COHU INC

Cohu, Inc. is a global supplier of equipment and services optimizing semiconductor manufacturing yield and productivity, serving customers across computing & networking, automotive, industrial, mobile and consumer electronics markets. The company's serviceable available market (SAM) is approximately $3 billion ¹. The semiconductor industry is characterized by rapid technological change, cyclical demand, and a concentrated customer base, with a limited number of large semiconductor manufacturers and OSAT providers accounting for a significant portion of industry sales. The industry has historically been characterized by pronounced cyclicality and seasonal demand patterns, with recurring periods of oversupply, excess capacity, and rapid shifts in capital spending.

Cohu's primary competitors include established global players in semiconductor test and inspection, such as Advantest, Teradyne, Hon Precision, KLA, and other Asia-based manufacturers. The company differentiates through a broad and integrated product portfolio spanning test, automation, inspection, interface solutions, thermal subsystems, and software analytics; significant investments in R&D, particularly in solutions for high-growth markets such as high-performance computing, automotive (ADAS), and HBM; proprietary technologies in active thermal control, vision inspection, and machine learning-based process control, and precision test instrumentation; a resilient recurring revenue model with a strong focus on services, consumables, and software analytics; strategic partnerships, targeted acquisitions, and a disciplined approach to capital allocation; and a large and highly skilled global field service organization. In 2025, the ten largest customers represented 60% of total revenue ².

Cohu generates revenue through the sale of semiconductor test automation and interface solutions, semiconductor test equipment, inspection and metrology solutions, and software analytics. The company's recurring revenue consists of interface products, services, spares, upgrades, configuration tooling, and software analytics, supporting a resilient and scalable business model which complements the systems revenue driven by the capital expenditure of customers. The active equipment installed base exceeds 25,000 systems ³, serving over 280 high-volume manufacturing facilities ⁴ across 108 customers ⁵ in 31 countries ⁶. During the last three fiscal years, consolidated net sales were distributed as 40% ⁷ semiconductor test & inspection systems (including kits) and 60% ⁸ recurring revenues in 2025, compared to 35% ⁹ and 65% ¹⁰ in 2024, and 51% ¹¹ and 49% ¹² in 2023.

Cohu's product portfolio is organized into several key lines. Test automation products include equipment and systems used to automate movement of semiconductor devices, control temperature during test, optimize throughput and efficiency, ensure quality and maximize yield in volume production, using innovative active thermal management (ATC) technology. Inspection and Metrology equipment provides advanced quality inspection and metrology of molded leaded and leadless devices, post-singulated wafer level chip scale packages (WLCSP), and bare dies, with full six-sided optical inspection with infrared technology and deep learning and pattern recognition. Semiconductor Automated Test Equipment (ATE) consists of an instrumentation and universal platform for testing semiconductor devices with best-in-class solutions in radio frequency (RF), digital, mixed signal and power management applications. Interface Solutions consist of a full suite of test contactors and power probe cards that provide the electrical interface between the semiconductor test equipment and the semiconductor device, optimizing signal performance via an array of consumable probe pins. Software analytics products include an AI-driven digital twin software platform offering a suite of data analytics specializing in process control. Services include device applications, spares, and board repair, complemented by service agreements.

Cohu's R&D priorities are aligned with customer needs for stringent quality while addressing ever evolving technical challenges, with investments spanning AI-enabled analytics, high-precision inspection and metrology, advanced thermal control, and intelligent automation. Growth programs in high-performance computing, HBM, high power semiconductors supporting AI infrastructure, advanced driver assistance systems (ADAS), electric vehicles, factory automation, and physical AI delivered incremental revenue gains in fiscal 2025, with increased recurring orders and design wins indicating stronger pull-though opportunities across test automation, inspection platforms, semiconductor test and interface products. The company's continued focus on more stable revenue through recurring product offerings enhances its long-term growth profile.

On January 7, 2025, Cohu completed the acquisition of Tignis, a provider of AI process control and analytics-based monitoring software ¹³. On September 29, 2025, Cohu issued $287.5 million ¹⁴ aggregate principal amount of 1.50% convertible senior notes due 2031, including the full exercise by the initial purchasers on September 25, 2025 of their option to purchase up to an additional $27.5 million ¹⁵ principal amount of the Notes. Net proceeds from the offering were approximately $278.9 million ¹⁶, after deducting the initial purchasers' discounts and commissions but before estimated offering expenses. Cohu used approximately $31.4 million ¹⁷ of the net proceeds to enter into capped call transactions. On February 19, 2025, Cohu initiated a global restructuring program designed to improve profitability while maintaining investment in product development. During fiscal 2025, Cohu repurchased 432,288 shares ¹⁸ of its common stock for approximately $8.6 million ¹⁹ to offset dilution from share-based compensation plans. On February 9, 2024, Cohu made a cash payment of $29.3 million ²⁰ to repay the remaining outstanding principal of its Term Loan Credit Facility.

