Executive Summary / Key Takeaways

• Proprietary MST Technology Poised for Inflection: Atomera's Mears Silicon Technology (MST) offers unique, quantifiable performance and yield enhancements for transistors, positioning it as a critical enabler for advanced semiconductors in high-growth markets like AI, 5G, and Power.
• Strategic Engagements Maturing: Despite current limited revenue, Atomera is deeply engaged with major semiconductor manufacturers, including STMicroelectronics and two "transformative" customers, with several poised to transition to commercial production and generate high-margin royalty revenue.
• Diversified Growth Vectors: Beyond its foundational STMicroelectronics partnership, Atomera is expanding into advanced nodes (Gate-All-Around, DRAM, HBM), RF-SOI (with a new LNA focus), and Gallium Nitride (GaN), each offering significant market potential and, in some cases, faster time-to-revenue.
• Lean Model Sustained by Capital: The company maintains a conservative, IP-licensing-focused operational model, with sufficient liquidity from recent ATM offerings to fund operations for at least 12 months, supporting its pre-commercialization investment phase.
• Overcoming Adoption Hurdles: While facing delays (e.g., STMicro's 300mm transition) and customer bias towards internal solutions, Atomera's proven technology and strategic partnerships are designed to accelerate market adoption and overcome resistance, driving future growth.

The Dawn of a New Silicon Era: Atomera's Foundational Strategy

Atomera Incorporated (NASDAQ:ATOM) stands at the forefront of a quiet revolution in semiconductor manufacturing, operating as an early-stage company dedicated to developing, commercializing, and licensing proprietary processes and technologies. At its core is Mears Silicon Technology (MST), a patented thin film of reengineered silicon, typically a mere 100 to 300 angstroms thick – roughly 20 to 60 silicon atomic unit cells. This foundational technology is designed to enhance CMOS-type transistors, making them smaller, faster, more reliable, and significantly more power-efficient.

Atomera's overarching strategy is elegantly lean: to generate high-margin revenue through licensing arrangements, collecting license fees and royalties per silicon wafer or device that incorporates its MST. This model allows the company to leverage its intellectual property without the immense capital expenditure associated with chip fabrication. The company's journey, from its inception as Nanovis LLC in 2001 to its rebranding as Atomera in 2016, has been singularly focused on this IP-centric approach, culminating in over 400 issued and pending patents by Q2 2025. This extensive patent portfolio underscores Atomera's commitment to innovation and its intent to build a formidable competitive moat.

The semiconductor industry itself is undergoing profound shifts, driven by insatiable demand for artificial intelligence (AI) infrastructure, the evolution of 5G and 6G wireless technologies, and the burgeoning needs of vehicle electrification and data centers. These trends are pushing the boundaries of Moore's Law, increasingly relying on advanced materials engineering, particularly epitaxy (Epi), to achieve performance gains. This shift plays directly into Atomera's strengths, as MST is an Epi-based technology. The growing prevalence of Epi steps in advanced manufacturing processes significantly lowers the barrier to integrating MST, making it an incremental cost adder rather than a standalone, complex new step.

Technological Edge: MST's Quantifiable Impact

Atomera's competitive advantage is rooted in MST's ability to deliver tangible, often quantifiable, performance improvements that are difficult or impossible to achieve through conventional means. This technological differentiation is critical in an industry constantly seeking breakthroughs.

For advanced nodes, particularly the nascent gate-all-around (GAA) transistors at 2 nanometers and below, MST offers a compelling solution. It can increase drive current and reliability by improving interface traps at the channel-gate interface. Crucially, MST's source strain diffusion blocking capabilities are vital for these new nodes, preventing phosphorus from highly doped source/drain regions from diffusing into the channel. This leads to higher performance and, more importantly, improved yields, directly impacting the number and cost of GPUs that can be manufactured for the AI market. Management believes MST can deliver "one and a half to two generations of performance improvement" in these critical areas.

