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    FORM
    Earnings call· Mar 2026(Q1 FY26)

    FORMFACTOR Q1 FY26 earnings call FORM

    Apr 29, 2026 Source

    Executive summary

    FormFactor Q1 FY26 — Record Revenue & Strong Margin Expansion Driven by HBM and Networking

    FormFactor delivered record Q1 FY26 revenue of $226.1 million and achieved significant non-GAAP gross margin expansion to 49%, exceeding its target model on a run rate basis. Growth was fueled by strong demand in HBM and networking, with an accelerating ramp in co-packaged optics. The company is focused on operational efficiencies and the Farmers Branch expansion to support future growth and margin expansion, with a new target model to be unveiled at its upcoming Investor Day.

    Highlights

    7

    • Q1 revenue grew sequentially to an all-time record of $226.1 million, exceeding the midpoint of the outlook range.

    • Non-GAAP gross margin reached 49%, a 510 basis point increase quarter-over-quarter and 250 basis points above the high end of the Q1 outlook.

    • Non-GAAP EPS was $0.56, up from $0.46 in Q4 FY25.

    • Q2 revenue outlook of $240 million (midpoint) is expected to set another record.

    • Record revenue is forecasted for DRAM probe cards in Q2, driven by a step-up in HBM demand, including increased adoption by a second customer.

    • Significant growth in foundry and logic probe cards was driven by networking applications, making a high-performance compute leader a 10% customer for the first time, and incremental strength in data center CPU applications.

    • 2026 CPO revenues are expected at the high end of the $10 million to $20 million range, accelerating due to growing volumes and leadership in Insertion 1 test.

    Concerns

    5

    • GAAP gross margin decreased to 38.4% from 42.2% in Q4 FY25, primarily due to $21.5 million in restructuring costs.

    • GAAP net income for Q1 was $20.4 million ($0.26 per share), down from $23.2 million ($0.29 per share) in the prior quarter, driven by $17.6 million in restructuring-related costs, net of tax.

    • Free cash flow decreased to $30.7 million in Q1 from $34.7 million in Q4, due to greater capital expenditures and higher working capital needs.

    • Gross margins continue to be adversely impacted by tariffs, with approximately 140 basis points assumed in the Q2 outlook.

    • The pace of profitability improvement is expected to moderate later in the year as the company approaches the limitations of its current manufacturing footprint.

    Guidance & targets

    12
    CategoryTargetConfidence
    Q2 Revenue
    $240 million, plus or minus $5 million
    high materiality
    High
    Q2 Non-GAAP Gross Margin
    49.5%, plus or minus 150 basis points
    high materiality
    High
    Q2 Non-GAAP Operating Expenses
    $65 million, plus or minus $2 million
    medium materiality
    High
    Q2 Non-GAAP Effective Tax Rate
    15% to 19%
    medium materiality
    High
    Q2 Non-GAAP EPS
    $0.61, plus or minus $0.04
    high materiality
    High
    2026 CPO Revenues
    high end of the $10 million to $20 million range
    medium materiality
    High
    Farmers Branch Cash CapEx
    $140 million and $170 million
    high materiality
    High
    Farmers Branch Preproduction Ramp Costs and G&A
    $20 million and $25 million
    medium materiality
    High
    Farmers Branch Initial Production
    begin to come online later this year
    high materiality
    High
    Farmers Branch Ramp to Initial Target Capacity
    over the course of 2027
    high materiality
    High
    Farmers Branch Initial Target Capacity
    equivalent to our existing California footprint (roughly 60% of our existing probe cards business today)
    high materiality
    High
    Share Repurchase Program
    offset dilution from stock-based compensation
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    DRAM Probe Cards
    Delivered expected sequential growth from Q4 FY25 to reach another record in Q1 FY26, driven by increased HBM applications and sustained DDR demand. Forecasting record revenue in Q2 FY26, driven by another step-up in HBM demand, primarily from a second customer's increased adoption of Smart Matrix technology for HBM4 testing.
    HBM demand: increasedDDR demand: sustainedSmart Matrix full wafer contactor technology adoption: increased by second customer
    		Record—Sequential growth—
    Foundry and Logic Probe Cards
    Q1 FY26 demand increased significantly over Q4 FY25, driven primarily by networking applications, making a high-performance compute leader a 10% customer. Q2 FY26 expects continued growth from incremental strength in data center CPU applications (linked to AI inference) and continued strong networking demand, as well as steady PC and mobile demand.
    Networking applications: primary driver of Q1 growthData center CPU applications: incremental strength in Q2PC and mobile demand: steady
    		Increased significantly—Increased significantly—
    Systems segment
    Experienced expected seasonal reduction in demand in Q1 FY26. Non-GAAP gross margin declined to 38% (down 350 bps QoQ) due to softer demand and transition to Triton production for CPO. Focus continues on CPO growth and quantum computing.
    Co-package optics (CPO) growth opportunityQuantum computing challenges: helping customers solve
    		Seasonal reduction—Seasonal reduction38%

