Cohu, Inc. (COHU) | The Buildout — AI Infrastructure

The Verdict

Cohu makes the equipment and consumables semiconductor manufacturers use at the last step before a chip ships: testing that it works and inspecting that it was built correctly. Its AI connection runs through two products — the Eclipse thermal handler, which holds high-power AI processors at precise temperatures during final test, and the Neon inspection platform for HBM memory. Both sit at the back end of the manufacturing chain — the stage where advanced packaging is the fastest-growing part of the semiconductor equipment market and back-end integration is increasingly the defining constraint.

Earnings

Cohu reported Q2 FY2026 revenue of $149M, up 38% year over year and above the midpoint of its $144M ±$7M guide. Gross margin was 45.4%, above guidance on favorable product mix but below the prior quarter. The GAAP loss narrowed to $0.2M from $12.1M in Q1 FY2026, and non-GAAP income was $14.1M. Computing was 46% of system orders, up 150% year over year, driven by Eclipse growth in high-performance computing.

Management tone: The Q2 FY2026 call reads as more confident than Q1. Language moved from a range — growth of 20% to 25% — to a concrete figure of approximately 35%, the HPC outlook was raised for a second consecutive quarter, and the pipeline was re-segmented with customer counts and dollar buckets. Management was direct on the pipeline breakdown, qualification timing, capacity, competition and lead times, but declined to name customers, deflected on memory cost pass-through and CPU/GPU mix, and declined to quantify co-packaged optics revenue for 2027–2028. The framing also shifted from selling an opportunity to describing the difficulty of delivering it.

Management Guidance

For Q3 FY2026, management guided revenue to ~$170M ±$7M, up 14% sequentially and 35% year over year, with gross margin of ~45% and operating expenses of ~$54M. Full-year revenue growth is guided to ~35%, implying about $610M-$615M, with Q4 expected roughly flat to Q3 and full-year gross margin in the mid-40% range. Management also guided Q3 net interest income of ~$1.6M, a tax provision of ~$5.2M, and ~55M diluted shares including 5.8M convertible shares. Management said roughly 40% of sequential revenue growth should convert to operating profit, that the Q3 sequential step-up splits about 50% HPC and 50% core at roughly $10M each, and that capex is targeted at ~2% of revenue.

Trajectory

Revenue has climbed from a cyclical trough — $95.3M in Q3 FY2024 and $96.8M in Q1 FY2025 — to $149M in Q2 FY2026, up 38% year over year and 19.1% sequentially. Gross margin recovered from 33.5% in Q1 FY2025 to 45.4% in Q2 FY2026, though it edged down from the prior quarter as higher-margin recurring revenue fell from ~60% to ~53% of the mix. EBITDA has swung from negative through most of FY2024 and FY2025 to positive in Q1 and Q2 FY2026 ($0.7M and $10.0M). Management guides Q4 roughly flat to Q3, citing capacity ceilings on both the HPC and core sides.

The Model

The model projects FY+1 revenue of $614M and EBITDA of $50M, an 8.1% margin, then FY+2 revenue of $800M and EBITDA of $118M, a 14.7% margin. The near-term anchor is the guided FY2026 ramp: the Q3 guide of ~$170M, the $100M-$110M HPC revenue target, and the Malaysia handler capacity build. FY+2 depends on converting the pipeline's $250M active-qualification and ~$445M early-engagement buckets into orders, and on the operating leverage management describes — roughly 40% of sequential revenue growth converting to operating profit.

Projections are the median of 5 independent model runs. The model’s revenue sits 17.0% above analyst consensus.

For Q3 FY2026, management guided revenue to ~$170M ±$7M, up 14% sequentially and 35% year over year, with gross margin of ~45% and operating expenses of ~$54M. Full-year revenue growth is guided to ~35%, implying about $610M-$615M, with Q4 expected roughly flat to Q3 and full-year gross margin in the mid-40% range. Management also guided Q3 net interest income of ~$1.6M, a tax provision of ~$5.2M, and ~55M diluted shares including 5.8M convertible shares. Management said roughly 40% of sequential revenue growth should convert to operating profit, that the Q3 sequential step-up splits about 50% HPC and 50% core at roughly $10M each, and that capex is targeted at ~2% of revenue.

What Could Go Right — and Wrong

Looking Ahead

Over the next 12 months Cohu faces a capacity test more than a demand test. Malaysia handler output is scheduled to rise about 50% over six months and roughly double by mid-2027, with a stated path to triple that output by end-2027 if the market takes it there. One in-qualification customer is expected to give a green light 'within a month' of the July call and a fifth by mid Q1 FY2027.

Financials

Annual Summary

Key Ratios (Trailing)

The Company

Cohu sells the equipment, consumables and software that chipmakers and outsourced assembly-and-test houses use at the back end of semiconductor production — testing whether a finished device works and inspecting whether it was built correctly. The FY2025 10-K describes it as 'a global supplier of equipment and services optimizing semiconductor manufacturing yield and productivity.' Its AI relevance is concentrated in two products: the Eclipse thermal handler, which holds high-power AI processors at precise temperatures during final test, and the Neon platform, which inspects HBM memory stacks.

Cohu reports as a single segment, Semiconductor Test and Inspection Equipment, with three internal operating segments — Test Handler, Semiconductor Tester and Interface Solutions — aggregated under shared accounting criteria. It runs 11 locations. The manufacturing-bearing sites in Melaka, Malaysia (117,000 sq ft), Calamba City in the Philippines (92,000 sq ft), Kolbermoor, Germany (83,000 sq ft) and Osaka, Japan (67,000 sq ft) are owned; Singapore and Lincoln, Rhode Island are leased. The 10-K states that Cohu depends on Jabil to manufacture most of its semiconductor test systems from a facility in Malaysia. Revenue is heavily Asia-weighted: by shipment destination in Q1 FY2026, Malaysia was $20.8M, the Philippines $16.8M, Taiwan $14.8M, China $13.5M and the rest of the world $59.2M.

Business Segments

Competitive Landscape

In HPC thermal handlers, management describes an effectively single-competitor market: Hon Precision of Taiwan, which it calls the long-time supplier at test subcontractors, framing the market as effectively a duopoly. The 10-K competitor list is broader — Advantest, Teradyne, Hon Precision, KLA and other Asia-based manufacturers. Management's stated differentiator is thermal control. Adjacent pressure is real: Teradyne's compute revenue grew 600% year over year and KLA's advanced packaging process-control business is expected at about $1.1B in calendar 2026, though in different sockets and segments.

Supply Chain

Cohu sells test and inspection equipment into the back end of the semiconductor chain — to chipmakers and outsourced assembly-and-test houses. Its one disclosed manufacturing dependency is Jabil, which builds most of its test systems in Malaysia. No neighbor named Cohu on its own call.