Cohu, Inc. (COHU) | The Buildout — AI Infrastructure
The Verdict
Cohu supplies semiconductor test and inspection equipment and services that improve manufacturing yield and productivity. Its Eclipse test handlers manage temperature during testing of high-power AI processors, custom ASICs, and network processors; its Neon inspection platform covers HBM memory; and its Diamondx testers address power devices. The company sits at the back end of AI chip production, where power dissipation and packaging make test and inspection a bottleneck it addresses.
| Market Cap | — |
| Revenue (TTM) | $522M |
| Revenue Growth | +32.6% |
| EBITDA Margin (TTM) | 2.5% |
| Net Cash | $171M |
| Earnings Beats | 3 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- FY2026 HPC revenue guidance raised twice to $100–110M, with Eclipse thermal handlers the dominant driver.
- Annual HPC customer-spend pipeline expanded to ~$850M, staged as $190M qualified, $250M active qualification, and ~$445M early engagement.
- Malaysia capacity plan targets doubling HPC handler output by end-2026 and more than doubling by mid-2027.
- Management estimates GaN power plus advanced connectivity represents a $340M annual midterm addressable market.
- Core recovery signal: Q2 industrial orders up 87% YoY and test utilization crossed 80%.
What We’re Watching
- Qualification timing: only $190M of the ~$850M pipeline is qualified, and the near-edge Eclipse customer had not received official green light as of the Q2 call.
- Supply-chain and capacity risk: management says HPC is effectively maxed out in Q4; Jabil manufactures most test systems from Malaysia.
- Gross-margin pressure: Q3 guided ~45%, FY26 mid-40s; memory and component price talks had only just started.
- Automotive orders fell 24% YoY in Q2; management expects utilization to reach 80% only in late Q1 or Q2 2027.
The thesis is strengthening on revenue and HPC visibility, but the next phase is execution. Management raised FY2026 growth to about 35%, raised HPC guidance, and expanded the pipeline and capacity plan. The open question is whether qualification conversions and supply-chain/cost execution allow the raised shipments and margin framework to hold.
Earnings
Cohu reported Q2 FY2026 net sales of $149.0M, up 38% YoY and above the midpoint of guidance. Non-GAAP gross margin was 45.5%, above guidance; non-GAAP net income was $14.1M, or $0.26 per share. Recurring revenue was about 53% of total, while the GAAP net result was a loss of $0.2M, or $0.00 per share.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $149M | $125M | $108M | +38.3% |
| Gross margin | 45.4% | 40.4% | 34.4% | +1100bps |
| EBITDA | $10M | $1M | −$2M | −554.5% |
| EPS | $-0.00 | $-0.26 | $-0.36 | −98.8% |
| Recurring revenue % of total | ~53% | ~60% | n/a | — |
| Test utilization | 80% | 78% | n/a | — |
When we talk about the $850 million that is sort of an annual spend. Right? that is what we see these customers spending annually on this class of equipment, which is largely Eclipse for HPC. So if we were to capture the totality of this opportunity, you know, now, immediately, we would see an $850 million revenue stream next year. that is not the case. You know, we are qualifying over time.— Luis A. Müller, CEO, 2026-07-30
Management tone: Management's tone shifted over two quarters from qualitative enthusiasm to quantitative, staged, capacity-specific guidance. On Q1 management introduced explicit HPC ranges and pipeline figures; on Q2 management raised them again, detailed qualification stages and the Malaysia manufacturing expansion, and was candid about supply-chain and margin constraints.
Management Guidance
Management guided Q3 FY2026 revenue to $170M ± $7M, up 14% sequentially and 35% YoY, with gross margin of about 45% and OpEx of about $54M. For FY2026, management raised revenue growth to approximately 35%, implying about $610–615M, held full-year gross margin at mid-40%, guided HPC revenue to $100–110M, and reaffirmed capex of about 2% of revenue including the Malaysia expansion. Q4 revenue is expected roughly flattish to Q3.
Trajectory
Reported revenue stepped up from $125.1M in Q1 FY2026 to $149.0M in Q2, while reported gross margin expanded from 40.4% to 45.4%. The computed signal labels the revenue trajectory decelerating through recent quarters, but the Q2 sequential gain was 19.1%, driven by the HPC ramp and industrial recovery. Management guided Q3 revenue to $170M, with roughly half the sequential growth from HPC and half from the core business, while input costs pressure the margin outlook.
The Model
The model projects FY+1 revenue of $559M and EBITDA of $41M (7.4%), and FY+2 revenue of $700M and EBITDA of $122M (17.4%). The FY+1 projection is anchored by the HPC handler ramp and a recovering core business; the FY+2 step-up reflects Malaysia capacity expansion and conversion of the qualification pipeline.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $453M | $559M | $700M |
| YoY Growth | — | +23.4% | +25.2% |
| EBITDA | −$7M | $41M | $122M |
| EBITDA Margin | -1.5% | 7.4% | 17.4% |
Projections are the median of 5 independent model runs. The model’s revenue sits 2.4% above analyst consensus.
