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    FORM
    Earnings call· Jun 2026(Q2 FY26)

    FORMFACTOR Q2 FY26 earnings call FORM

    Jul 29, 2026 Source

    Executive summary

    FormFactor Q2 FY26 — Record Revenue and Profitability Driven by HPC and Advanced Packaging

    FormFactor delivered record Q2 FY26 results, driven by strong demand in high-performance compute and advanced packaging, particularly in HBM and co-packaged optics. The company surpassed a $1 billion annual revenue run rate and achieved over 50% gross margin, making significant progress towards its 2030 target model. Operational efficiencies and the upcoming Farmers Branch expansion are key to sustaining this growth and profitability trajectory.

    Highlights

    5

    • Record Q2 revenue of $258.2 million, up 14% QoQ and $18.2 million above the midpoint of guidance.

    • Non-GAAP gross margin expanded to 53.3%, up 430 bps QoQ, exceeding 50% for the first time.

    • Non-GAAP EPS nearly doubled sequentially to $0.82 per share, more than tripled YoY.

    • Systems segment revenue nearly doubled sequentially to $48.5 million, driven by core engineering probers and co-packaged optics (CPO).

    • Co-packaged optics (CPO) revenue expected to significantly exceed $20 million for the year, up from an initial $10M-$20M range.

    Concerns

    3

    • DRAM product mix expected to shift significantly towards DDR in Q3, offsetting higher Q3 revenue volumes for gross margin.

    • Farmers Branch ramp will incur some inefficiencies in 2027, though largely offset by operational effectiveness improvements.

    • Capacity constraints across the industry and within FormFactor's current footprint may govern market share growth for new customers until Farmers Branch ramps.

    Guidance & targets

    9
    CategoryTargetConfidence
    Revenue
    $270 million, plus or minus $10 million
    high materiality
    High
    Non-GAAP Gross Margin
    54%, plus or minus 150 basis points
    high materiality
    High
    Non-GAAP Operating Expenses
    $70 million, plus or minus $2 million
    medium materiality
    High
    Non-GAAP Effective Tax Rate
    between 15% to 19%
    low materiality
    High
    Non-GAAP EPS
    $0.86, plus or minus $0.09
    high materiality
    High
    Co-Packaged Optics (CPO) Revenue
    significantly exceed the $20 million level
    medium materiality
    High
    Cash CapEx for Farmers Branch and capacity additions
    between $140 million and $170 million
    medium materiality
    High
    Farmers Branch Preproduction Ramp Costs (total)
    between $25 million and $30 million
    low materiality
    High
    Farmers Branch Initial Target Capacity Completion
    by the beginning of 2028
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Probe Cards
    Record DRAM Probe Cards revenue driven by HBM4 and DDR. Foundry and Logic growth from data center CPU, networking, and custom ASICs.
    HBM comprised approximately 2/3 of overall DRAM revenueDRAM revenues comparable to record Q2 in Q3significant underlying shift from HBM to DDR in Q3 DRAMFoundry and Logic demand increased significantly over Q1continued growth in Foundry and Logic Probe Card revenue in Q3
    		———54.4%
    Systems
    Significant recovery and new record, up $20.6 million QoQ, driven by core engineering prober business and accelerating growth in co-packaged optics (CPO).
    CPO revenues to exceed $20 million for 2026leadership in test insertion 1 for CPO
    		$48.5 million—74%48.5%

    Operational metrics

    21
    Non-GAAP gross margin
    53.3%up 430 bps QoQ, up nearly 15 percentage points YoY
    Q2 FY26

    Achieved record non-GAAP gross margin, making progress towards 2030 target model.

    Non-GAAP EPS
    $0.82up nearly 50% QoQ, more than tripled YoY
    Q2 FY26

    Achieved record non-GAAP EPS, making progress towards 2030 target model.

    Revenue
    $258.2 millionup $32.1 million (14%) QoQ
    Q2 FY26

    Set an all-time record for quarterly revenue.

    GAAP gross margin
    50.7%up from 38.4% in Q1 FY26
    Q2 FY26

    Reported GAAP gross margin for the quarter.

    GAAP to Non-GAAP reconciling items (Cost of Revenues)
    $6.7 million
    Q2 FY26

    Items included in cost of revenues for GAAP to non-GAAP reconciliation.

    Restructuring costs
    $18.8 million
    Q1 FY26

    Restructuring costs included in Q1 GAAP gross margins that did not recur in Q2.