    Operational metrics

    13
    Non-GAAP Gross Margins
    49%up 510 bps QoQ
    Q1 FY26

    Achieved target model of 47% non-GAAP gross margins at $850 million annual revenues on a run rate basis.

    Non-GAAP Gross Margins
    50.5%up 603 bps QoQ
    Q1 FY26

    Primary driver of overall non-GAAP gross margin improvement.

    Non-GAAP Gross Margins
    38%down 350 bps QoQ
    Q1 FY26

    Partially offset overall non-GAAP gross margin improvement due to seasonally softer demand and transition to Triton production.

    GAAP Operating Expenses
    $70.1 milliondown 470 bps YoY as % of revenue
    Q1 FY26

    Included $7.1 million of expense related to the preproduction ramp of Farmers Branch, demonstrating spending discipline.

    GAAP Net Income
    $20.4 milliondown from $23.2 million QoQ
    Q1 FY26

    Decrease driven by $17.6 million restructuring-related costs, net of tax.

    Non-GAAP Net Income
    $44.5 millionup from $36.6 million QoQ
    Q1 FY26

    Up from $0.46 per diluted share in Q4 FY25.

    GAAP Effective Tax Rate
    2.1%
    Q1 FY26

    Reported GAAP effective tax rate for the quarter.

    Non-GAAP Effective Tax Rate
    16.1%
    Q1 FY26

    Reported non-GAAP effective tax rate for the quarter.

    Cash and Investments Balance
    $303 millionup $28.1 million QoQ
    Q1 FY26

    Balance at quarter end.

    Remaining Share Repurchase Authorization
    $70.9 million
    Q1 FY26

    Remaining under the $75 million 2-year buyback program approved in 2025. No shares repurchased in Q1.

    Tariff Impact on Gross Margins
    140 bps
    Q2 FY26 outlook

    Assumed in outlook despite recent reduction in amount paid. Continues to be an adverse impact.

    Potential Tariff Refund
    $9 million to $11 million
    null

    Potential refund for tariffs previously recorded in cost of goods sold, due to Q1 FY26 Supreme Court ruling. Not recorded in Q1, not assumed in Q2 outlook.

    HBM Probe Card Business Growth
    >50%
    H1 FY25 to H1 FY26

    Growth in HBM probe card business, taking the midpoint of guidance.

    Industry KPIs

    5
    MetricValueDetails
    Lead timesmostly shorter in the quarter
    Ai data center revenue—
    Fab capacity utilizationvery, very high
    Design wins socket pipeline—
    End market segment revenue mix—

    Product announcements

    1
    ProductTypeDetails
    Flatiron dilution refrigeratorlaunch

    Deals & partnerships

    1
    Keystone PhotonicsIntegration of fourth-quarter acquisition to define and execute silicon photonics and co-packaged optics probing roadmap.

    Successfully integrated the fourth-quarter acquisition.

    Capital programs

    1
    Farmers Branch site expansionon track
    Period spend: $140 million and $170 million (cash CapEx for 2026); $20 million and $25 million (preproduction ramp costs and G&A for 2026)
    Spent to date: $7.1 million (Q1 FY26 operating expenses related to preproduction ramp)
    Funding: certain incentives (including $24 million in cash grants)

    Benefit: increased capacity with structurally lower costs; initial target capacity equivalent to existing California footprint (roughly 60% of current probe cards business)

    The project is on track and expected to begin coming online later this year, ramping over 2027. It is expected to be accretive to gross margins upon completion of the ramp to initial target capacity. Incentives include $24 million in cash grants designated to fund capital expenditures.

    Risks & headwinds

    3
    TariffsQ2 FY26

    around 140 basis points of tariffs in our outlook for Q2

    Mitigation: Actively monitoring developments; potential refund of $9 million to $11 million from previously paid tariffs due to Q1 FY26 Supreme Court ruling.