Management guided Q3 FY2026 revenue to $170M ± $7M, up 14% sequentially and 35% YoY, with gross margin of about 45% and OpEx of about $54M. For FY2026, management raised revenue growth to approximately 35%, implying about $610–615M, held full-year gross margin at mid-40%, guided HPC revenue to $100–110M, and reaffirmed capex of about 2% of revenue including the Malaysia expansion. Q4 revenue is expected roughly flattish to Q3.
What Could Go Right — and Wrong
- Official qualification from the near-edge Eclipse customer green-lights the late-August production configuration and converts qualified pipeline into orders.
- The $250M active-qualification bucket converts earlier than expected, pulling 2027 HPC revenue above the current capacity path.
- Customer pricing conversations succeed, allowing memory and component cost pass-through and holding or expanding gross margin.
- Software attach rate moves materially above about 1.3% of systems, proving installed-base recurring revenue.
- Silicon photonics and co-packaged optics move from interface sales to full handler pull-through.
- Malaysia expansion or Jabil supply slips, pushing HPC shipments out of 2026.
- Qualification delays or lost slots to Hon Precision, given current reliance on four qualified customers.
- Memory and component costs stay elevated without pricing relief, compressing gross margin even as revenue grows.
- Automotive remains weak into 2027, leaving the core recovery unbalanced.
- Next-generation compute demand slips into early 2027, a timing risk competitor Teradyne has flagged.
Looking Ahead
The next twelve months are framed by HPC qualification and capacity milestones. Management expects the official green light from the near-edge Eclipse customer around the end of August 2026, the $26M Eclipse order to ship largely in Q4, Malaysia HPC output to double by end-2026, and new production space to be ready in Q1 2027. The November 10, 2026 investor day should provide a long-term financial framework, while automotive utilization is not expected to reach 80% until late Q1 or Q2 2027.
- Late August 2026Eclipse qualification decision — Production configuration for near-edge customer expected to ship; official green light pending.
- November 10, 2026Investor Day in New York — Long-term strategy and financial framework; tests 2027 HPC commitment.
- Q4 2026$26M Eclipse order ships — Tests supply-chain and Q4 Eclipse capacity; management says it fills slots.
- End of 2026Malaysia HPC output doubles — Capacity milestone; management says fit-out already started.
- Mid-Q1 2027Fifth HPC qualification completes — Expected completion of active qualification customer; tests pipeline conversion.
- Mid-2027Malaysia output more than double — Second step in HPC handler capacity; path to triple by end-2027.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $402M | $453M | $522M | +12.7% |
| Gross Margin | 44.0% | 34.4% | 39.2% | 955bps |
| EBITDA | −$19M | −$7M | $614M | +63.9% |
| EBITDA Margin | -4.8% | -1.5% | 2.5% | +323bps |
| Net Income | −$70M | −$74M | −$39M | -6.3% |
| Free Cash Flow | −$8M | $11M | $399M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)39.2%
- EBITDA Margin (TTM)2.5%
- Net Margin (TTM)-7.4%
- ROIC-4.4%
- FCF Conversion268.5%
- SBC / Revenue4.6%
The Company
Cohu is a global supplier of equipment and services that optimize semiconductor manufacturing yield and productivity. Its portfolio includes test handlers, inspection and metrology tools, automated test equipment, interface solutions, software analytics, and services. The 10-K describes the portfolio as enabling optimized yield and productivity and accelerating customers' manufacturing time-to-market. In AI infrastructure, Eclipse handlers with T-Core active thermal control test high-power AI processors, custom ASICs, and network processors; Neon inspects HBM3/HBM4/HBM4e memory; and Diamondx tests GaN power devices.
Cohu reports one segment, Semiconductor Test and Inspection Equipment, with three aggregated operating segments: Test Handler, Semiconductor Tester, and Interface Solutions. Manufacturing is concentrated in Asia—owned facilities in Malaysia, Philippines, Germany, and Japan, plus leased manufacturing in Singapore and Lincoln, Rhode Island—with headquarters in San Diego. Jabil manufactures most of its semiconductor test systems from Malaysia, and management is expanding internal Malaysia HPC handler capacity.
Business Segments
Competitive Landscape
Cohu's 10-K names Advantest, Teradyne, Hon Precision, KLA, and other Asia-based manufacturers as competitors. Management frames high-power thermal handling as essentially one primary competitor, Hon Precision—transcribed 'Han Precision' on the Q2 call.
- AdvantestNamed in the 10-K as a competitor; not further discussed in the supplied material.
- TeradyneNamed in the 10-K; intel-file read-throughs note a warning that next-generation compute could slip into early 2027.
- Hon PrecisionNamed in the 10-K; management calls this the primary competitor in high-power thermal handling, with the transcript spelling 'Han Precision.'
- KLANamed in the 10-K; not further discussed in the supplied material.
- Other Asia-based manufacturersNamed collectively in the 10-K as competitors; not individually discussed.
Supply Chain
Cohu sits between semiconductor device makers and back-end test capacity, supplying handlers, inspection tools, testers, and consumables. No neighbor transcript in the supplied material mentioned Cohu by name.
More on COHU: Earnings recap