Cohu Inc. Earnings Call Signals Momentum and Upside

Cohu Inc ((COHU)) has held its Q4 earnings call. Read on for the main highlights of the call.

Cohu Inc.’s latest earnings call struck an upbeat tone, with management emphasizing robust demand, rising bookings, and a resilient recurring revenue base that now anchors results. One-off hits to margins and taxes weighed on reported Q4 numbers, but executives framed these as transitory, pointing instead to improving utilization, strong liquidity, and a visible path to higher gross margins as volumes climb.

Recurring Revenue Mix Supports Stability

Recurring revenue accounted for roughly 60% of Q4 sales and climbed 4% sequentially and 25% year over year, underscoring the stability of consumables, service contracts, and spares. This mix offers investors a buffer against cyclical swings in systems demand and positions Cohu with a more predictable earnings base.

Bookings and Orders Signal Strong Demand

Recurring bookings rose 34% quarter over quarter, while systems demand surged 47%, pointing to broad-based strength across the portfolio. Management added that full-year 2025 orders increased 29% year over year, suggesting momentum that should underpin revenue into mid-2026 and beyond.

Revenue Growth in Q4 and Full Year

Q4 revenue reached $122.2 million, up about 30% from a year earlier, marking a solid acceleration into the year-end. For full-year 2025, revenue totaled $453 million, a 13% annual increase that reflects both recurring growth and growing systems shipments.

Design Wins Fuel Product Momentum

The company highlighted several strategic design wins, including a key transition for test interface products at a leading analog and mixed-signal customer. Cohu also booked its first high-performance thermal Eclipse handler for an AI device roadmap, plus multiunit handler orders for automotive and so-called physical AI applications, alongside wins in inspection, mixed-signal test, and power module handlers.

HBM and Neon Platform Traction Builds

Cohu exited 2025 with roughly $11 million in revenue tied to high-bandwidth memory, supported by its Neon platform, and booked additional HBM systems in Q4 and January. Management projects HBM-related revenue of $15 million to $20 million in 2026, with shipments expected to be relatively linear through the year, reflecting steady adoption in advanced memory test.

Backlog Underpins Near-Term Convertibility

About 70% of guided Q1 revenue was already in backlog at the quarter’s start, providing good visibility into near-term performance. The company expects most of the remaining systems to ship in Q2, supporting a revenue ramp that management believes can extend into mid-2026 as orders convert.

Improved Utilization and Market Signals

Estimated test utilization, or serialization, improved to 76% in December, including 78% in compute and 75% in automotive, pointing to healthier fab and test activity. Recurring revenue has now increased sequentially for four straight quarters, signaling strengthening demand across compute, automotive, and industrial end markets.

Cash and Liquidity Position Strengthened

Cohu exited the year with $484 million in cash and investments, an increase of $286 million in Q4 driven by net proceeds from an upsized convertible notes offering and operating cash generation. The bolstered balance sheet gives management flexibility to invest in growth and navigate industry cycles despite higher reported leverage.

Roadmap to Higher Gross Margins

Management laid out a clear gross margin trajectory as volumes recover from one-time pressures, guiding Q1 margin to roughly 45%. At quarterly revenue of about $130 million, they see gross margin around 46.7% to 46.8%, approaching just under 48% at $150 million, and reaching about 48% at a normalized $160 million per quarter.

One-Time Inventory Charges Hit Q4 Margins

Q4 gross margin came in at 40.8%, falling short of guidance largely due to one-time inventory charges from discontinuing certain product lines and consolidating offerings. Management said these charges accounted for most of the miss, portraying them as a strategic cleanup that should not recur and that simplifies the product portfolio.

Higher Tax Provision from Non-Cash Reserve

The Q4 tax provision exceeded guidance because of a $5 million non-cash increase in tax reserves against existing tax assets. Executives stressed that this adjustment does not change the ultimate economic benefit of those assets and has no impact on cash taxes going forward.

Convertible Notes Increase Debt but Limit Dilution

Cohu completed a $287.5 million convertible notes offering with a 1.5% coupon and five-year term, lifting total debt to about $305 million. The structure is supported by a 100% capped call that is designed to limit dilution for shareholders, trading a higher reported leverage ratio for added financial flexibility.

No Share Repurchases in Favor of Balance Sheet

The company did not repurchase any shares in Q4, opting instead to allocate liquidity toward the convertible issuance and overall balance-sheet strength. While this may disappoint buyback-focused investors, management framed the decision as prioritizing strategic and financial resilience.

Quarterly Customer Concentration Spike

Two customers, one in mobile and one in automotive, each represented more than 10% of sales in Q4, creating a temporary spike in concentration risk. Management emphasized that on a full-year 2025 basis no customer exceeded 10%, suggesting a more diversified demand profile over time.

Timing Uncertainty in Multi-Quarter Conversions

Although backlog covers much of near-term revenue, some of the strong bookings—particularly multi-year service contracts and certain multi-unit system orders—will convert over several quarters. This introduces some uncertainty in revenue recognition timing for later 2026, even as the overall demand outlook remains constructive.

Guidance and Outlook

For Q1, Cohu guided revenue to about $122 million, plus or minus $7 million, with recurring sales near 60% of the mix and systems at 40%, supported by backlog that already covers roughly 70% of systems revenue. Gross margin is expected around 45%, operating expenses near $50 million, and capital spending in 2026 at roughly 2% of revenue, as management reiterated confidence in continued revenue growth and margin leverage.

Cohu’s earnings call painted a picture of a company exiting a clean-up phase and entering a volume-driven upcycle, backed by strong recurring revenue and accelerating bookings. While one-time charges, higher tax reserves, and elevated leverage cloud some headline metrics, the improving utilization, rich design-win pipeline, and clear margin roadmap suggest a constructive setup for investors watching the semiconductor test space.