COHU Q2 Earnings Beat Estimates on AI Compute and Favorable Mix

COHU's Revenue Mix Shows Computing Strength

Recurring revenues were approximately $78 million, representing 53% of total revenues. Systems revenues were about $71 million, accounting for the remaining 47%, as improved demand from core integrated device manufacturers supported the quarter.

Computing contributed 41% of revenues, followed by automotive at 22%, industrial at 16%, consumer at 11% and mobile at 10%. Computing also generated 46% of system orders, which increased 150% year over year, driven by Eclipse growth in high-performance computing.

Cohu Expands AI Compute Opportunity

Cohu raised its annual AI-driven compute opportunity pipeline to approximately $850 million. The total includes roughly $650 million in systems opportunities and $200 million in recurring opportunities across device kits, thermal upgrades, maintenance and software.

Management increased its 2026 high-performance computing revenue estimate to $100-$110 million from the prior $80-$100 million range. The increase was entirely tied to Eclipse handlers, reflecting stronger adoption for high-power processors used in data centers.

COHU Advances Inspection and Software Growth

Cohu shipped additional final inspection systems for HBM3, HBM4 and HBM4E devices to a U.S.-based integrated device manufacturer. The company also qualified its Neon platform at a Taiwan-based outsourced semiconductor assembly and test provider, opening additional advanced packaging and AI-related inspection opportunities.

Software analytics delivered its first $1 million revenue quarter, while orders climbed 140% year over year. The company is expanding predictive maintenance deployments and advancing an on-site AI appliance that keeps process, yield and equipment data inside customer factories.

Cohu’s Margins Benefit From Favorable Mix

Non-GAAP gross margin was 45.5%, up from 44.4% in the year-ago quarter. The upside reflected a favorable product mix, including stronger tester and recurring revenues.

Non-GAAP operating expenses increased to $52.7 million from $47.7 million a year earlier. The increase reflected continued investment in resources supporting the expanding high-performance computing pipeline. Adjusted EBITDA margin improved to 12.3% from 3.6%.

COHU Builds Capacity for HPC Demand

Cohu is expanding its manufacturing infrastructure to double high-performance computing output by the end of 2026 and support another capacity increase by mid-2027. The investment is intended to accommodate additional Eclipse production as customer programs move through qualification.

Supply-chain execution remains a key focus. Longer lead times and higher costs for certain integrated circuits and specialty components are pressuring inputs, although the company has used advance purchases to secure critical supplies and protect delivery schedules.

Cohu's Balance Sheet Supports Expansion

Cohu ended the second quarter with cash and investments of $498.2 million, up from approximately $489 million at the end of the first quarter. Cash flow from operations was $10.5 million.

Total debt was $304 million, including $288 million from the fourth-quarter 2025 convertible note offering. The company continues to target capital expenditures at about 2% of revenues in 2026, including spending on its Malaysia manufacturing expansion.

COHU Guides Higher on Broad-Based Recovery

For the third quarter of 2026, Cohu expects revenues of $170 million, plus or minus $7 million. The midpoint implies 14.1% sequential growth and 35% year-over-year growth, with roughly half of the sequential increase expected from high-performance computing and half from the core business.

The company projects a non-GAAP gross margin of about 45%, operating expenses of roughly $54 million and an adjusted EBITDA margin near 16%. The Zacks Consensus Estimate for third-quarter 2026 revenues and earnings is currently pegged at $148.5 million and 24 cents per share, respectively.

For 2026, management raised its revenue growth outlook to approximately 35% year over year and maintained its gross-margin forecast in the mid-40% range. The Zacks Consensus Estimate for 2026 revenues and earnings is currently pegged at $559.75 million and 60 cents per share, respectively.

COHU’s Zacks Rank and Other Stocks to Consider

Currently, Cohu carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader Zacks Computer and Technology sector are AppFolio APPF, Amkor Technology AMKR and Amphenol APH, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of AppFolio have plunged 24.4% year to date. The Zacks Consensus Estimate for APPF’s 2026 earnings is pegged at $6.90 per share, up by 2.2% over the past seven days, indicating an increase of 30.4% year over year.

Shares of Amkor Technology have jumped 23.1% year to date. The Zacks Consensus Estimate for AMKR’s 2026 earnings is pegged at $2.40 per share, up by 15.4% over the past seven days, indicating a rise of 60% year over year.

Amphenol shares have surged 18.1% year to date. The Zacks Consensus Estimate for APH’s 2026 earnings is pegged at $4.95 per share, up by 8 cents over the past seven days, indicating an increase of 48.2% year over year.

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