In the power semiconductor market, MST SPX technology targets voltage ranges from 5 to 48 volts. A specifically optimized 48-volt version of SPX offers "dramatic performance improvements" for AI data centers, which are rapidly transitioning to 48-volt power supplies. This transition can "reduce power dissipation by a factor of up to 16 times," a critical advantage in the ongoing "chip war" for data center efficiency. Atomera's ability to simulate different architectures using its MSTcad software and internal AI tools allows it to propose solutions believed to enable "breakthrough levels of performance" unachievable without MST.

For RF-SOI devices, essential for 5G mobile phones, Atomera has expanded its offerings beyond RF power switches to include low-noise amplifiers (LNAs). MST can "significantly improve the performance of LNAs by lowering the circuit bias current and hence, the power consumption." This is particularly timely as new 5G and 6G frequency bands and increased carrier aggregation (expected to move from 4 to 6 carriers) demand more active LNAs, driving up power consumption. The ability to provide both LNA and power switch benefits with a single MST deposition offers "2 much needed solutions for the cost of 1," making it highly attractive to manufacturers.

Furthermore, Atomera is making strides in Gallium Nitride (GaN), a wide bandgap semiconductor material. Initial studies showed MST could reduce stresses during GaN-on-silicon manufacturing, improving crystal quality. Subsequent electrical testing, conducted in partnership with Sandia National Labs, has shown "improved electrical performance consistent with our previous observation of improved material quality." This is a significant step towards enabling high-volume, low-cost GaN devices, with a strategic collaboration with Incize further characterizing the technology for RF GaN applications.

Competitive Dynamics and Strategic Positioning

Atomera operates in a highly competitive landscape dominated by established giants like Applied Materials , Lam Research , ASML Holding , and Intel . These companies offer broad portfolios of equipment, materials, and integrated solutions. Atomera, as a specialized IP licensor, distinguishes itself by offering targeted, high-impact material enhancements rather than comprehensive fabrication tools.

While larger competitors benefit from immense scale, diversified revenue streams, and entrenched customer relationships, Atomera's lean, IP-centric model provides agility and potentially higher gross margins on successful licenses. For instance, Applied Materials (AMAT) and Lam Research (LRCX) excel in delivering full production line solutions, whereas Atomera's value proposition lies in its ability to enhance specific process steps with MST, often as an incremental addition to existing Epi tools. This contrasts with ASML's (ASML) lithography dominance, where Atomera's material science complements rather than directly competes, enabling next-generation chip performance. Against integrated device manufacturers like Intel (INTC), Atomera's IP offers external innovation that can challenge internal development efforts by providing superior efficiency in specific transistor performance metrics.

Atomera's competitive advantages are its proprietary MST technology and its IP licensing model. The technology's ability to deliver quantifiable performance gains, such as up to 16x power dissipation reduction in 48-volt power devices, creates a strong competitive moat. The licensing model allows for broad adoption without the capital intensity of manufacturing, potentially leading to superior growth and improved pricing power in IP-driven markets. However, Atomera's smaller scale can lead to higher customer acquisition costs and slower development cycles in broader applications, potentially limiting its market share expansion against larger, more diversified players. Overcoming customer bias for internally developed solutions remains a constant challenge, requiring Atomera to consistently demonstrate compelling, silicon-validated results.

To accelerate market adoption and overcome these hurdles, Atomera is actively pursuing strategic partnerships. A notable agreement signed in April 2025 with a leading capital equipment company aims to accelerate MST adoption for next-generation technologies. This partner provides crucial customer insights, significant development resources, and direct sales force assistance, leveraging their existing relationships to promote MST. This collaboration is expected to expand beyond gate-all-around architectures into advanced memories and other areas. Atomera's "land-and-expand" strategy is also gaining traction, with existing customers exploring MST in entirely new product areas, demonstrating growing confidence in the technology and signaling a potential "domino effect" of wider adoption. The company's recent membership in the National Semiconductor Technology Center (NSTC) further aligns it with U.S. leadership in chip innovation, potentially providing access to advanced prototyping services and CHIPS Act funding opportunities.

