Formfactor ((FORM)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for FormFactor presented a mixed outlook for the company. While the company reported revenue exceeding expectations and made strategic investments aimed at long-term growth, it also faced significant challenges. These included gross margin difficulties, impacts from tariffs, and increased operating expenses. Despite expanding its customer base and receiving recognition for customer satisfaction, the financial metrics indicate a need for improvement in profitability.
Revenue Exceeds Expectations
FormFactor reported second quarter revenue of $195.8 million, surpassing the high end of the outlook range by $0.8 million. This represents a 14.3% increase from the first quarter, indicating strong performance in their probe card business and highlighting the company’s ability to exceed market expectations.
Strategic Investments
The company made two strategic investments, acquiring a manufacturing facility in Farmers Branch, Texas, and a minority equity investment in FICT. These moves are aimed at improving long-term competitiveness and profitability, positioning FormFactor for future growth in a competitive market.
Growth in DRAM and HBM
FormFactor saw significant growth in its DRAM and HBM segments, with DRAM revenues increasing by 16.8% from the first quarter. HBM revenues also rose by $7.4 million to $37 million in Q2, showcasing the company’s strength in these critical areas of the semiconductor market.
Customer Satisfaction Recognition
FormFactor was recognized as the #1 global supplier in test subsystems and focused chip-making equipment categories in the annual TechInsights’ 2025 global customer satisfaction survey. This recognition underscores the company’s commitment to quality and customer service.
Gross Margin Challenges
Despite positive revenue growth, FormFactor faced challenges with its gross margins. The non-GAAP gross margin fell to 38.5%, at the low end of the outlook range, due to an unfavorable product mix and ramp-up costs for an HBM DRAM customer.
Impact of Tariffs
Tariffs continue to negatively impact FormFactor’s gross margins, reducing them by 1 to 1.5 percentage points. With potential increases in tariffs, the company may face further margin pressures, highlighting the ongoing challenges posed by international trade policies.
Systems Segment Revenue Decline
The Systems segment experienced a revenue decline of $1.1 million from the first quarter, with a reduction in gross margin from 44.5% to 39.4%. This decline indicates challenges within this segment that the company needs to address.
Increased Operating Expenses
FormFactor’s non-GAAP operating expenses rose to $52.5 million in Q2, driven by higher performance-based compensation, increased labor costs, and expenses related to the new manufacturing facility. These increased costs highlight the financial pressures the company is facing as it invests in future growth.
Forward-Looking Guidance
Looking ahead to the third quarter, FormFactor anticipates revenues to remain stable, with a slight increase in gross margin to 40% and operating profit. Despite current challenges, the company remains optimistic about future growth, driven by advanced packaging and generative AI. Strategic investments are expected to enhance long-term competitiveness and profitability.
In summary, FormFactor’s earnings call highlighted both achievements and challenges. While the company exceeded revenue expectations and made strategic investments for future growth, it faces significant hurdles in improving profitability. The recognition for customer satisfaction and growth in key segments are positive signs, but addressing gross margin challenges and tariff impacts will be crucial for sustained success.