 million for the same period in 2024. Quarterly net loss for Q3 2025 was $5.57 million, an increase from $4.60 million in Q3 2024. Revenue remains limited, totaling $15,000 for the nine months ended September 30, 2025, a significant decrease from $112,000 in the prior year period. Quarterly revenue for Q3 2025 was $11,000, down from $22,000 in Q3 2024.

Operating expenses have seen an upward trend, reflecting increased activity. For Q3 2025, GAAP operating expenses were $5.68 million, an increase of $857,000 from $4.82 million in Q3 2024. This was primarily driven by a $544,000 increase in research and development (R&D) expenses and a $353,000 increase in general and administrative (G&A) expenses. The rise in R&D is attributed to higher outsourced device fabrication work and increased compensation, while G&A saw higher stock-based compensation. Gross margin was negative in Q3 2025 due to a timing mismatch where costs for MST deposition were incurred, but corresponding revenue from wafer shipments will be recognized in subsequent periods.

Despite recurring losses, Atomera maintains a prudent liquidity position. As of September 30, 2025, the company held $20.32 million in cash and cash equivalents and $18.10 million in working capital. Management believes this capital is sufficient to fund operations for at least 12 months from the 10-Q filing date (October 29, 2025). To manage liquidity, Atomera has utilized at-the-market (ATM) equity offerings, raising approximately $2.0 million in net proceeds during Q3 2025 and $5.20 million for the nine months ended September 30, 2025. An additional $836,000 was raised post-quarter end. Net cash used in operating activities for the nine months ended September 30, 2025, was $11.65 million. The company's financial strategy is to balance R&D investment with careful capital management, aiming to convert its technological advancements into sustainable revenue streams.

Strategic Momentum and Future Outlook

Atomera’s strategic narrative is one of persistent engagement and expanding market reach. While the collaboration with STMicroelectronics on their BCD110 smart power platform faced a delay due to ST's transition to 300-millimeter wafers and an aggressive launch schedule, the technical achievements were significant. Atomera developed a new MST implementation that "doubled our performance improvement without the associated reduction in device lifetime," a solution now being actively discussed with other power market players. STMicroelectronics continues to explore MST in other technology areas, validating the technology's broader applicability.

The company is seeing "record number of wafers processed for our customers," indicating a high level of engagement across its target segments. Atomera is actively pursuing opportunities with multiple customers in Gate-All-Around (GAA) logic, engaged with two of the three major DRAM manufacturers, and conducting integration work with four fabs and a fabless player in RF-SOI. The "land-and-expand" strategy is gaining traction, with existing customers initiating demos in entirely new product areas, signaling growing confidence in MST's versatility.

The Gallium Nitride (GaN) initiative, in collaboration with Sandia National Labs, is progressing towards a "customer-ready stage with shareable electrical data." This segment is particularly promising due to its potential for a faster time-to-revenue, as MST could enable higher quality GaN-on-silicon starting wafers with a shorter qualification process. The GaN market is projected to exceed $2 billion at the device level by the end of the decade, growing at a 40% CAGR.

For Q4 2025, Atomera expects to recognize between $75,000 and $125,000 of NRE revenue from wafer shipments. The non-GAAP operating expense for the full year 2025 is guided to be in the range of $17.25 million to $17.50 million, reflecting strategic investments in outsourced engineering and key hires like Wei Na, the new VP of Sales, to drive commercial growth. Management emphasizes fiscal discipline, with new hires primarily focused on catching up to demand and backfilling positions. The next major revenue milestone from STMicroelectronics, related to formal process qualification, is now anticipated in the next year.

Risks and Challenges

Investing in Atomera comes with inherent risks typical of an early-stage, technology-licensing company. The primary challenge remains the conversion of technological validation into consistent, high-volume royalty revenues. The delay with STMicroelectronics' BCD110 program, while offering valuable technical learnings, underscores the "rarely linear" path of bringing new materials into mass production and the potential for extended timelines. The stalled negotiation with a "transformative customer" highlights the resistance to adopting new, externally developed materials and royalty-based business models within a conservative industry.

Atomera's recurring operating losses and reliance on ATM equity offerings for liquidity mean that sustained commercial success is critical to avoid further dilution or the need to curtail R&D initiatives. While management believes current capital is sufficient for 12 months, future capital requirements are highly dependent on the pace of commercialization. Furthermore, the company's disclosure controls and procedures were deemed ineffective as of September 30, 2025, due to a material weakness, though management is actively working on remediation. Competition from established players with vast resources and the emergence of alternative technologies also pose ongoing threats to market share and pricing power.

Conclusion

Atomera Incorporated is a compelling investment proposition for those with a long-term view on the fundamental role of materials science in advancing semiconductor technology. The company's MST offers a unique and validated solution to critical performance and efficiency challenges across the most dynamic segments of the semiconductor industry, including AI-driven logic, memory, power, and RF applications. Despite the inherent volatility of an early-stage licensing model and the recent STMicroelectronics delay, Atomera's strategic partnerships, expanding customer engagements, and robust R&D pipeline, particularly in GaN, demonstrate a clear path toward commercialization.

The company's ability to consistently deliver performance improvements, as evidenced by the new MST implementation that resolves a key performance-reliability trade-off, positions it as a valuable partner for chip manufacturers struggling with conventional scaling limits. While financial performance remains characterized by losses and limited revenue, the strategic investments in R&D and sales infrastructure, coupled with a solid liquidity position, are designed to convert its technological leadership into a sustainable and significant revenue stream. Investors should closely monitor the progress of ongoing customer engagements, particularly the "transformative customers" and the GaN initiative, as these represent the most immediate catalysts for Atomera to transition from a technology pioneer to a semiconductor licensing powerhouse. The long-term investment thesis remains strong, predicated on MST's potential to become an indispensable material solution in the evolving semiconductor landscape.