FormFactor (FORM) Citi’s 2026 Global TMT Conference summary

Industry trends and market drivers

• Advanced packaging and chiplet adoption are increasing the complexity and demand for semiconductor testing, driving substantial market growth through 2026 and beyond.

• Probe card spending per unit is rising, but overall intensity as a percentage of customer revenue is being distorted by rapid ASP increases in end markets like DRAM.

• Custom ASICs and GPUs are emerging as significant growth areas, with advanced MEMS probe technology becoming essential for next-generation high-performance chips by 2027.

• The company is diversifying its growth vectors across ASICs, GPUs, HBM, photonics, and CPUs, aiming for a $1.6 billion revenue target by 2030.

• Capacity constraints are currently the main growth limiter, with major expansion underway at the Farmers Branch, Texas facility to double probe card capacity by late 2027.

End market opportunities and competitive positioning

• Initial revenue from custom ASIC projects is expected to ramp up in 2027, with engagement across all major customers and foundry partners.

• GPU market share is targeted to reach 20–30% in the next generation, following successful qualification and pilot production at a leading foundry.

• HBM revenue grew 60–70% year-over-year in the first half, driven by share gains, volume growth, and higher-value configurations for HBM4.

• The company maintains strong positions with all three major DRAM manufacturers and is actively expanding share at a third HBM customer as capacity increases.

• Photonics, especially CPO, is a key growth theme, with revenue guidance upgraded to $20 million for 2026 and broadening customer engagement beyond a single major partner.

Financial performance and margin outlook

• Gross margin has improved to 53–54% in recent quarters, with a target of 55% driven mainly by operational efficiencies and differentiated product value, not pricing.

• Record DRAM probe card revenue and a favorable mix shift to DDR5 are supporting margin gains, with ongoing efforts to reduce COGS and maintain strong profitability.

• The consumable nature of probe cards is now driven more by rapid chip design changes than by physical wear, supporting recurring revenue as new products are released.

• Expansion at Farmers Branch is being managed conservatively to align capacity with demand and protect gross margins, with flexibility to accelerate if market growth exceeds forecasts.

• The company is positioned to reach its $1.6 billion revenue model ahead of 2030 if demand materializes faster than expected.