    GAAP operating expenses
    $73.1 millionup from Q1
    Q2 FY26

    Reported GAAP operating expenses.

    Non-GAAP operating expenses
    $65.7 millioncompared to $62 million in Q1 FY26
    Q2 FY26

    Demonstrates 200 basis point sequential improvement in OpEx as a percent of revenue.

    Farmers Branch Preproduction Ramp Costs (in OpEx)
    $4.9 million
    Q2 FY26

    Costs included in Q2 operating expenses for the Farmers Branch site.

    GAAP net income
    $56.2 millionup from $20.4 million in Q1 FY26
    Q2 FY26

    Increase driven by higher revenue, gross margin, and lower restructuring costs.

    Non-GAAP net income
    $65 million
    Q2 FY26

    Reported non-GAAP net income.

    GAAP effective tax rate
    11.1%
    Q2 FY26

    Reported GAAP effective tax rate.

    Non-GAAP effective tax rate
    16.2%
    Q2 FY26

    Reported non-GAAP effective tax rate.

    Cash flows from operations
    $61.8 millionup $16.8 million from Q1 FY26
    Q2 FY26

    Driven primarily by higher net income partially offset by working capital investments.

    Cash and investments balance
    $349 millionup $42.8 million QoQ
    Q2 FY26

    Total cash and investments at quarter end.

    Remaining share repurchase authorization
    $70.9 million
    Q2 FY26

    No shares repurchased during Q2; authorization intended to offset dilution from stock-based compensation.

    Farmers Branch Preproduction Ramp Costs (incurred to date)
    $12 million
    Q2 FY26

    Preproduction ramp costs incurred to date for Farmers Branch.

    Farmers Branch Preproduction Ramp Costs (expected Q3)
    $7 million
    Q3 FY26

    Expected preproduction ramp costs for Farmers Branch in the current third quarter.

    IEEPA tariff refunds
    $7 million to $9 million
    Q3 FY26

    Expected to be received in Q3, representing return of tariffs paid from 2025 through early 2026.

    Cycle time improvement target
    60%
    Long-term

    Goal for cycle time improvement presented at Analyst Day.

    Fabless CPU customer market share
    low single-digit
    Q2 FY26

    Current market share at a large fabless XPU customer, with significant opportunity for growth.

    Industry KPIs

    5
    MetricValueDetails
    Ai data center revenueapproximately 2/3%
    Fab capacity utilizationincreased output
    Design wins socket pipelinemultiple design wins
    Node platform ramp scheduleHBM4
    End market segment revenue mixWorld's leading foundry was 10% customer; HBM comprised ~2/3 of overall DRAM revenue

    Deals & partnerships

    1
    Keystone MicrotechExpansion of multiyear partnership for semiconductor manufacturing and test services.multiyear

    Expands FormFactor's regional footprint in Taiwan, improving local assembly and service capabilities and responsiveness in supporting the exceptionally steep ramps of complex devices like GPUs and custom ASICs.

    Capital programs

    1
    Farmers Branch site expansionon track to come online in the fourth quarter and ramp throughout 2027
    Period spend: between $140 million and $170 million
    Spent to date: $12 million
    Funding: largely self-funding from increased profitability, more efficient cost structure and cash flow from operations

    Benefit: increased capacity at a structurally lower cost, roughly equivalent to our California approach [indiscernible] to date

    The expansion is supported by a $24.2 million grant from the Texas Semiconductor Innovation Fund, designated to fund capital expenditures upon meeting certain criteria. Preproduction ramp costs are expected to be $25 million to $30 million in total for 2026, with $7 million expected in Q3.

    Risks & headwinds

    4
    DRAM Product Mix ShiftQ3 FY26

    significant underlying shift from HBM to DDR

    Mitigation: FormFactor's probe cards are device-specific, so mix will track customer product shifts; company adapts to dynamic market to maximize profit opportunity.

    Farmers Branch Ramp Inefficiencies2027

    some measure of inefficiency

    Mitigation: Planning to be as efficient as possible, completing ramp quickly, largely offsetting inefficiencies through operational effectiveness improvements.

    Capacity Constraintsuntil Farmers Branch comes online

    very capacity constrained across the industry

    Mitigation: Farmers Branch expansion will provide needed capacity to support market share growth for new customers.

