Q2 2025 Earnings Summary
- AEHR is poised to capitalize on significant growth opportunities in AI processors, with initial production orders for multiple high-power FOX-XP systems, and the potential for this market to exceed $100 million per year in revenue. The CEO mentioned, "if this gets into available, addressable timing of this, it could be a lot bigger than that."
- AEHR is diversifying into multiple new markets beyond silicon carbide, including GaN semiconductors, hard disk drives, silicon photonics, and flash memory, which are expected to contribute to revenue growth in the coming years. The CEO stated that "the other markets, for sure, have a chance to grow year-over-year."
- AEHR has significant manufacturing capacity and is prepared to scale up to meet increased demand, indicating readiness to handle large orders and growth from new markets. The CEO noted, "We have more capacity than demand by a lot, and we could increase our capacity significantly if we needed to."
- AEHR has experienced flat revenue of $65 million to $70 million for the past 3 years, and management has not provided clear guidance on when significant growth will occur, raising concerns about the company's growth prospects.
- Gross margins have declined due to lower-margin products from the Incal acquisition, indicating potential pressure on profitability if the product mix continues to include these lower-margin items.
- Uncertainties and risks associated with patent infringement cases in China and trade tensions could negatively impact AEHR's business in China, potentially affecting revenue and market share in that region.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total Revenue | FY 2025 | $70 million | $70 million | no change |
Non-GAAP Net Profit Before Taxes | FY 2025 | At least 10% of revenue | No less than 10% of revenue | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Silicon Carbide Market Growth and Customer Acquisition Dynamics | Q1 2025 described early enthusiasm with ramp‑up delays ; Q4 2024 emphasized long‑term market opportunity with postponed orders ; Q3 2024 noted softness in capital spending and delays | Q2 2025 reiterated significant long‑term growth potential but highlighted challenges such as ramp‑up delays and diversification away from silicon carbide | Recurring with evolving sentiment: Ongoing optimism is tempered by persistent concerns over timing and ramp‑delays. |
AI Processor Market Expansion and Uncertain Industry Adoption | Q1 2025 emphasized bullish outlook with new volume orders and adoption challenges ; Q4 2024 noted a significant market opportunity alongside technical hurdles ; Q3 2024 focused on silicon photonics and memory drivers while underscoring unclear adoption timelines | Q2 2025 stressed the progress in securing first volume orders and breakthroughs while reaffirming uncertainty in industry adoption | Recurring bullish outlook with persistent uncertainty: Continued optimism is coupled with an unclear timeline for widespread adoption by major industry players. |
Diversification into New Semiconductor Markets | Q1 2025 discussed entering GaN, flash memory, silicon photonics, and HDD segments ; Q4 2024 reiterated expansion into multiple non‑SiC markets ; Q3 2024 reinforced focus on GaN, silicon photonics, and memory semiconductors | Q2 2025 confirmed progress across GaN (first production order), advanced flash memory and silicon photonics evaluations, and a ramp in HDD production | Consistent strategic focus: The multi‑market diversification strategy remains central, supporting future growth beyond traditional silicon carbide. |
Incal Technology Acquisition Integration | Q1 2025 highlighted smooth integration progress with benefits in capability expansion ; Q4 2024 noted its revenue potential and integration-related cost investments ; (Not mentioned in Q3 2024) | Q2 2025 discussed how Incal’s ultra‑high‑power systems have enhanced the portfolio despite introducing margin pressures and facility cost burdens | Recurring with shifting emphasis: Initially positive integration now also brings attention to cost and margin pressures. |
Manufacturing Capacity and Scalability Readiness | Q1 2025 described infrastructure upgrades and capacity for new applications ; Q4 2024 underscored ample capacity and inventory to support large orders ; Q3 2024 stressed investments and healthy cash reserves for scalability | Q2 2025 reiterated robust capacity, with excess capacity and use of multiple suppliers ensuring quick scale-up if needed | Consistently strong and positive: Across periods, the company highlights its manufacturing strength as a key enabler for future orders. |
Revenue Growth Challenges and Customer Acquisition Delays | Q1 2025 acknowledged delayed ramp timings and lower revenue due to postponed orders ; Q4 2024 cited flat revenue growth and 1–1.5‑year pushouts driven by EV demand softness ; Q3 2024 detailed significant revenue declines tied to order pushouts | Q2 2025 focused on flat revenue levels and delays in customer orders, stressing that timing issues are pushing revenue into subsequent quarters | Persistent concern: Delayed order ramps and flat revenue remain an ongoing challenge, signaling cautious near‑term growth expectations. |
Gross Margin Pressure and Rising Operating Expenses | Q1 2025 showed improved margins with a favorable product mix ; Q3 2024 reported declining margins and rising expenses tied to increased R&D investments ; Q4 2024 noted slight margin pressure and higher operating expenses from incrementally increased headcount and external fees | Q2 2025 reported a decline in gross margin (from 51.6% to 45.3%) and increasing expenses partly due to integration costs and legal fees | Mixed trend: Early improvements are now challenged by margin pressures and rising costs, indicating increasing operational investment costs. |
