Everspin Technologies delivered the kind of top line growth bulls have been waiting for, but earnings fell short. On Earnings Whispers' normalized basis, the MRAM maker earned $0.06 per share on revenue of $20.65 million, missing the $0.13 consensus by 53.8%. Revenue rose 46.9% year over year to a third consecutive record and came in slightly above the $19.5-$20.5 million guide. Management then guided fourth-quarter revenue to $21.5-$22.5 million, which is above estimates. That is the central tension: demand is accelerating, but the costs of defending and running the business are absorbing much of the operating leverage.
The earnings figure needs explanation because the company's own non-GAAP EPS was $0.12, up from $0.06 a year ago and $0.11 last quarter. That measure excludes stock-based compensation, $6.0 million of litigation costs and a new $2.7 million regulatory provision tied to a Bureau of Industry and Security (BIS) export-control fine that has not yet been settled. Even on management's preferred basis, results landed a penny shy of consensus. On a GAAP basis, Everspin swung from a $54,000 profit a year ago to a $7.2 million loss, or $(0.29) per share. GAAP operating expenses more than doubled to $18.5 million, and nearly all of that increase came from items outside the core business. Excluding those items, non-GAAP operating expenses rose only 13% and non-GAAP operating margin held at 11.2%. The core cost structure is disciplined; the extraordinary items are not shrinking.
The operating story beneath the headline is better than the miss suggests. MRAM product sales grew 34% year over year to $16.9 million, and sequential product growth has accelerated for three straight quarters: 5%, 9%, then 11%. Management cited strength in industrial automation, data center, energy management and medical, a market it highlighted for the first time after new design wins in dialysis, infusion pumps and defibrillators. A shortage of NOR flash, as suppliers shift capacity to DRAM, is generating distributor requests for MRAM replacements. That demand is included in the fourth-quarter guide and could become significant into early 2027. Non-product revenue climbed to $3.7 million from $0.8 million in the first quarter, lifted by the $40 million subcontract at roughly 70-90% gross margin.
That high-margin mix makes the gross margin decline more telling. GAAP gross margin fell to 51.4% from 53.9% in the second quarter and 52.7% in the first. Management said product margins dropped a couple of points on higher manufacturing, materials and back-end costs. Price increases to offset that inflation take effect only in the fourth quarter, so the recovery is a management expectation, not yet a reported result. Litigation costs have climbed from $1.6 million to $4 million to $6 million over three quarters. Management expects the fourth quarter to be only slightly lower, with relief not anticipated until 2027 after a year-end administrative law judge (ALJ) hearing. That is why fourth-quarter GAAP guidance still calls for a loss of $(0.08) to $(0.13) per share against non-GAAP EPS of $0.13-$0.18. Cash generation is also thin. Nine-month operating cash flow was $1.6 million versus $7.3 million a year earlier, while capital spending more than doubled.
The longer-dated pipeline expanded but also slipped at the edges. New catalysts include a Teledyne HiRel partnership to sell Persyst STT-MRAM into military and aerospace, a CXL-connected MRAM demonstration that drew strong interest, and a JEDEC persistent-memory task group chaired by Everspin, with LPDDR6 MRAM samples targeted for end-2028. Timelines elsewhere moved out. Unisys shifted from engineering samples in the fourth quarter of 2026 to a 256Mb prototype in the first half of 2027. Microchip fab qualification is now phased, with toggle and sensor products in the second half of 2027 and STT in the first half of 2028. Department of Defense sustainment income continues to wind down. Bears have legitimate ammunition here, even if none of these items threatens the near-term revenue path.
Investors entered the report modestly more constructive than last quarter, with sentiment rising from 0.25 to 0.32, but the stock told a harsher story. Shares closed at $13.93 heading into the print, down 10.6% from the open after the August report. They were 16.6% below the 200-day moving average of $16.70 and nearly 31% below the mid-August inter-earnings high of $20.15. The stock had bounced 14% off its October 23 low of $12.22. The market had already priced a good deal of skepticism, with Earnings Whispers price and AVWAP trends negative even as sequential-growth and momentum readings remain positive.
The bottom line is that Everspin's business is growing faster than its earnings can show right now. Record revenue, accelerating product growth and a higher guide preserve a credible growth story. However, the earnings miss, falling gross margins, unrelenting litigation spending and an unresolved export-control fine mean investors are still waiting for that growth to reach the bottom line. The fourth quarter, with price increases taking hold and the ALJ hearing approaching, should show whether that gap begins to close.