Executive Summary / Key Takeaways

• Strategic Transformation Bearing Fruit: TTM Technologies has successfully reshaped its business to be less cyclical and more differentiated, with Aerospace and Defense (A&D) and AI-driven commercial markets now comprising a significant majority of its revenue. This strategic pivot, including key acquisitions and divestitures, has led to improved operating margins and reduced seasonality.
• Strong Q2 2025 Performance & Robust Outlook: The company delivered impressive Q2 2025 results, with net sales up 20.7% year-over-year to $730.6 million and non-GAAP EPS reaching a record $0.58. Strong demand in A&D, data center computing, networking, and medical/industrial/instrumentation (MII) markets, particularly from generative AI, underpins a solid Q3 2025 guidance.
• Aggressive Capacity Expansion & Diversification: TTM is making substantial investments in new, advanced manufacturing facilities in Penang, Malaysia, Syracuse, New York, and Eau Claire, Wisconsin. These initiatives aim to diversify its supply chain beyond China, meet increasing domestic demand for high-tech PCBs in defense and AI, and enhance its technological leadership.
• Differentiated Technology as a Moat: TTM's expertise in Ultra HDI PCBs, asymmetric designs, and RF/microwave/microelectronic assemblies provides a critical competitive advantage, enabling high-performance, high-reliability solutions for demanding applications. This technological edge supports higher average selling prices and stronger margins.
• Navigating Operational Headwinds and Market Shifts: While the Penang facility faces initial ramp-up challenges impacting margins (210 basis points drag in Q2 2025) and the automotive market remains soft, TTM's strategic focus on high-growth, high-margin segments and proactive risk mitigation strategies position it for continued long-term growth.

Forging a High-Tech Future: TTM's Strategic Evolution

TTM Technologies, founded in 1978, has undergone a profound transformation, evolving from a traditional printed circuit board (PCB) manufacturer into a diversified provider of advanced technology solutions. This strategic journey, particularly over the last decade, has been driven by a clear mandate: to build a less cyclical, more differentiated business. The company's core offerings now span mission systems, radio frequency (RF) components, RF microwave/microelectronic assemblies, and technologically advanced PCBs, serving critical sectors like aerospace and defense, data center computing, automotive, medical, industrial, and networking.

A cornerstone of this transformation has been the significant re-weighting of its revenue mix towards the Aerospace and Defense (A&D) market. Over the past six years, A&D's contribution to total revenues has surged from approximately 25-30% to 46-47%. This shift was propelled by strategic acquisitions, notably Anaren and Telephonics, which expanded TTM's capabilities in engineered and integrated electronic products. Today, over 50% of TTM's A&D revenues are generated from these integrated solutions, with traditional PCBs contributing less than half. Concurrently, TTM divested its highly seasonal Mobility business in 2020, which was heavily exposed to consumer products, further reducing overall revenue volatility.

The industry landscape is currently defined by several powerful trends that play directly into TTM's strategic strengths. Generative AI is fueling unprecedented demand in data center computing and networking, while global geopolitical dynamics are driving increased defense spending and a strong push for supply chain diversification and domestic manufacturing. TTM, as a leading global manufacturer, particularly in North America PCB production, is strategically positioned to capitalize on these tailwinds.

The Technological Edge: TTM's Differentiated Moat

TTM's competitive advantage is deeply rooted in its differentiated technology, which allows it to deliver high-performance, high-reliability solutions for the most demanding applications. The company's expertise extends beyond conventional PCBs to encompass Ultra High-Density Interconnect (HDI) PCBs, complex asymmetric designs, and sophisticated RF/microwave/microelectronic assemblies.

The new Syracuse, New York facility, for instance, is specifically designed to produce Ultra HDI PCBs, critical for national security requirements. These advanced boards offer superior signal integrity and power delivery in a smaller form factor, essential for modern defense systems. Similarly, TTM's expansion in China is targeting "asymmetric designs" – multilayer, high layer count boards with specialized laminate structures optimized for both high-speed data transmission and efficient power delivery. This capability addresses the evolving needs of data center computing, where performance and thermal management are paramount.

The tangible benefits of this technological differentiation are clear. TTM's "one-stop design, engineering, and manufacturing solution" enables customers to significantly reduce time-to-market for new products. Its high-reliability products command higher average selling prices (ASPs) and contribute to stronger gross and operating margins, particularly in the A&D segment. This technological leadership is a critical component of TTM's competitive moat, allowing it to compete effectively against larger, more generalized electronic manufacturing services (EMS) providers by offering specialized, high-value solutions that rivals may struggle to replicate.

