FormFactor's Q2 Earnings Beat Estimates, Revenues Increase Y/Y

FORM's Probe Card Revenues Advance

Probe Card revenues reached $209.7 million, increasing 29.4% year over year. The segment benefited from rising test intensity across advanced memory and high-performance computing applications.

Foundry and Logic revenues increased 22.4% year over year to $121.8 million. Growth was led by probe cards for data-center CPU applications, alongside continued networking strength, early momentum in hyperscaler custom ASICs and steady PC and mobile demand.

Management expects further sequential growth in the third quarter, supported by broad demand across its served applications. FORM is also shipping production units for a newly qualified GPU program, which is expected to begin contributing revenues in the second half of 2026.

FORM's DRAM Business Sets Another Record

DRAM revenues jumped 48.9% year over year to $85 million. High-bandwidth memory accounted for approximately two-thirds of DRAM sales, driven by two customers adopting the company’s SmartMatrix full-wafer contactor technology for high-speed HBM4 testing.

SmartMatrix allows customers to test hundreds of completed HBM stacks simultaneously at data rates exceeding 10 gigabits per second. This capability helps verify that HBM stacks are functional before they are combined with expensive GPUs or custom ASICs in advanced packaging.

Third-quarter DRAM revenues are expected to remain comparable with the second-quarter record. However, management anticipates a significant mix shift from HBM toward DDR as memory manufacturers adjust wafer production to capitalize on higher DDR pricing.

FormFactor's Systems Segment Rebounds

Systems revenues increased 43.9% year over year to a record $48.5 million. Sales also rose sharply from $27.9 million in the prior quarter, reflecting a recovery in the engineering prober business and accelerating demand for co-packaged optics.

FORM now expects 2026 co-packaged optics revenues to exceed $20 million, surpassing its previous projection of reaching the high end of a $10-$20 million range. The company expects cumulative CPO revenues to cross $20 million by the end of the third quarter, followed by additional contributions in the fourth quarter.

FORM's Margins Show Operating Leverage

Non-GAAP gross margin expanded to 53.3% compared with 38.5% reported in the year-ago quarter. 

Non-GAAP operating expenses were $65.7 million, up 25.1% year over year.

Non-GAAP operating income rose to $72 million from $22.8 million a year earlier.

FormFactor's Cash Flow and Liquidity Improve

As of June 27, 2026, cash and cash equivalents and marketable securities were $345.6 million compared with $303.2 million as of March 28, 2026.

Cash provided by operating activities was $61.8 million, up from $18.9 million in the year-ago period. Free cash flow totaled $52.6 million compared with a free cash outflow of $47.1 million reported in the year-ago quarter.

FORM continues to expect 2026 cash capital expenditures of $140-$170 million, primarily supporting its Farmers Branch manufacturing expansion. The new facility remains on track to begin ramping in the fourth quarter and continue through 2027. Its initial capacity is expected to be roughly equivalent to the company’s current California probe-card manufacturing footprint.

FORM Offers Upbeat Q3 Guidance

For the third quarter of 2026, FormFactor expects revenues of $270 million (plus or minus $10 million). At the midpoint, this implies continued sequential growth and another quarterly revenue record.

Non-GAAP gross margin is projected at 54% (plus or minus 150 bps). The margin outlook includes an anticipated $7-$9 million benefit from tariff refunds, partly offset by a less favorable DRAM product mix.

Non-GAAP earnings are expected at 86 cents per share (plus or minus 9 cents).

Zacks Rank & Stocks to Consider

FormFactor currently carries a Zacks Rank #3 (Hold).

Shopify SHOP, Sandisk SNDK and HubSpot HUBS are some better-ranked stocks in the broader Zacks Computer and Technology sector. Each of the three stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shopify, Sandisk and HubSpot are expected to report their quarterly results on Aug. 5. Shares of Sandisk have jumped 327.9%, while Shopify and HubSpot have dropped 19.8% and 37.5%, year to date, respectively.

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