    Production capacity constraintsLater this year

    pace of profitability improvement will moderate as we approach the limitations of our current footprint, later this year

    Mitigation: Farmers Branch site coming online later this year to provide increased capacity and structurally lower costs.

    Yield learning curve for new CPO technologyAs new technology ramps

    discussed_not_quantified

    Mitigation: Focusing on Insertion 1 as foundational optical probing technology, which can be ported to other insertions. Active conversations on all insertions with partners and customers.

    What to watch in Q2 FY26

    5

    Farmers Branch ramp progress

    End of 2026
    Currenton track and expected to begin to come online later this year
    TargetInitial production online

    Why it matters

    This expansion is key to increasing capacity, lowering costs, and enabling future revenue and gross margin expansion.

    Our Farmers Branch site expansion is the next key priority. And the project is on track and expected to begin to come online later this year and to ramp over the course of 2027.

    Q&A highlights

    5

    Why is NVIDIA broken out separately, how much is networking-related, and what does it imply for market share?

    NVIDIA crossed the 10% customer threshold based on purchase orders and invoices. The second 10% customer is associated with networking applications. GPU qualification is nearing completion, with $20 million in revenue expected in the second half of the year, likely from the foundry.

    “With all customers, as we report them as -- when they cross the 10% threshold is required to it's based on who's placed the PO and who's paying the invoice. And so in this case, you see we have 2, 10% customers in this quarter. And as I described on the call, the second 10% customer is associated with networking.”

    asked by Brian Chin · answered by Mike Slessor

    2 min read6 chapters

    Detailed Narrative

    01

    Operational Excellence and Margin Expansion

    FormFactor achieved its target model of 47% non-GAAP gross margins at $850 million in annual revenues on a run rate basis in Q1 FY26, reaching 49%. This improvement was driven by operational effectiveness, manufacturing yield improvements, reduced manufacturing spending, and cycle time reductions. The company expects the bulk of these improvements to be durable, with further moderate gains throughout 2026, and anticipates another 50 basis points of expansion in Q2.

    02

    High-Performance Compute and Advanced Packaging Leadership

    The company continues to benefit from its leadership position at the intersection of high-performance compute and advanced packaging, two powerful trends transforming the semiconductor industry. This strategic positioning is critical as test intensity and complexity continue to rise. Growth is fueled by strength in familiar areas like HBM and accelerating contributions from newer foundry and logic opportunities like networking.

    03

    DRAM Probe Card Strength

    FormFactor delivered expected sequential growth in DRAM probe cards in Q1 to reach another record, with increased demand in HBM applications paired with sustained demand in DDR applications. The company is forecasting record revenue in DRAM probe cards again in Q2, driven by another step-up in HBM demand. This incremental growth is largely from a second customer's increased adoption of FormFactor's Smart Matrix full wafer contactor technology, enabling high-speed testing for HBM4.

    04

    Foundry and Logic Diversification

    Foundry and logic demand increased significantly in Q1 over Q4, primarily driven by growth in probe cards for networking applications, which led to a high-performance compute leader becoming a 10% customer for the first time. In Q2, the company expects continued growth in foundry and logic probe revenue, driven by incremental strength in data center CPU applications (linked to AI inference use cases), continued strong networking demand, and steady PC and mobile demand. FormFactor is also expanding its custom ASIC business with hyperscalers and their ASIC design partners.

    05

    Co-Packaged Optics (CPO) Ramp

    The ramp of the Triton production test system for co-packaged optics (CPO), co-developed with Advantest and Tokyo Electron, is accelerating. FormFactor now expects 2026 CPO revenues to reach the high end of the previously communicated $10 million to $20 million range. This acceleration is due to growing volumes of CPO chips and the company's leadership in Insertion 1 test, which ensures known good die on the photonic integrated circuit (PIC) wafer, a critical step for high yields in CPO modules.

    06

    Farmers Branch Expansion Progress

    The Farmers Branch site expansion project is on track and expected to begin coming online later in 2026, with a ramp over the course of 2027. This increased capacity is anticipated to provide structurally lower costs, creating the foundation for future revenue growth and gross margin expansion beyond the current target model. The initial target capacity is estimated to be equivalent to roughly 60% of the company's existing probe cards business today.

    AI-generated summary of the company’s earnings call. Not investment advice.