Financial Performance: A Story of Growth and Strategic Execution

TTM's financial performance in the second quarter of 2025 and the first half of the year reflects the positive impact of its strategic transformation and strong market tailwinds.

For the second quarter ended June 30, 2025, net sales climbed to $730.6 million, a robust 20.7% increase year-over-year from $605.1 million in Q2 2024. This growth was primarily fueled by strong demand in the A&D, data center computing, and networking end markets, with generative AI being a significant driver for the latter two. The medical, industrial, and instrumentation (MII) market also showed strength as inventories normalized. Gross profit for the quarter rose to $148.1 million, resulting in a gross margin of 20.3%, up from 19.4% in Q2 2024. This improvement was attributed to higher sales volume, improved operational execution, and a favorable product mix.

Operating income for Q2 2025 reached $61.8 million, translating to an operating margin of 8.5%, a notable increase from 6.4% in the prior-year quarter. This margin expansion was driven by the higher gross margins and a slower rate of growth in selling, general, and administrative (SG&A) costs. However, operating expenses increased due to the absence of $14.4 million in gains from asset sales in Q2 2024 and higher incentive compensation, partially offset by reduced amortization of definite-lived intangibles. Net income for the quarter was $41.5 million, or $0.40 per diluted share, a significant improvement from $26.4 million, or $0.25 per diluted share, in Q2 2024.

Looking at the first half of 2025, net sales totaled $1.38 billion, up 17.4% from $1.18 billion in H1 2024. Gross profit for the period was $279.1 million, with a gross margin of 20.2% (up from 18.8% in H1 2024). Operating income doubled to $112.0 million, and net income increased to $73.7 million, or $0.70 per diluted share, compared to $36.8 million, or $0.35 per diluted share, in H1 2024.

Cash flow from operations remained strong, providing $97.8 million in Q2 2025, representing 13.4% of net sales. For the first half, operating cash flow was $87.1 million. This robust cash generation has contributed to a healthy balance sheet, with net debt to last 12 months EBITDA ending Q2 2025 at a comfortable 1.2x. The company also initiated a new $100 million share repurchase program in May 2025, signaling confidence in its financial position.

Segmental Deep Dive and Strategic Outlook

TTM's new three-segment reporting structure – Aerospace and Defense (AD), Commercial, and RF and Specialty Components (RFS Components) – provides clearer insights into its diversified operations.

The Aerospace and Defense (AD) segment continues to be a powerhouse. In Q2 2025, segment sales grew 19.3% year-over-year to $327.6 million, with operating income surging 77.6% to $45.3 million, yielding a strong 13.8% operating margin. This performance was driven by improved defense spending, strategic program alignment, and key bookings for franchise programs like missiles and munitions. The A&D program backlog remains solid at $1.46 billion, providing long-term visibility. While the Q2 2025 book-to-bill was 0.69, management attributes this to order timing, emphasizing that overall demand remains healthy, and multi-year orders provide greater certainty. The recently signed FY25 reconciliation bill, with an additional $150 billion in defense spending and priorities like Golden Dome missile defense, bodes well for future growth, particularly for TTM's radar systems business, which accounts for roughly half of its A&D revenue.

The Commercial segment, primarily focused on PCBs for automotive, MII, networking, and data center computing, saw sales increase 22.4% year-over-year to $395.6 million in Q2 2025. Operating income grew 20.9% to $60.1 million, though the operating margin slightly decreased to 15.2% due to ramp-up costs at the Penang facility and product mix changes. Data center computing and networking are experiencing accelerated growth, driven by generative AI, which now contributes close to 30% of TTM's total revenues. The MII market is also normalizing, with increased demand from robotics and automated test equipment for AI applications. The automotive market, however, remains a persistent challenge, with continued inventory adjustments and soft demand leading to a slight year-over-year decline in Q2 2025. Management does not anticipate near-term growth in this segment.

The RF and Specialty Components (RFS Components) segment, though smaller, delivered strong growth, with sales up 10.9% to $10.1 million and operating income up 39.5% to $2.9 million, resulting in an impressive 28.4% operating margin. This was driven by strong demand in networking and MII markets.