Financial Performance and Outlook

Atomera's financial performance reflects its early-stage, pre-commercialization status, characterized by significant investment in research and development and limited revenue. For the three months ended June 30, 2025, the company reported $0 in revenue, and for the first six months of 2025, revenue was a mere $4,000, primarily from MSTcad licensing and consulting services. This marks a decrease from the prior year, where Q2 2024 revenue was $72,000 and H1 2024 revenue was $90,000. The company incurred a gross loss of $62,000 in Q2 2025 and $58,000 in H1 2025, indicating that current operational costs outweigh the minimal revenue generated.

Operating expenses have seen an increase as Atomera ramps up its development efforts. For the first six months of 2025, total operating expenses were $10.66 million, up from $9.65 million in the same period of 2024. This increase was primarily driven by a 15% rise in research and development expenses to $6.26 million and a 14% increase in general and administrative expenses to $4.14 million, reflecting higher outsourced device fabrication work, increased payroll, and intellectual property-related costs. Selling and marketing expenses, however, decreased by 52% to $265,000 due to headcount reductions. The net result was a net loss of $4.97 million in Q2 2025 and $10.18 million for H1 2025.

From a liquidity perspective, Atomera ended June 30, 2025, with approximately $22.0 million in cash and cash equivalents and $20.0 million in working capital. The company used $8.29 million in operating activities during the first half of 2025.

To sustain operations, Atomera has actively utilized its at-the-market (ATM) equity distribution facilities. A new $50 million ATM facility was established in May 2025, through which the company raised approximately $792,000 in Q2 2025 and a total of $3.20 million in H1 2025. Critically, an additional $2 million was raised post-Q2, further bolstering its cash position. Management believes its current capital is sufficient to fund operations for at least 12 months from the August 5, 2025, 10-Q filing date. This reliance on equity financing underscores the pre-revenue nature of the business and the need for significant commercial breakthroughs.

Looking ahead, management's guidance reflects a strategic investment phase. While only a "small amount of NRE revenue" is expected in Q3 2025 from wafer shipments, the next major revenue milestone from the STMicroelectronics agreement – a payment for process qualification – is now anticipated in 2026. This delay stems from STMicro's decision to transition directly to 300-millimeter wafers for their BCD 110 process, a move that, while delaying near-term revenue, signals ST's aggressive ambitions for higher capacity and potentially larger long-term royalty streams. Atomera's full-year 2025 non-GAAP operating expense guidance is maintained at $17.25 million to $17.75 million, tracking towards the lower end of the range. The company is actively recruiting engineering and sales/marketing staff, viewing these hires as necessary to "catch up to demand" and support the "unprecedented level of customer activity."

Conclusion

Atomera Incorporated stands at a pivotal juncture, embodying the high-risk, high-reward profile typical of an IP-centric innovator in the semiconductor industry. Its core investment thesis hinges on the successful commercialization of Mears Silicon Technology, a differentiated solution poised to address critical performance and yield challenges across the most dynamic segments of the semiconductor market, from AI-driven logic and memory to high-efficiency power and next-generation RF. While current financial performance reflects a necessary pre-commercialization investment phase, characterized by limited revenue and ongoing operating losses, the company's strategic engagements and technological advancements paint a compelling picture of future potential.

The delayed but strategically significant STMicroelectronics (STM) partnership, coupled with the accelerating progress with "transformative" customers in advanced nodes and the promising inroads into GaN and RF-SOI, suggests that Atomera is building a robust pipeline for high-margin royalty revenue. The company's lean operating model, supported by prudent capital management through ATM offerings, provides the runway needed to convert these engagements into commercial success. As the semiconductor industry increasingly relies on materials engineering to advance Moore's Law, Atomera's unique technology and growing patent portfolio position it as a vital partner. The ultimate success for Atomera will depend on its ability to convert its technological leadership and deep customer relationships into a consistent stream of production royalties, transforming it into the semiconductor technology licensing powerhouse it envisions.