Key Tronic’s QQ3 2025 results reflect a cloudy near-term demand environment driven by global tariffs and macro uncertainties, even as the company moves forward with meaningful capacity additions and a strong program win pipeline. Revenue declined 14.9% year over year to $111.97 million, while gross margin expanded modestly to 7.69% from 5.70% a year earlier, aided by cost-cutting and headcount reductions. However, operating margin remained negative at approximately -0.41% and the company posted a quarterly net loss of $0.60 million. Management highlighted ongoing cost-reduction initiatives, inventory optimization, and strategic footprints in Arkansas (US) and Vietnam as levers to drive fixed-cost leverage and near-term profitability once volumes recover. Importantly, management elected not to provide Q4 guidance due to tariff-related cost and demand uncertainties, while signaling a longer-term rebalancing of the manufacturing footprint to mitigate tariff risk and capitalize on nearshore/onshore opportunities. A multi-quarter earnings trajectory is anticipated, underpinned by added production capacity online in fiscal 2026 and a robust project pipeline that could meaningfully lift revenue and improve gross margins if demand stabilizes. Cash flow remained challenged in the quarter on a standalone basis, with negative net cash from operations (-$1.42 million) and negative free cash flow (-$3.62 million), though year-to-date cash flow from operations remained positive ($10.1 million) through nine months, reflecting working capital improvements. The strategic backdrop remains constructive, with management forecasting improved profitability from cost structure improvements, higher capacity utilization, and a larger, more flexible production footprint to address tariff volatility and onshoring trends.