Aehr Test ((AEHR)) has held its Q3 earnings call. Read on for the main highlights of the call.
Aehr Test Systems’ recent earnings call painted a picture of robust growth tempered by external challenges. The company reported strong revenue growth and successful diversification into AI and other segments. However, recent tariff announcements have introduced uncertainty, particularly regarding the company’s ability to maintain margins. Despite these hurdles, Aehr remains optimistic about long-term growth prospects.
Record Revenue Growth
Aehr Test Systems achieved record revenue growth in the third quarter, reaching $18.3 million. This marks a remarkable 142% increase from the $7.6 million reported in the same quarter last year. The surge was primarily driven by shipments of the high-power FOX-XP system for AI processors, underscoring the company’s successful penetration into this burgeoning market.
Diversification Success
The company’s strategic diversification efforts have paid off, with AI processors now accounting for over 35% of Aehr’s business this year. This shift represents a significant move away from its previous heavy reliance on silicon carbide, showcasing Aehr’s adaptability and forward-thinking approach.
Strategic Market Expansions
Aehr has strategically expanded into several new markets, including GaN power semiconductors, AI processors, silicon photonics, and hard disk drives. This expansion is part of the company’s broader strategy to tap into emerging technologies and diversify its revenue streams.
Successful Product Integration
The integration of InCal Technology’s products has been a success for Aehr, enhancing its manufacturing capabilities and expanding its offerings in the AI markets. This integration is expected to bolster the company’s competitive edge and drive further growth.
Tariff-Related Uncertainty
Recent U.S. tariff announcements have created uncertainty for Aehr, particularly concerning potential delays or pauses in customer orders and deliveries. This external factor poses a challenge to the company’s otherwise positive growth trajectory.
Temporary Guidance Withdrawal
In light of the tariff impacts and potential customer order delays, Aehr has made the decision to temporarily withdraw its fiscal 2025 guidance. This cautious approach reflects the company’s need to reassess its projections amidst the current uncertainties.
Gross Margin Challenges
Aehr reported that its non-GAAP gross margin for the third quarter remained flat at 42.7%, attributed to one-time charges and high manufacturing overhead. This highlights the ongoing challenge of maintaining profitability in a rapidly evolving market landscape.
Increased Operating Expenses
The company’s non-GAAP operating expenses increased by 34% year-over-year. This rise was driven by costs associated with the InCal integration and increased legal fees, reflecting the financial impact of its strategic initiatives.
Forward-Looking Guidance
Despite the temporary withdrawal of fiscal 2025 guidance due to tariff-related uncertainties, Aehr Test Systems remains optimistic about its future. The company highlighted a backlog of $22 million and emphasized its strategic expansion into AI processors, gallium nitride, and flash memory markets. Aehr projects a total addressable market of $1 billion by 2027, with significant contributions expected from wafer and package part burn-in systems.
In conclusion, Aehr Test Systems’ earnings call reflects a company navigating the complexities of rapid growth and external challenges. While tariff-related uncertainties pose immediate concerns, the company’s strong revenue growth, successful diversification, and strategic market expansions underscore its potential for long-term success.