Denis Pyatchanin

Denis Pyatchanin asked about the key drivers behind the computing segment's over 20% year-over-year growth and whether these drivers would persist into Q4 despite a sequential revenue decline. He also requested more color on the continued strength in Android communications, potentially by geography.

Answer

CEO Giel Rutten explained that computing showed broad-based strength in Q3 across PCs, networking, and data center products, which is expected to continue, emphasizing that AI proliferation has just begun. Regarding Android, he noted a global trend towards higher-end/premium-tier smartphones and believed inventory had been digested, but could not provide geographical specifics.

Denis Pyatchanin asked about the key drivers of the over 20% year-over-year computing growth and if these drivers are expected to persist into Q4 despite a sequential revenue decline. He then requested more color on the Android strength persisting into the next quarter, potentially by geography.

Answer

President and CEO Giel Rutten noted broad-based strength in computing across PCs, networking, and data center products, which is expected to continue. He expressed optimism as AI proliferation has just begun, driving more products for edge devices, networking, and data centers. Regarding Android, he mentioned a global trend towards higher-end, premium-tier devices, with inventory currently digested, but could not provide specific geographical details.

Denis Pyatchanin, on for Brian at Stifel, asked about the expected shipment ratio of Hawk versus Eagle systems for HBM4. He also requested more detail on the strengthening trend at OSATs and their expansion plans for 2025-2026.

Answer

COO Ramy Langer explained that the Hawk versus Eagle mix is highly customer-dependent and not a metric they disclose, though customers requiring very high volumes for HBM4 may lean towards the Hawk. Regarding OSATs, he reiterated that growth is driven by HPC (COWAS-like applications) and conventional advanced packaging, but noted it was too early to discuss specific 2026 expansion plans.

Denis Pyatchanin of Stifel inquired about the expected hardware and software mix for new Advanced Compute customers over their lifecycle. He also asked for clarification on the source of services revenue, the drivers of memory segment strength, the impact of DRAM pricing on margins, and the memory-to-compute attach rate.

Answer

President & CEO Mark Adams explained that new customer deals are typically hardware-heavy upfront, with software and services revenue recognized over time. CFO Nate Olmstead confirmed the vast majority of services revenue is from Advanced Computing. Adams added that memory strength was driven by broad demand and unit growth, noting that rising DRAM prices can slightly compress margin percentages.

Denis Pyatchanin, on behalf of Stifel Financial, inquired about the expected hardware and software mix for the five new Advanced Compute customers over their lifecycle. He also asked about the drivers of strength in the memory segment, the impact of DRAM pricing on margins, and the attach rate of memory products to Advanced Computing solutions.

Answer

Mark Adams, President & CEO, reiterated that new customer engagements are typically hardware-heavy upfront, with software and services revenue recognized over time. He confirmed that the vast majority of services revenue is from the Advanced Computing segment. For memory, Adams noted that DRAM pricing was stable, and while rising prices can slightly pressure margin percentages, strong unit growth also contributed to the quarter's success. He emphasized the focus on developing advanced memory solutions like CXL and OMA to serve the AI ecosystem.

On behalf of Brian Chin, Denis Pyatchanin asked about the stability of the recurring revenue run rate, whether the outlook for the mobile market has changed, and if the recent strength in the industrial segment can be sustained.

Answer

Executive Jeffrey Jones affirmed that the recurring revenue stream is historically stable, with about one-third the volatility of systems revenue. President and CEO Luis Müller clarified that while the overall mobile market outlook is for low single-digit growth, specific share shifts within the Android ecosystem could create opportunities for Cohu in the second half of the year. He also noted that the industrial segment has the potential to recover ahead of automotive.

Denis Pyatchanin of Stifel asked for details on the new HBM opportunity, including the specific process steps won and revenue timing. He also requested an update on the previously announced design win with a major analog and embedded semiconductor customer.

Answer

President and CEO Luis Müller clarified the HBM win is for stacked die inspection and metrology, a final-stage process, and does not compete with wafer-level inspection firms. Regarding the prior win, Müller confirmed it was with a top-5 automotive semi manufacturer for a complete test cell solution—including the Diamondx tester, handlers, and contactors—with initial revenue expected in Q4. He noted this win was enabled by the new VI100 instrument, strengthening Cohu's position in the mixed-signal market. CFO Jeffrey Jones reiterated that it is too soon to project revenue timing for the HBM win.

Denis Pyatchanin of Stifel asked about management's confidence in HBM revenue growth for 2025 over 2024 and the timeline for other HBM customers to become significant revenue contributors. He also requested color on the lower Q4 gross margin guidance.

Answer

CEO Mike Slessor indicated a 'reasonable case' for HBM growth in 2025, dependent on AI spending and tech transitions. He noted that while a second DRAM customer is becoming more significant in Q4, revenue will likely stay concentrated with the market leader. CFO Shai Shahar attributed the lower Q4 gross margin guide primarily to reduced overall revenue volume compared to Q3's record, rather than a major shift in product mix.