Aehr Test Eyes 2027 Rebound Amid Near-Term Strain

Aehr Test ((AEHR)) has held its Q2 earnings call. Read on for the main highlights of the call.

Aehr Test Balances Near-Term Pain With Longer-Term Promise in Earnings Call

Aehr Test’s latest earnings call painted a mixed but cautiously optimistic picture: management acknowledged a tough quarter marked by lower revenue, sharply compressed margins, and a swing back to losses, yet emphasized a strengthening strategic position heading into the second half of fiscal 2026 and into fiscal 2027. The tone balanced realism about current headwinds—especially in silicon carbide and EV-related demand, as well as technical delays in new programs—with visible momentum in bookings visibility, product wins, and market diversification that could support a more robust growth phase in the coming years.

Reinstated Guidance and Strong Second-Half Bookings Visibility

After previously withdrawing guidance, Aehr Test reinstated its outlook for the second half of fiscal 2026, signaling greater confidence in demand visibility. Management now expects H2 FY26 revenue between $25 million and $30 million, even as they still forecast a non‑GAAP net loss per diluted share of between negative $0.09 and negative $0.05 for that six‑month period. More notably for investors, customer forecasts point to potential bookings of $60 million to $80 million in the same period, suggesting a pipeline that, if it materializes into firm orders, could set up a materially stronger fiscal 2027 starting in late May 2026. While these forecasts are not fully backed by purchase orders, the reinstated guidance and bookings visibility were presented as evidence that demand is starting to line up after a difficult stretch.

Recent Orders and Backlog Growth Provide Near-Term Support

The company highlighted a meaningful build in orders and backlog since the quarter ended, which helps bridge the gap between weak recent revenues and the more upbeat outlook. In Q2, bookings totaled $6.2 million, and backlog stood at $11.8 million at quarter end. In the first six weeks of Q3, Aehr Test booked an additional $6.5 million, pushing effective backlog to $18.3 million. Importantly, more than $5.5 million of these Q3-to-date orders were for Sonoma systems from multiple customers, underscoring broader adoption of the platform. While not enough to offset the prior slowdown, this growing backlog gives the company improved visibility into near-term revenue and supports management’s confidence in a stronger second half of the fiscal year and beyond.

Product Wins and Strategic Partnerships Expand Market Reach

Beyond the financials, Aehr Test devoted significant time to product and partnership milestones that it believes will underpin longer-term growth. The company reported substantial progress in both wafer-level and packaged-part burn-in solutions across several key technology segments, including AI processors, flash memory, silicon photonics, GaN power, and HDD components. A notable highlight was the expanded collaboration with ISE Labs, part of ASE, where Aehr is positioning its technology to support advanced test and burn-in requirements. Additionally, Aehr completed a wafer-level benchmark with a global NAND flash leader, an important step toward broader adoption in the memory segment. The development of fine‑pitch WaferPaks designed for high‑current AI processors was presented as a competitive differentiator, positioning Aehr to ride the AI hardware investment cycle as customers look for scalable reliability solutions for power-hungry chips.

New High-Power Platforms Target AI and Advanced Nodes

Aehr Test showcased a leap forward in its high-power testing capabilities, most prominently through its next-generation, fully automated Sonoma system that supports up to 2,000 watts per device and continuous-flow operation. This high-power capability is tailored to the demands of next-generation AI and power devices, where heat and reliability requirements are increasingly stringent. The company also highlighted continued development of its FOX-XP platform and auto-aligner capabilities for 300mm wafers, aimed at enabling higher-throughput wafer-level burn-in for advanced nodes and larger wafer formats. Management indicated that its manufacturing footprint can support roughly 20 systems per month—whether package or wafer systems—if demand ramps, suggesting ample capacity leverage should orders scale as forecast.

Liquidity Strengthened but Capital Needs Still Evident

On the balance sheet, Aehr Test has improved its cash position but remains reliant on external capital to fund growth and R&D. Cash and equivalents rose to $31.0 million from $24.7 million at the end of Q1, helped by $10 million in gross proceeds raised through an at-the-market (ATM) equity program during Q2. The company still has approximately $30 million of capacity remaining under the ATM, in addition to an active shelf registration. While this bolstered liquidity and helps support ongoing operations and development efforts, management’s willingness to continue using the ATM suggests future dilution remains possible, reflecting continued investment needs even as the business works back toward profitability.

Expanding Beyond Silicon Carbide to Diverse End Markets

A central theme on the call was Aehr Test’s deliberate effort to reduce its historical dependence on the silicon carbide segment, particularly for EV applications, and to broaden into multiple high-growth end markets. The company pointed to traction in AI processors, silicon photonics, flash memory, GaN power semiconductors, and HDD components as evidence of progress. This diversification not only expands the company’s overall addressable market but also helps mitigate the cyclical and customer-concentration risks that have weighed on results in the past. Management framed this broader market reach as a key pillar of the long-term thesis, arguing that demand for reliability and burn-in solutions will rise alongside the complexity and power density of next-generation chips across multiple sectors.

Revenue Down as WaferPak Shipments Slow

Despite strategic progress, the near-term financial picture remains challenged. Q2 revenue came in at $9.9 million, a 27% decline from $13.5 million in the prior-year period, largely driven by lower shipments of WaferPak contactors. These high-margin consumables had previously been a major contributor to both revenue and profitability, and their reduced contribution this quarter directly impacted the top line. Management linked this slowdown to softer demand in certain segments and timing shifts in customer programs rather than loss of competitive position, but the revenue shortfall underscores the business’s sensitivity to order timing and customer-specific developments.

