PDF Solutions (PDFS) Q2 FY26 earnings call: guidance and Q&A

Has the target audience for DirectScan systems expanded beyond the initial 5-10 customers, especially given the new contract for a mature process node?

John Kibarian confirmed the target audience is expanding, particularly with customers developing more mature nodes, which was demonstrated by a significant new contract in Q2. He noted it's "definitely bigger than what we thought."

“We do think it's expanding... it's definitely bigger than what we thought.”

asked by Clark Wright · answered by John Kibarian

What are the primary sources of the accelerated backlog growth this quarter – large existing customers or a broadening customer base?

John Kibarian stated that backlog growth comes from both new customers, as seen with the DirectScan contract, and existing customers, citing the 8-figure secureWISE contract with an existing equipment company.

“So some of it is from the new customers... But also, usually, a good chunk of it is existing customers.”

asked by Clark Wright · answered by John Kibarian

Can management explain the components driving the gross margin contraction in Q2 and clarify if current levels are a run rate or if expansion back to Q1 levels is expected?

Adnan Raza attributed the Q2 gross margin dip to higher perpetual software licenses in Q1. He expects margins to revert to historical higher levels next quarter and reiterated the long-term target of 77%, with line of sight to achieving it.

“Q1 had some perpetual software licenses, and that is really what drove the difference for this quarter... for the next quarter, we expect the margins to be reverting back to the levels that we are historically used to.”

asked by Clark Wright · answered by Adnan Raza

Given the impressive 8-figure secureWISE contract, how is the market opportunity and total addressable market (TAM) for secureWISE evolving?

John Kibarian explained that secureWISE has expanded beyond equipment vendors to fabs themselves (e.g., Intel contract) and into back-end test/assembly. He highlighted its role in AI agent-driven collaboration and data transmission, expecting it to grow at least at the company's overall growth rate.

“We started to demonstrate that there is a secureWISE application with the fabs themselves... And we're extending it into the back end because the production is getting more complex.”

asked by Blair Abernethy · answered by John Kibarian

What is the pipeline for DirectScan, particularly regarding the evaluation machine shipped this quarter, and the expected ramp to contracted revenue?

John Kibarian noted the evaluation machine is an important beachhead into the memory market and mature nodes. He stated that such conversions typically take close to a year, but did not speculate on specific timing or certainty of conversion.

“This is getting us into the memory market, which is an important step... these things typically take close to a year to convert.”

asked by Blair Abernethy · answered by John Kibarian

With eProbe on track for 6 shipments in 2026, what is the visibility for 2027 production, and could the company ship another 6 units?

John Kibarian stated it's too early to communicate specific 2027 targets but confirmed they are working with the supply chain to optimize timelines and capacity. He believes they are not capacity-limited and have the potential to produce more if needed.

“I don't know that we're ready to go and communicate what we think 2027 would look like... there's potential that we could produce more if we needed to.”

asked by Benjamin Taxdahl · answered by John Kibarian