    Supply Chain Constraintscurrent

    more constraints across the supply chain at current production levels

    Mitigation: Global FormFactor team demonstrates remarkable agility in navigating and quickly resolving internal and external constraints.

    What to watch in Q3 FY26

    5

    Farmers Branch capacity ramp

    Q4 2026 and throughout 2027
    CurrentOn track to come online in Q4 2026
    TargetRamping throughout 2027, contributing meaningful capacity

    Why it matters

    Essential for next phase of growth, gross margin expansion, and supporting demand.

    Our Farmers Branch site expansion remains on track to ramp starting at the end of this year and continue to ramp over the course of 2027. Bringing this capacity up on time and on budget, remains a key focus as it will enable our next phase of growth and gross margin expansion.

    Q&A highlights

    7

    Clarification on the new 51% non-GAAP gross margin baseline and if Farmers Branch accretion is included, and if margins should be higher with increased revenue.

    Aric clarified that 51% is the sustainable baseline for current volumes and mix, excluding non-recurring items. Farmers Branch is expected to be accretive to current gross margin levels once online.

    “So the recurring or sustainable element of gross margins, we believe, is more like at the current volumes and mix. So we expect that, that's the new baseline that you should be thinking of.”

    asked by Sreekrishnan Sankarnarayanan · answered by Aric McKinnis

    2 min read7 chapters

    Detailed Narrative

    01

    Strategic Diversification and Market Position

    FormFactor's strategy to serve all major semiconductor customers and applications, rather than concentrating on a single segment, has proven valuable. This diversification is evident in the broad demand across high-performance compute (HPC) and advanced packaging, including high-bandwidth memory (HBM) and co-packaged optics (CPO), and is driving market share gains. The company's unique position at the intersection of HPC and advanced packaging is a key competitive advantage, with 65% of revenue coming from customers not on the 10% customer list.

    02

    Taiwan Operations and Foundry Relationship

    Taiwan is a critical manufacturing hub for HPC and advanced packaging, with FormFactor playing an important role. Q2 revenue from Taiwan grew over 30% sequentially, and the world's leading foundry remained a 10% customer. The recent expansion of a multiyear partnership with Keystone Microtech in Taiwan further enhances local assembly and service capabilities, supporting the steep ramps of complex devices like GPUs and custom ASICs.

    03

    HBM and DDR Market Dynamics

    The DRAM Probe Card business saw record revenue, driven by HBM4 demand and sustained DDR applications. HBM comprised approximately two-thirds of overall DRAM revenue, with FormFactor's SmartMatrix technology enabling high-speed HBM4 testing. However, in Q3, a significant shift towards DDR is expected as customers prioritize DDR designs due to higher profitability, leading to a corresponding dynamic product mix.

    04

    Foundry and Logic Strength

    Q2 saw significant growth in Foundry and Logic Probe Card demand, primarily from data center CPU applications, networking, and initial hyperscaler custom ASICs. FormFactor benefits from long-term relationships with data center CPU leaders, an expanding relationship with a high-performance compute leader, and successful design wins with a large fabless XPU customer, providing broad exposure to growing CPU demand.

    05

    Co-Packaged Optics (CPO) Acceleration

    The Systems segment experienced rapid growth in CPO, with 2026 CPO revenues now expected to significantly exceed $20 million, up from an initial forecast of $10 million to $20 million. This acceleration is driven by increasing CPO chip volumes and FormFactor's leadership in critical test insertions for photonic integrated circuits (PICs), addressing the physical limits of traditional copper interconnects.

    06

    Operational Excellence and Farmers Branch

    The company achieved significant operational improvements, driving higher output from existing facilities through yield and cycle time enhancements. The Farmers Branch site expansion remains on track to ramp in Q4 2026 and throughout 2027, providing increased capacity at a structurally lower cost and enabling the next phase of growth and gross margin expansion. This investment is largely self-funded by increased profitability and cash flow, supported by a $24.2 million grant from the Texas Semiconductor Innovation Fund.

    07

    Progress Towards 2030 Target Model

    FormFactor is making meaningful progress towards its new target model introduced in May, aiming to double revenue to $1.6 billion, achieve 55% non-GAAP gross margin, and more than double non-GAAP EPS to $5 per share by 2030. The Q2 results and Q3 outlook demonstrate strong operating leverage and a clear path to these long-term goals, with the current normalized non-GAAP gross margin at 51%.

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