Denis Pyatchanin

Denis Pyatchanin asked about the recent dip in gross margins for Q4 2025 and Q1 2026, seeking clarification on the drivers and the expected progression towards the 41%-43% full-year 2026 guidance, and also inquired about any tariff headwinds factored into the gross margin outlook.

Answer

SVP and CFO John Kiernan attributed the Q4 2025 and Q1 2026 gross margin dip to a product mix shift towards advanced packaging and the impact of evaluation system sign-offs. He projected gross margins to accelerate in the second half of 2026, driven by new higher-margin products, increased data storage business, and higher volumes, aiming for the 45% target. He also quantified a 100 basis points gross margin headwind from tariffs in the second half of 2025, with a slightly higher impact baked into the 2026 forecast.

Denis Pyatchanin asked about the segments driving the strong bookings growth, the implications of a flat 2026 revenue outlook for general mature and power segments given DRAM strength, and whether power SiC or other power segments appear stronger over the next few quarters.

Answer

Russell Low, President and CEO, clarified that bookings primarily reflect general mature and power, as memory typically books and ships in the same quarter. He confirmed general mature and power are expected to be slightly down year-over-year, despite improving utilization rates, due to customers absorbing existing capacity. Jamie Coogan, EVP and CFO, added that while encouraging signs exist, they are cautious about calling a recovery in order rates for these markets and that both power SiC and other power segments are seeing a handful of systems lower year-over-year.

Denis Pyatchanin asked about the specific segments driving the strong bookings and, given the flat revenue outlook for 2026 despite DRAM strength, whether both general mature and power segments are expected to show weakness throughout the year. He also sought more color on whether power SiC or other power segments look stronger over the next few quarters or throughout 2026.

Answer

Russell Low (President and CEO, Axcelis Technologies) clarified that bookings primarily match prior revenue history, with general mature and power being the main drivers, as memory typically books and ships in the same quarter. He confirmed that general mature and power are expected to be slightly down year-over-year, with improving utilization rates in general mature indicating a potential rebound in 2027. Jamie Coogan (EVP and CFO, Axcelis Technologies) added that the current view for both power segments is a slight decrease in system volume, and while utilization rates are encouraging for CS&I, order rates for new systems haven't picked up enough to call a cycle recovery.

Denis Pyatchanin asked for color on IDM versus OSAT performance and utilization in Q4, along with the Q1 outlook. He also requested segment-specific insights (compute vs. auto/industrial) from a systems perspective for Q1 and more details on the recent analog and mixed-signal design win.

Answer

President and CEO Luis Müller reported Q4 utilization rates for IDMs at over 76% and OSATs at over 75%, anticipating Q1 utilization to rise with OSATs potentially increasing faster. He provided Q4 segment utilization rates (compute 78%, auto 75%, industrial 77%, mobile 72%, consumer 76%) and projected Q1 momentum in mobile (potentially crossing 75%) and continued rise in compute. Luis Müller detailed the analog and mixed-signal win with a top automotive semiconductor manufacturer, deploying testers for digital controllers and PMIC devices used in data centers, expecting acceleration towards mid-year.

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 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 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, 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.

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.