FormFactor (FORM) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue was $171.4M, down 9.6% sequentially but up 1.6% year-over-year, with profitability impacted by lower DRAM probe card demand and prior-year gains from China operations sale.

• Q2 is expected to see double-digit sequential revenue growth, driven by hyperscaler investments in generative AI, HBM DRAM probe cards, and co-packaged optics test systems.

• Tariff and export control headwinds, especially with China, continue to impact revenue and gross margin, but proactive divestment from China and ongoing supply chain adjustments have mitigated some risk.

• Acquisition of FICT Limited strengthens access to advanced multi-layer organic substrates for probe cards and supports technology leadership.

• Recognized for technical leadership and customer satisfaction, with awards from Intel and SK hynix in 2024.

Financial highlights

• Q1 2025 revenue: $171.4M (up 1.6% year-over-year, down 9.6% sequentially); Q2 2025 outlook: $190M ± $5M.

• Non-GAAP gross margin was 39.2% (Q1 2025), near the high end of guidance; GAAP gross margin was 37.7%.

• Non-GAAP EPS was $0.23 in Q1 2025; Q2 2025 outlook: $0.30 ± $0.04.

• Free cash flow was $6.3M in Q1 2025, down from $28.8M in Q4 2024.

• Cash, cash equivalents, and investments at quarter end were $299M, down mainly due to the $67M FICT investment.

Outlook and guidance

• Q2 2025 revenue expected at $190M ± $5M, with growth in all major markets, especially HBM, DRAM, and foundry/logic.

• Q2 non-GAAP gross margin expected at 40% ± 1.5%; non-GAAP EPS expected at $0.30 ± $0.04.

• Tariffs expected to reduce Q2 revenue by mid-single-digit millions and gross margin by 1 percentage point.

• Long-term target model: $850M revenue, 47% non-GAAP gross margin, 22% operating margin, $2.00 non-GAAP EPS, $160M free cash flow.

• Management expects to recognize 61.2% of remaining $19.4M performance obligations as revenue in 2025.