Cohu Q2 Earnings Call Highlights

Key Points

• Cohu’s Q2 revenue rose 38% year over year to $149 million, exceeding the guidance midpoint, while non-GAAP gross margin reached 45.5% and EPS was $0.26. Management forecast Q3 revenue of approximately $170 million and raised its full-year 2026 growth outlook to about 35%, or roughly $610 million–$615 million.
• High-performance computing demand accelerated sharply: computing orders increased 150% year over year, and Cohu raised its 2026 HPC revenue estimate to $100 million–$110 million. The company’s HPC customer pipeline expanded to approximately $850 million, led by Eclipse handler opportunities.
• Cohu is expanding manufacturing capacity in Malaysia and through suppliers, targeting a 50% increase in HPC handler output over the next six months and more than double the output by mid-2027. Automotive remains the weakest major market, with utilization not expected to reach 80% until late Q1 or Q2 2027.

Cohu NASDAQ: COHU reported second-quarter 2026 revenue of $149 million, up 38% from a year earlier and above the midpoint of its guidance, as demand for high-performance computing equipment and a recovery in several core semiconductor markets supported results.

President and CEO Luis Müller said recurring revenue, primarily from consumables, represented approximately 53% of quarterly sales. The company cited customer adoption of its thermal test handlers for AI processors, high-volume manufacturing inspection products, automated test platforms for power and connectivity devices, and software analytics offerings.

“Cohu is benefiting from durable demand drivers in AI infrastructure and edge computing,” Müller said, pointing to customer investments aimed at managing higher power levels, improving production yield and increasing factory productivity.

Utilization and Orders Improve in Computing and Industrial Markets

Müller said estimated semiconductor test utilization rose sequentially to 80% at the end of the second quarter, a level that has historically marked a turning point for capital spending among the company’s integrated device manufacturer customers. Computing and industrial utilization were in the low 80% range, while automotive and mobile utilization was in the high 70% range.

Computing accounted for 46% of total system orders in the quarter, with orders rising 150% year over year, driven by growth in Eclipse handlers for high-performance computing applications. Industrial orders increased 87% from a year earlier, consumer orders rose 29%, mobile was essentially flat, and automotive orders fell 24%.

The automotive market continues to lag other end markets in the current recovery cycle. Müller said he does not expect automotive utilization to reach 80% until late in the first quarter or the second quarter of 2027.

CFO Jeff Jones said Cohu expects its third-quarter revenue increase to be split roughly evenly between high-performance computing and the company’s core business, with each contributing about $10 million of growth sequentially.

HPC Pipeline Expands; Manufacturing Capacity Is Being Increased

Cohu raised its estimate for fiscal 2026 high-performance computing revenue to $100 million to $110 million, from its prior range of $80 million to $100 million. Müller said the increase is entirely tied to the Eclipse handler business rather than Neon inspection systems for high-bandwidth memory.

The company now estimates its annual high-performance computing customer pipeline at approximately $850 million, including:

• About $190 million of qualified annual opportunity across four customers, consisting of three high-performance computing customers and one HBM customer.
• Approximately $250 million of active qualification opportunities across five customers.
• Roughly $445 million of early-stage engagement across 10 additional customers.

Müller said qualified customer opportunities range from roughly $30 million to $60 million annually per customer. One customer in the qualification group could receive official qualification within about a month, while another may complete its process around the middle of the first quarter of 2027, based on systems expected to ship in late August and an estimated six-month qualification process.

To support expected demand, Cohu is expanding internal manufacturing in Malaysia and working with suppliers to increase capacity. The company expects to increase output for HPC handlers by about 50% over the six months following the second quarter and to more than double output by around mid-2027. Müller said the company could potentially triple output by the end of 2027 if market demand supports that expansion.

Cohu also received a $26 million order early in the third quarter from a single customer for Eclipse systems, with much of that order expected to ship in the fourth quarter. The company said Eclipse lead times remain about 13 to 14 weeks to the first system shipment after receipt of an order, although larger orders are shipped across multiple weeks.

Inspection, Software and Interface Businesses Advance

In inspection and metrology, Cohu shipped additional final inspection systems for HBM3, HBM4 and HBM4E devices to a U.S.-based integrated device manufacturer, with a strong forecast for the second half of 2026. The company also qualified its Neon platform at a Taiwan-based outsourced semiconductor assembly and test provider and introduced a shortwave infrared vision sensor designed to detect inner cracks in complex silicon devices.

The company said its software analytics business recorded its first $1 million revenue quarter, while orders increased 140% year over year. Cohu is expanding a predictive-maintenance deployment with a high-performance computing chipmaker that Müller said is expected to become its largest software deployment with a single customer.

Cohu also continued work on an on-site AI appliance that runs AI models and autonomous agents inside a customer’s network, addressing semiconductor manufacturers’ data sovereignty requirements.

Interface solutions accounted for about 19% of consolidated second-quarter revenue. Cohu booked $500,000 of interface solutions for optical engine testing and is pursuing additional opportunities tied to co-packaged optical devices. The company plans to ship a handler-based qualification unit for optical-engine test by the end of 2026.

Margins, Balance Sheet and Outlook

On a non-GAAP basis, second-quarter gross margin was 45.5%, above guidance due primarily to favorable product mix. Operating expenses were $52.7 million, net interest income after interest expense and foreign-currency losses was approximately $1.7 million, and non-GAAP earnings per share were $0.26. Adjusted EBITDA margin was 12%.

Cash and investments increased approximately $9 million during the quarter to $498 million, while cash from operations was $10 million. Total debt was $304 million, including $288 million related to the company’s fourth-quarter 2025 convertible debt offering. Cohu did not repurchase shares during the quarter.

For the third quarter, Cohu forecast revenue of approximately $170 million, plus or minus $7 million, representing growth of 14% sequentially and 35% year over year. The company expects third-quarter gross margin of approximately 45% and operating expenses of about $54 million.

Cohu also raised its full-year 2026 revenue outlook to approximately 35% growth from the prior year, implying annual revenue of roughly $610 million to $615 million, according to management’s discussion. Jones said fourth-quarter revenue would need to be approximately flat with the third quarter to reach that range.

The company said rising demand has contributed to longer lead times and higher costs for certain semiconductors and specialty components, particularly memory. Cohu has made advance purchases where possible and has begun discussions with customers about passing along some higher costs. Management said its guidance incorporates current supply-chain risks and constraints.

About Cohu (NASDAQ:COHU)

Cohu, Inc is a global provider of semiconductor test and inspection solutions, offering a broad portfolio of products designed to support chip manufacturers, outsourced semiconductor assembly and test (OSAT) providers, and electronics original equipment manufacturers (OEMs). The company's product lineup includes automatic test handlers, wafer probers, test sockets, thermal subassembly systems and burn-in boards, all engineered to optimize throughput, accuracy and reliability in semiconductor production and final test.

Founded in 1947 and headquartered in Poway, California, Cohu has grown through both organic development and targeted acquisitions to become a recognized leader in test handling and interconnect technologies.

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