Executive Summary

Q3 2025 revenue of $0.203B, non-GAAP gross margin of 41.0%, and non-GAAP EPS of $0.33 all exceeded the midpoint of guidance and improved sequentially; GAAP gross margin rose 250 bps QoQ to 39.8% .
Results beat Street consensus: revenue beat by ~$2.7M* and EPS beat by ~$0.08*, while EBITDA was below consensus*; management guided Q4 to further sequential improvement in revenue ($210M ±$5M), non-GAAP GM (42% ±150 bps), and non-GAAP EPS ($0.35 ±$0.04) .
DRAM probe cards set a record, driven by HBM; HBM4 crossover underway, with Q3 HBM revenue at “around $40M,” and non-HBM DRAM expected to drive Q4 growth .
Profitability improvement program is driving margin gains (labor reductions, overtime changes, manufacturing cost actions); tariffs still weigh ~150–200 bps on GM, but mitigation efforts continue .

What Went Well and What Went Wrong

What Went Well
- DRAM probe cards delivered expected double-digit sequential growth to a new record, primarily from HBM; “we expect to post another record” in Q4 with non-HBM applications (DDR5, LPDDR4) .
- Systems segment revenue increased as expected, with momentum towards initial volume production of co-packaged optics; multiple Triton systems were installed for silicon photonics test .
- Margin improvement actions delivered a 250 bps QoQ increase in GAAP GM and 250 bps QoQ increase in non-GAAP GM; management reiterated commitment to reaching a 47% non-GAAP GM target model: “we’re focused…to the 47%…gross margins” .
What Went Wrong
- Foundry and Logic probecard demand was weaker sequentially; CPU probecard demand remained muted as customers leveraged legacy node fleets rather than new leading-edge ramps .
- EBITDA underperformed Street consensus* despite revenue and EPS beats, reflecting mix and continued cost headwinds including tariffs (~150–200 bps GM impact) .
- A large CPU customer fell below the 10% revenue threshold in Q3, highlighting near-term concentration risk and the importance of diversifying/qualifying at other CPU/GPU customers .

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Millions)	$207.9	$195.8	$202.7
GAAP Gross Margin (%)	40.7%	37.3%	39.8%
Non-GAAP Gross Margin (%)	42.2%	38.5%	41.0%
GAAP Diluted EPS ($)	$0.24	$0.12	$0.20
Non-GAAP Diluted EPS ($)	$0.35	$0.27	$0.33
GAAP Operating Income ($USD Millions)	$17.9	$12.3	$18.0
Cash from Operations ($USD Millions)	$26.7	$18.9	$27.0
Free Cash Flow ($USD Millions)	$20.0	$(47.1)	$19.7

Segment and KPIs

Segment Margin (Non-GAAP): Probecard 40.8%; Systems 42.0% .
HBM Revenue: “in round numbers, $40M” in Q3 .
Cash and Equivalents: $97.678M; Marketable Securities: $168.351M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	Q4 2025	N/A	$210 ± $5	Raised vs Q3 baseline
Non-GAAP Gross Margin (%)	Q4 2025	N/A	42.0% ± 1.5%	Raised vs Q3 baseline
Non-GAAP EPS ($)	Q4 2025	N/A	$0.35 ± $0.04	Raised vs Q3 baseline
GAAP Gross Margin (%)	Q4 2025	N/A	40.0% ± 1.5%	N/A
Non-GAAP OpEx ($USD Millions)	Q4 2025	Q2 actual Non-GAAP OpEx $52.5	$58 ± $2	Increased vs Q2
Effective Tax Rate (%)	Q4 2025	Q3 Non-GAAP ETR 21.2%	17%–21%	Lower

Q3 2025 Guidance vs Actuals (context)

Q3 guidance midpoints: Revenue $200M, Non-GAAP GM 40%, Non-GAAP EPS $0.25 .
Q3 actuals: Revenue $202.7M, Non-GAAP GM 41.0%, Non-GAAP EPS $0.33—beat across all three .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2025)	Trend
Gross Margin Improvement	Q2: non-GAAP GM shortfall due to mix and HBM ramp-up costs . Q1: sequential GM decline and Systems demand reduction .	250 bps QoQ GM improvement; immediate actions (headcount reduction, overtime management, precious metal recovery); commitment to 47% model .	Improving; structural and tactical actions underway.
HBM / DRAM	Q2: shipping in volume to all three major HBM manufacturers; ramp costs . Q1: DRAM reduced due to China export controls .	HBM4 crossover; Q3 HBM ~$40M; Q4 HBM similar to Q3; non-HBM DRAM to drive Q4 sequential record .	Strong and diversifying; stable HBM near-term, non-HBM growth Q4.
Foundry & Logic / CPU	Q1: Foundry & Logic up low single digits; export controls constrained advanced node designs to China . Q2: anticipated strength in Foundry & Logic .	Sequentially weaker; CPU demand subdued; qualifications ongoing at major fabless CPU and merchant GPU (Apollo MEMS), pilot stage for GPU .	Near-term soft; pipeline building for 2026 ramps.
Systems / CPO / Triton	Q1: Systems demand reduction noted .	Sequential Systems revenue increase; multiple Triton installs; pilot progressing towards initial volume for CPO .	Building momentum into 2026.
Tariffs / Export Controls	Q1: Export controls limited DRAM shipments to China .	Tariffs impact GM by ~150–200 bps; mitigation efforts ongoing .	Persistent headwind with mitigation.
Capacity Expansion (Farmers Branch)	Q2: Facility acquisition closed to add flexibility in lower-cost region .	Capex $140–$170M in 2026; initial capacity late-2026, majority in 2027 .	Execution progressing; long-term margin tailwind.

