SVCO

Silvaco sells genuinely good software — TCAD/EDA/SIP tools for semiconductor process and chip design, with an 78.3% gross margin and exposure to the AI/foundry theme the MD&A leans on hard. But quality of product is not the same as quality of stock. Below the gross line the model is bleeding: FY2025 operating income was -$45.9M on just $63.1M of revenue (a -72.8% operating margin), net income was -$41.2M, and operating cash flow was -$33.9M, a 71.5% deterioration year over year. Revenue grew only 5.7%, and a chunk of even that thin growth is bought, not organic — the filing details three 2025 acquisitions (Cadence's OPC business for $11.5M, Tech-X for $8.2M, Mixel for $22.5M).

The balance sheet is where this becomes an avoid rather than merely a sell. Cash and equivalents fell 54.1% to just $9.01M, while the company burned $33.9M from operations and spent tens of millions on cash-heavy acquisitions. That is well under four months of runway at the current burn — a company cannot fund a $34M annual cash gap from a $9M cash balance without raising capital, taking on debt, or slashing spend. R&D was actually pushed up 44% to $29.9M, so management is leaning into the burn, not away from it. Shares already grew 9.7% (partly acquisition stock), and the filing notes contingent consideration was amended to be payable in stock and extended to July 2027 — the dilution mechanism is already turning. Stockholders' equity dropped 25.1% and the accumulated deficit deepened to -$69.2M.