Shares of small-cap semiconductor equipment supplier Axcelis Technologies (ACLS 10.06%) rallied big on Tuesday, up 9.6% as of 3:57 p.m. ET.

Axcelis reported earnings this morning, beating expectations and delivering solid guidance, with positive commentary on forward-looking bookings.

While the company is still posting large year-over-year declines, the stock had gotten incredibly cheap, and investors may be sniffing out a solid cyclical bottom.

Ion implant continues to be important

Axcelis makes ion implant machines, which infuse silicon wafers with other ions that change the properties of chips, such as enhancing thermal resistance and conductivity in silicon carbide (SiC) power chips. Power chips made up 55% of system revenue last quarter, with 43% going to "general semiconductors," 3% going to memory applications, and 0% to advanced node sales.

That being said, the company said it had booked a follow-on order from an advanced logic company, showing that ion implant may soon be used in a wider variety of applications.

In the quarter, Axcelis saw revenue decline 24.2% to $194.5 million, with adjusted (non-GAAP) earnings per share down 35% to $1.13. Despite the big year-over-year declines, those numbers were actually much better than what analysts expected. Management also guided for sequential growth in revenue to $200 million for the third quarter, albeit with a slight margin decline due to mix.

Axcelis' main end markets are still working through a cyclical downturn, especially electric vehicles (EV), which are heavy users of silicon carbide. However, things appear to be bottoming out, and if the past several quarters indicate a bottom, Axcelis still looks cheap. After today's jump, shares trade around a high-teens earnings multiple on 2025 expectations. However, the stock is cheaper than it appears, since Axcelis has $581 million worth of cash on the balance sheet and no debt, good for over 20% of its $2.5 billion market cap.

Image source: Getty Images.

The coming recovery has a wide range

While it's possible that a recovery in EVs and ion implant demand may remain muted, especially given tariffs and the rollback of U.S. EV subsidies, it may also be stronger than some think. Silicon carbide-based power chips are coming down in price and are finding their way into more and more applications, such as industrial processes and AI data centers.

As one of only two big companies making ion implant machines, Axcelis would be the pure-play beneficiary of an increased dependence on advanced power chips in electric vehicles and other power-intense applications in the future.