FormFactor Q1 Earnings Call Highlights

Key Points

• FormFactor reported Q1 2026 revenue of $226.1M — an all‑time record — and non‑GAAP EPS of $0.56, both above outlook, while GAAP results were reduced by $17.6M of restructuring costs; management guides Q2 revenue around $240M and non‑GAAP EPS ~ $0.61.
• Non‑GAAP gross margin expanded to 49% (up 510 bps sequentially) driven by operational improvements, restructuring savings and some timing benefits, and the company said a Supreme Court ruling could make $9–$11M of prior IEEPA tariffs refundable (not assumed in guidance).
• End‑market strength is concentrated in probe cards for HBM and DDR plus growing networking and data‑center CPU demand, while systems revenue is ramping on the TRITON Co‑Packaged Optics test system and 2026 CPO revenue is now expected at the high end of the $10–$20M range.

FormFactor NASDAQ: FORM reported first-quarter 2026 results that management said marked another all-time revenue record, alongside profitability that exceeded the company’s outlook. On the earnings call, Chief Executive Officer Mike Slessor said revenue grew sequentially and that gross margin and earnings per share came in “significantly above the high end of our outlook range.”

Looking ahead, Slessor said the company expects the momentum to continue in the second quarter, with another record revenue quarter and sequential improvements in both gross margin and earnings per share. He added that FormFactor plans to unveil its “next target model” and related strategy at an Investor Day event at the Nasdaq MarketSite on May 11.

Q1 financial performance and Q2 outlook

Chief Financial Officer Aric McKinnis said Q1 2026 revenue totaled $226.1 million, which was $1.1 million above the midpoint of FormFactor’s prior outlook range of $220 million to $230 million.

On a GAAP basis, gross margin was 38.4%, down from 42.2% in the prior quarter. McKinnis attributed the GAAP comparison in part to $23.9 million of GAAP-to-non-GAAP reconciling items in cost of revenue, including $21.5 million tied to a restructuring action announced January 5.

On a non-GAAP basis, FormFactor posted gross margin of 49%, up 510 basis points from 43.9% in Q4 2025 and above the high end of the company’s outlook range. McKinnis said probe card segment non-GAAP gross margin rose 603 basis points to 50.5%, while systems segment non-GAAP gross margin declined 350 basis points to 38% due to seasonally softer demand and the company’s transition to production of its TRITON system for Co-Packaged Optics applications.

GAAP net income was $20.4 million, or $0.26 per diluted share, versus $23.2 million, or $0.29 per diluted share, in Q4. McKinnis said the decline was driven by restructuring-related costs, net of tax, of $17.6 million in Q1. Non-GAAP net income was $44.5 million, or $0.56 per diluted share, up from $36.6 million, or $0.46 per diluted share, in Q4.

For the second quarter, management guided to revenue of $240 million plus or minus $5 million and non-GAAP gross margin of 49.5% plus or minus 150 basis points. Non-GAAP EPS is expected to be $0.61 plus or minus $0.04, with non-GAAP operating expenses of $65 million plus or minus $2 million and a non-GAAP effective tax rate between 15% and 19%.

Drivers of gross margin expansion: restructuring, efficiency, and tariffs

McKinnis said FormFactor’s top priority over the past three quarters has been lifting gross margin and delivering on a target model of 47% non-GAAP gross margin at $850 million in annual revenue, which he said the company achieved in Q1 on a run-rate basis. He described a “cumulative improvement of more than 1,000 basis points in gross margins over the last three quarters,” and said the company expects an additional 50 basis points of expansion at the midpoint of its Q2 guide.

Management attributed the gross margin improvement to a combination of operational actions and cost discipline, including more effective deployment of the workforce and existing manufacturing footprint (including the Q1 restructuring), higher manufacturing yields, reduced manufacturing spending, and shorter cycle times.

Discussing the 510-basis-point sequential increase in non-GAAP gross margin, McKinnis said roughly half of the Q1 overperformance versus expectations was tied to timing items and half to durable improvements. He said about 200 basis points of timing-related benefit was “primarily driven by changes in customer-driven priorities within the quarter,” while another 200 basis points reflected faster-than-expected savings from restructuring and what he called “unexpected relief from tariffs” as IEEPA tariffs were discontinued and replaced by lower Section 232 tariffs during the quarter.

On tariffs, McKinnis said FormFactor still expects an adverse impact and assumed approximately 140 basis points of tariff impact in the Q2 outlook. He added that due to a Q1 2026 Supreme Court ruling, some or all IEEPA-based tariffs paid in 2025 “may be refundable,” but the company did not record any recovery in Q1 or assume a recovery in Q2. If recoverable, McKinnis said the refund could total $9 million to $11 million previously recorded in cost of goods sold.

Probe card demand: HBM, DDR, networking, and data center CPUs

Slessor said FormFactor continues to benefit from its position at the “intersection of high-performance compute and Advanced Packaging,” citing strength in probe cards for high-bandwidth memory (HBM) and accelerating contributions from foundry and logic opportunities such as networking.

In DRAM probe cards, Slessor said the company delivered expected sequential growth to another record, driven by increased HBM demand alongside sustained DDR demand. He described DRAM as supply constrained and said customers are dynamically shifting wafer start mix across HBM and DDR designs. Because probe cards are specific to each chip design, he said FormFactor expects its DRAM mix to shift accordingly while conditions persist.