Patent Infringement and Trade Tensions in China | Q3 2024 mentioned the need for IP protection measures amid local supply chain pressures ; (Q1 2025 and Q4 2024 did not discuss this topic) | Q2 2025 discussed a lawsuit against a Chinese supplier and acknowledged ongoing trade and IP risks in China | Less consistently emphasized: Although previously a strong concern, commentary on China risks occurs intermittently, with some periods giving it less focus. |
Lack of Transparency in Backlog and Revenue Forecasting | Q1 2025 detailed limited backlog disclosure to protect competitive information ; Q3 2024 noted forecasting challenges due to order delays ; Q4 2024 indirectly referenced conservative forecasting amid order pushouts | Q2 2025 highlighted the volatility of quarterly revenue and difficulties in providing precise forecasts | Recurring concern with mixed disclosure: The challenge of achieving forecast clarity persists, prompting occasional strategic opacity for competitive protection. |
Dependence on Adoption of New Technologies by Major Industry Players | Q4 2024 stressed dependence on EV and silicon carbide adoption for market growth ; Q1 2025 highlighted reliance on major names for driving silicon photonics and optical I/O markets ; Q3 2024 discussed uncertainties in optical I/O adoption due to secretive plans by key players | Q2 2025 noted that success in emerging areas like AI processors and flash memory hinges on adoption by major industry players, with technology advancements driving both opportunities and risks | Consistently recognized dependency: While opportunities are abundant, significant uncertainty remains regarding when and how rapidly major industry players will adopt new technologies. |
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Top Line Growth Outlook
Q: When will we see strong top-line growth beyond the current $65–$70 million level?
A: Management acknowledged that while they've operated at $65–$70 million for three years, they anticipate growth in fiscal year '26 and beyond, driven by markets like silicon photonics, GaN, flash memory, and AI. They did not provide a specific forecast but stated that silicon carbide has a chance to grow next year from this year, and they will provide annual guidance in July as they head into fiscal year '26. -
Near-term Growth Drivers
Q: What are the biggest near-term drivers of growth beyond silicon carbide?
A: Management highlighted that near-term growth will come from AI production, both in packaged part and wafer-level burn-in, as well as new silicon carbide orders expected in Q4. They believe these opportunities are larger in the near term than the hard disk drive application, which remains attractive over the next several years. Flash memory is also considered a significant opportunity, potentially larger than AI in the long term. -
Quarterly Revenue Miss and Timing Issues
Q: Was the revenue miss this quarter due to timing issues with shipments?
A: Yes, the miss was due to timing issues. Some orders were on the shipping dock but were delayed due to customers asking for concessions at the end of the fiscal quarter. Had these orders been received earlier, the quarterly number would have been significantly higher. The delayed orders have moved into the current quarter, and management is working to manage customer expectations. -
Gross Margin Outlook
Q: How should we think about gross margins going forward given the recent decline?
A: The decline in gross margins is attributed to product mix, particularly the inclusion of Incal systems, which have lower margins compared to WaferPaks and legacy Aehr Test systems. WaferPaks have the highest gross margins, followed by Aehr Test systems, then Incal systems. Management expects operational efficiencies from the Incal acquisition, including cost savings of about $0.5 million annually once manufacturing is consolidated, which will positively impact margins. -
China Market and Patent Infringement Case
Q: If the patent infringement case in China isn't successful, is there still a market for you there?
A: Management believes there is still a market in China even if the patent case is unsuccessful. They contend that the competing system is not as capable, with issues in repeatability and functionality. Despite trade uncertainties, Aehr Test has a team in China and a history of business with 14 customers there. They are committed to competing based on their technological advantages but are taking the legal aspect seriously to protect their patents. -
Flash Memory Market Opportunity
Q: What will drive your opportunity in the flash memory market?
A: The opportunity is driven by both commercial demands and technical challenges in NAND flash memory. Customers need to ship significantly more bits without proportional revenue increases, necessitating cost-effective solutions. Technical issues arise with devices like 200-layer NAND, which require addressing thermal problems and tester resource constraints due to higher power consumption during testing. Aehr Test is well-positioned to address these challenges, offering solutions for both commercial efficiency and technical disconnects. -
HBM Opportunity and Capacity
Q: Can you handle the potential demand from HBM and AI market growth with your current capacity?
A: Yes, management is confident in their ability to meet increased demand. They have substantial manufacturing capacity, larger than what was available at Verigy, and utilize subcontract manufacturers and multiple suppliers for scalability. The recent facility upgrades enhance their capacity further. They assert that they currently have more capacity than demand and can significantly increase production to support market opportunities in HBM and AI.