Gross Margin Compression Reflects Mix and Volume Pressure

Profitability was hit hard by both mix and volume effects, with Aehr Test’s non‑GAAP gross margin slipping to 29.8% in Q2 from 45.3% a year earlier. The company attributed this drop primarily to lower overall sales volumes and a less favorable product mix, as WaferPak contactors accounted for only $3.4 million (35% of revenue) versus $8.6 million (64% of revenue) in the prior-year quarter. Lower utilization of manufacturing resources and a shift toward lower-margin system sales amplified the margin pressure. Management indicated that as WaferPak and other higher-margin consumables rebound with new program ramps, margins should improve, but for now the business is operating well below its prior profitability profile.

Return to Non-GAAP Losses Despite Expense Discipline

The weaker revenue and margin profile pushed Aehr Test back into the red on a non‑GAAP basis. Q2 non‑GAAP net loss was $1.3 million, or negative $0.04 per diluted share, compared with non‑GAAP net income of $0.7 million, or $0.02 per share, a year earlier. Operating expenses were held relatively in check, with non‑GAAP operating expenses slipping slightly to $5.7 million from $5.9 million, but this was not enough to offset the revenue and gross margin declines. Looking ahead to the second half of FY26, management explicitly guided to continued non‑GAAP losses, expecting a net loss per diluted share of between negative $0.09 and negative $0.05, highlighting that the company is still in an investment and recovery phase rather than a fully normalized earnings environment.

Bookings Volatility and Forecast-Driven Outlook Add Risk

Aehr Test acknowledged that bookings patterns remain uneven, injecting uncertainty into the timing and magnitude of any rebound. Q2 bookings of $6.2 million were down sharply from $11.4 million in Q1, a sequential decline that reflects both market softness and project timing. While the company’s outlook for $60 million to $80 million in bookings in the second half of FY26 is encouraging, management noted that a material portion of this figure is derived from customer forecasts rather than firm purchase orders. This reliance on forecasts leaves the company exposed to potential delays, reductions, or cancellations if customers adjust plans. For investors, the message is that while the pipeline appears robust on paper, execution and timing risk remain central factors to watch.

Technical Delays and Design Challenges Slow Revenue Conversion

The call also detailed multiple technical and design challenges that have pushed out revenue and extended customer qualification timelines. In its GaN wafer-level burn-in program, Aehr encountered unexpected high-voltage faults that required WaferPak and protection circuitry redesigns, delaying roughly $2 million of WaferPak shipments into the current quarter. Separately, the ramp in silicon photonics has shifted later than initially anticipated and is now expected to begin early next fiscal year. Benchmarks in flash memory and other wafer-level applications also experienced multi-month delays driven by test-vector and architectural issues on the customer side. While management presented these as solvable engineering and customer-readiness problems, they highlight how complex technical engagements can lengthen sales cycles and push out revenue recognition.

Market Headwinds in Silicon Carbide and EV Weigh on Near Term

Short-term market conditions in several of Aehr Test’s legacy strongholds remain a drag on performance. Demand for silicon carbide devices, particularly those tied to EV applications, has softened, with some customers pushing orders toward the end of the fiscal year or into the next one. This has contributed to the decline in WaferPak shipments and created gaps in system orders that hurt both revenue and gross margin in Q2. Management tried to frame these issues as timing-related rather than structural, and reiterated that silicon carbide still represents a significant long-term opportunity. However, for now, the combination of delayed orders and softer EV-related spending is a clear headwind for the business.

Rising R&D Spend and Ongoing Use of ATM Could Be Dilutive

To maintain its technology edge—especially in AI wafer-level testing and memory-related solutions—Aehr Test plans to increase R&D spending, even as it operates at a loss. The company indicated that it will continue to leverage its ATM equity program as needed, having already raised about $10 million in Q2 with roughly $30 million of capacity still available. While these investments are intended to capture emerging opportunities in AI, memory, and other advanced applications, they also create the potential for further shareholder dilution and underscore that the company is still reliant on capital markets to fund growth. Investors will be watching closely to see whether these R&D outlays translate into sustainable high-margin revenue streams that justify the dilution.

Guidance and Outlook Signal a Potential Turn in Fiscal 2027

Management’s forward-looking comments centered on the reinstated H2 FY26 guidance and the implied setup for FY27. For the second half of fiscal 2026, Aehr Test expects revenue between $25 million and $30 million and a non‑GAAP net loss per diluted share of negative $0.09 to negative $0.05, indicating that profitability is not expected to fully recover in the near term. However, customer forecasts suggesting $60 million to $80 million in bookings for that period, combined with an improved backlog that has grown from $11.8 million at the end of Q2 to $18.3 million six weeks into Q3, underpin management’s view that a stronger fiscal 2027 is within reach. The company is banking on an upturn in silicon carbide and EV-related orders, ramping programs in AI and memory, and continued traction in silicon photonics and GaN to drive a more durable growth phase once the current transition period passes.

In closing, Aehr Test’s earnings call reflected a company navigating a difficult short-term environment but investing aggressively to capitalize on what it sees as significant multi-market opportunities ahead. Near-term numbers are under pressure from weaker silicon carbide demand, technical delays, margin compression, and a return to losses, and there is real risk tied to forecast-based bookings expectations. Yet the strengthened liquidity, expanding product portfolio, deeper partnerships, and broadening end-market exposure provide a foundation for potential recovery and growth. For investors, the story now hinges on whether the promising pipeline in AI, memory, GaN, and photonics can convert to firm orders fast enough to offset existing headwinds and move Aehr back toward profitable, scalable growth as fiscal 2027 approaches.