For Q2, Slessor said the company is forecasting record DRAM probe card revenue again, driven by “another step up in HBM demand.” He said most incremental growth is expected from a second customer increasing adoption of FormFactor’s SmartMatrix full wafer contactor technology, which he said enables high-parallelism, high-speed testing of HBM stacks at HBM4 speeds “before it’s combined with GPUs or custom ASICs.”

In foundry and logic probe cards, Slessor said Q1 demand increased significantly from Q4, “driven primarily by growth in probe cards for networking applications.” For Q2, he said FormFactor expects continued growth led by incremental strength in data center CPU applications, building on strong networking demand and steady PC and mobile demand. Slessor linked the CPU probe card demand to increasing CPU compute intensity in AI inference use cases.

During Q&A, Slessor also addressed customer concentration disclosures, explaining that 10% customer reporting is based on “who’s placed the PO and who’s paying the invoice.” He said the quarter included two 10% customers and noted that the “second 10% customer is associated with networking.” He added that GPU qualification progress is in its final stages and referenced an expectation of “essentially the $20 million in revenue we’ve described in the second half.”

Asked about whether pricing was driving margin improvement in a constrained environment, Slessor said pricing and ASP were “not a major factor” and that the gains were driven by cost reductions in cost of goods sold, yield improvements, and cycle-time reductions. He noted there can be “isolated incidents” of expedite fees, but characterized the overall margin performance as operationally driven.

Systems segment: quantum refrigeration and Co-Packaged Optics ramp

In the systems segment, Slessor said Q1 experienced an expected seasonal reduction in demand. He said FormFactor’s systems focus remains two-pronged: building the Co-Packaged Optics (CPO) opportunity and helping customers address challenges in scalable quantum computing.

Slessor highlighted the company’s Flatiron dilution refrigerator, which he described as a new benchtop millikelvin platform designed to simplify measurements and accelerate quantum device development and validation.

On CPO, Slessor said FormFactor is beginning to ramp its TRITON production test system, co-developed with Advantest and Tokyo Electron. He said the ramp is accelerating and that FormFactor now expects 2026 CPO revenue to come in at the high end of the previously communicated $10 million to $20 million range. Slessor attributed the acceleration to growing volumes of CPO chips expected later in the year and FormFactor’s leadership in “test insertion one,” which is intended to ensure known good die on the photonic integrated circuit (PIC) wafer.

In response to analyst questions, Slessor said the company is initially focused on insertion one because it represents foundational optical probing technology needed across insertions, and he said the technology can be ported across other insertion points. He said FormFactor is having “active conversations” across insertions but is prioritizing the near-term ramp opportunity.

Slessor also said FormFactor has successfully integrated its fourth-quarter acquisition of Keystone Photonics and that teams are collaborating on a silicon photonics and CPO probing roadmap, including electro-optical probe cards.

Capacity, Farmers Branch expansion, and cash priorities

Management repeatedly pointed to manufacturing constraints and ongoing efforts to increase output from the existing footprint through operational efficiency. McKinnis said the company is now manufacturing at levels that “would not have been possible even one quarter earlier,” citing improvements in cycle times, yields, and workforce deployment.

Both executives discussed the company’s planned Farmers Branch site expansion. McKinnis said the project is on track to begin coming online later this year and ramp over the course of 2027, and he emphasized that bringing it up on time and on budget is a key focus. He said that upon completion of the ramp to initial target capacity, Farmers Branch is expected to be accretive to gross margins.

On sizing, management said initial target capacity is “more or less equivalent to our existing California footprint,” with McKinnis characterizing it as “roughly 60%” of the existing probe card business. Slessor clarified later that Farmers Branch is “not a replacement,” but an expansion, and said there would be “not much impact” to 2026 given production starts “at the very end” of the year.

In the quarter, free cash flow was $30.7 million, down from $34.7 million in Q4, which McKinnis attributed to higher capital expenditures and lower cash flow from operations. Cash flow from operations was $45 million, down about $1 million sequentially, reflecting higher working capital needs and $4.1 million in cash paid related to restructuring actions. Cash and investments ended the quarter at $303 million.

McKinnis said FormFactor continues to expect 2026 cash capital expenditures for Farmers Branch of $140 million to $170 million and pre-production ramp costs in G&A of $20 million to $25 million. He also cited incentives including approximately $24 million in cash grants designated to fund capital expenditures upon meeting certain criteria.

The company did not repurchase shares in Q1. McKinnis said $70.9 million remained available under the company’s $75 million two-year buyback program approved in April 2025, and that in the short term FormFactor is prioritizing cash deployment to accelerate the Farmers Branch ramp.

About FormFactor NASDAQ: FORM

FormFactor, Inc NASDAQ: FORM is a leading provider of advanced test and measurement solutions for the semiconductor industry. The company specializes in the design, development and manufacture of high-performance wafer-level and package-level test interfaces used in wafer sort, characterization, reliability and failure analysis applications. By leveraging precision microelectromechanical systems (MEMS) and photolithographic processes, FormFactor delivers probe cards, analytical probes and test sockets that enable device makers to validate next-generation integrated circuits across logic, memory, RF, analog and power applications.

FormFactor's product portfolio includes custom probe cards for wafer probers, TEM-based analytical probes for material and device characterization, and socket solutions for burn-in and final test of packaged devices.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.