Management Commentary

CEO on margin focus: “we’re focused on…improving our profitability to get back on a path to the 47% non-GAAP gross margins of our target model” .
CFO on actions: “we just completed a reduction in headcount…implemented changes in how we manage overtime…expanded…precious metal recovery…targeted decreases in manufacturing spending” .
Tariff impacts: “we continue to see a 150 to 200 basis point impact in gross margins from tariffs…taking actions to mitigate” .
HBM specifics: “HBM…in round numbers, $40M in the quarter…HBM4 takes over as the majority…expect continued growth” .
Systems/CPO: “installed multiple units of our next-generation Triton…bringing…optical and electrical probe and test capability…transition…from the lab to the fab” .

Q&A Highlights

HBM4 crossover and test intensity tailwinds (higher stacks, faster I/O) should increase probecard intensity; FormFactor’s SmartMatrix architecture validated at 10+ Gbps .
CPU weakness: a large CPU customer dropped below 10% revenue in Q3; near-term PC sector soft, but qualification efforts underway across major CPU/GPU customers for 2026 .
Margin drivers: mix, volume, and cost actions all contributed; volume was the minority; restructuring benefits ~$1M in Q4 and ~$1.5M thereafter .
CPO milestone path: pilot production ongoing; Triton systems installed; external product launches expected early–mid next year as potential catalysts .
Networking silicon opportunity: growing importance in data centers; FormFactor positioned to leverage advanced MEMS capabilities as requirements converge with GPU-level specs .

Estimates Context

Q3 2025 Actuals vs Street Consensus

Metric	Consensus	Actual	Beat/Miss
Revenue ($USD Millions)	199.97*	202.68	Beat by ~$2.71M*
Primary EPS (Non-GAAP, $)	0.249*	0.33	Beat by ~$0.081*
EBITDA ($USD Millions)	34.45*	27.78*	Miss by ~$6.67M*

Q4 2025 Context

Metric	Street Consensus	Company Guidance
Revenue ($USD Millions)	210.33*	$210 ± $5
Primary EPS (Non-GAAP, $)	0.35*	$0.35 ± $0.04

Values retrieved from S&P Global.*

FY Consensus Snapshot

Metric	FY 2025	FY 2026
Primary EPS (Mean, $)	1.18*	1.551*
Revenue (Mean, $USD Millions)	780.18*	856.98*

Interpretation: Revenue/EPS beats in Q3 likely support modest upward estimate revisions for near-term non-GAAP profitability; EBITDA shortfall may temper magnitude of upward revisions.*

Key Takeaways for Investors

Margin momentum is credible: immediate cost actions plus structural initiatives (automation, yield/cycle-time, Farmers Branch facility) are driving sequential GM gains with a path to 47% non-GAAP GM in 2026 .
HBM remains a core growth engine: HBM4 crossover underway; Q3 HBM ~$40M; Q4 HBM similar to Q3 while non-HBM DRAM (DDR5/LPDDR4) drives sequential growth .
Diversification pipeline is critical: near-term CPU softness underscores the importance of securing qualifications across major CPU/GPU customers; GPU Apollo MEMS pilot sets up H1 2026 volume opportunity .
Systems/CPO optionality: Triton deployments and pilot-to-volume trajectory can add incremental growth; watch for early–mid next-year product launch catalysts .
Tariffs remain a headwind (~150–200 bps GM), but mitigation is underway; investors should monitor risk around policy changes and export controls, especially for China-related advanced nodes .
Liquidity and cash generation improved: operating cash flow rebounded to $27.0M; FCF positive at $19.7M; cash and marketable securities total $266.0M, supporting capacity investment and margin initiatives .
Near-term trading: evidence of execution (beats, rising margins, Q4 guide higher) plus HBM narrative can be catalysts; watch commentary on Foundry/Logic and any updates on GPU/CPU qualifications to gauge 2026 earnings power .

FORMFACTOR INC (FORM)·Q3 2025 Earnings Summary