Looking ahead to Q3 2025, TTM projects net sales between $690 million and $730 million, with non-GAAP EPS in the range of $0.57 to $0.63. This guidance incorporates the operating costs associated with the Penang facility ramp-up. Capital expenditures for 2025 are expected to be between $235 million and $255 million, with $66 million allocated to the Syracuse facility.

Strategic Investments and Competitive Positioning

TTM's strategic investments are designed to reinforce its competitive standing and capitalize on long-term market shifts. The new state-of-the-art facility in Penang, Malaysia, is a cornerstone of its commercial strategy, aiming to serve data center computing, networking, and MII customers. While Q2 2025 revenue from Penang was $5.2 million, the ramp-up has been slower than expected due to "growing pains inherent in a greenfield start-up," including longer customer qualifications and personnel training impacting yields. This has resulted in a 210 basis point drag on operating margins. Despite these challenges, customer interest remains strong, and TTM's long-term confidence is evident in its acquisition of land rights for a second Penang facility, aligning with the industry's push for supply chain diversification beyond China. TTM believes it has a "first mover advantage" in Penang compared to competitors establishing operations in Thailand.

In the U.S., TTM is making two significant moves. The Syracuse, New York facility, focused on Ultra HDI PCBs for A&D, is on track for volume production in the second half of 2026. This facility will provide advanced domestic capacity, crucial for national security. The recent acquisition of a 750,000-square-foot facility in Eau Claire, Wisconsin, is a proactive step to support future high-volume U.S. production of advanced technology PCBs for generative AI applications. While U.S. production costs are expected to be at least 50% higher than in China, TTM is engaging with customers to secure commitments for this strategically important domestic capacity.

TTM's competitive landscape includes larger EMS providers like Sanmina (SANM), Flex (FLEX), Jabil (JBL), and Celestica (CLS). While these rivals often boast greater scale and broader market diversification, TTM differentiates itself through its specialized technology and value-added services. TTM is the largest PCB producer in North America "by a factor," and with Syracuse, it will be the only company with scaled capability to produce advanced PCBs in the U.S. This specialized focus, particularly in RF components and custom engineering, allows TTM to command higher margins in niche, high-reliability markets like A&D, where performance often outweighs pure cost considerations. However, TTM's customer concentration, especially in the hyperscale data center market, and potential inefficiencies in its global supply chain, could be vulnerabilities compared to the more streamlined operations of some larger competitors.

Risks and Challenges

Despite the positive momentum, TTM faces several risks. The slower-than-expected ramp-up of the Penang facility poses an operational challenge, impacting short-term profitability. While management is actively addressing yield and qualification issues, the timeline to breakeven remains uncertain. The higher cost structure of new U.S. facilities like Eau Claire necessitates strong customer commitment to absorb these costs, a factor that could influence the pace of future expansion.

The automotive market remains a significant headwind, with continued soft demand and inventory adjustments, particularly due to the rise of Chinese EV OEMs. This segment's underperformance could partially offset growth in other areas. Furthermore, the global geopolitical environment introduces risks related to tariffs and potential economic slowdowns. While TTM has mitigation strategies for direct tariff impacts, the broader indirect effects on end-market demand are harder to predict. The upcoming CEO transition, following Thomas Edman's announced retirement, also represents a period of leadership change, though the company emphasizes a robust succession planning process.

Conclusion

TTM Technologies is in the midst of a compelling transformation, strategically repositioning itself at the intersection of critical growth markets: aerospace and defense and AI-driven commercial applications. The company's strong Q2 2025 performance, marked by robust revenue growth and expanding operating margins, underscores the success of its differentiated strategy. By leveraging its technological leadership in advanced PCBs and integrated electronic solutions, TTM is building a formidable competitive moat, particularly in high-reliability segments.

The significant investments in new, state-of-the-art facilities in Malaysia and the U.S. are pivotal to its long-term growth narrative, addressing both supply chain resilience and the escalating demand for advanced technology. While operational challenges at Penang and softness in the automotive market warrant close monitoring, TTM's proactive strategic moves, coupled with a healthy balance sheet and a track record of strong execution, suggest a company well-equipped to capitalize on the powerful industry trends shaping the future of electronics. For investors, TTM represents an opportunity to participate in the growth of essential, high-tech sectors, driven by a clear vision and a commitment to innovation.