For the fiscal year ended December 27, 2025, net sales increased 12.7% ²¹, year-over-year, to $453.0 million ²². Net loss was $74.3 million ²³ in fiscal 2025 compared to $69.8 million ²⁴ in fiscal 2024. Gross margin, as a percentage of net sales, decreased to 42.7% ²⁵ in fiscal 2025 from 44.9% ²⁶ in fiscal 2024. Cash provided by operating activities in fiscal 2025 totaled $31.7 million ²⁷ compared to $2.8 million ²⁸ in fiscal 2024.

Cohu plans to record restructuring charges in the first quarter of fiscal 2026. The company expects to continue to invest heavily in research and development and must manage product transitions successfully. Cohu anticipates that demand for its systems will continue to fluctuate in response to industry investment cycles, customer utilization rates, inventory corrections, new technology ramps, and broader market conditions.

Cohu is capitalizing on high-growth opportunities in high-bandwidth memory (HBM) inspection, high performance processor test in AI applications (CPUs, embedded-NPUs, discrete and integrated GPUs, ASICs and xPUs), mixed signal devices, silicon carbide (SiC) and gallium nitride (GaN) wide bandgap test, and AI-driven software analytics. The company's R&D priorities are aligned with customer needs for stringent quality while addressing ever evolving technical challenges, with investments spanning AI-enabled analytics, high-precision inspection and metrology, advanced thermal control, and intelligent automation, expanding its serviceable available market (SAM) to approximately $3 billion ²⁹ and strengthening competitive differentiation in high-complexity device segments. Growth programs in high-performance computing, HBM, high power semiconductors supporting AI infrastructure, advanced driver assistance systems (ADAS), electric vehicles, factory automation, and physical AI delivered incremental revenue gains in fiscal 2025, with increased recurring orders and design wins indicating stronger pull-though opportunities across test automation, inspection platforms, semiconductor test and interface products.

Cohu is expanding market opportunities with new solutions and is encouraged by growing demand for semiconductor testing and inspection used in AI data centers. The company continues to strengthen its regional presence across Asia-Pacific, Europe, and the U.S. where local technical engagement is essential for securing design-win positions and capturing new capacity investments. In markets with significant growth potential, Cohu deploys dedicated personnel to deepen customer relationships and support long term revenue expansion.

On February 19, 2025, Cohu initiated a global restructuring program designed to improve profitability while maintaining investment in product development. The 2025 Restructuring Program, as implemented over time, will reduce headcount and enable the company to optimize the facilities of its operations, as well as transition certain manufacturing to other lower cost regions. The company incurred restructuring charges totaling $10.1 million ³⁰ in fiscal 2025. Gross margin, as a percentage of net sales, decreased to 42.7% ³¹ in fiscal 2025 from 44.9% ³² in fiscal 2024, driven by product mix of systems delivered to customers, along with a one-time charge related to the decision to end manufacturing of certain products.

Cohu maintains a globally integrated manufacturing footprint designed to support the production of advanced semiconductor test, automation, interface, inspection and metrology solutions. The largest facility, located in Melaka, Malaysia, supports high-volume production of test automation and inspection product families. Additional volume manufacturing facilities in the Philippines, Singapore and Japan support interface solutions, contactors, advanced spring probes, and industrial test contacts. Cohu's supply chain is strengthened by long-standing relationships with strategic partners, including dedicated semiconductor ATE manufacturing operations at a facility of Jabil, Inc. in Penang, Malaysia. As of December 27, 2025, Cohu employed approximately 2,857 people ³³, across 25 countries ³⁴, including about 80 temporary employees ³⁵.

Cohu's total R&D expenditure was $92.2 million ³⁶ in fiscal 2025, $84.8 million ³⁷ in fiscal 2024 and $88.6 million ³⁸ in fiscal 2023. Additions to property, plant and equipment in fiscal 2025 were $21.0 million ³⁹ and were made to support operating and development activities. On October 28, 2021, the Board authorized a $70 million ⁴⁰ share repurchase program, and on October 25, 2022, the Board authorized an additional $70 million ⁴¹ under the share repurchase program. As of December 27, 2025, $22.8 million ⁴² remained available for share repurchases. On May 5, 2020, the Board indefinitely suspended the quarterly cash dividend.

Global macroeconomic and geopolitical factors have recently impacted the semiconductor industry, with higher cost of capital, slowing demand, and elevated inventory levels leading many semiconductor companies to reduce costs, delay capacity expansions, and implement workforce reductions. While the global macroeconomic environment continues to weigh on automotive, industrial, and consumer segments, demand for mobile and AI-based computing applications helped offset these pressures. The company faces risks from geopolitical instability in locations critical to its operations, particularly in Asia, and from the occurrence of natural disasters, health epidemics, and other threats.

Cohu is subject to U.S. laws and regulations that limit and restrict the export of some of its products and services and may restrict transactions with certain customers, business partners and other persons, particularly in China. Export controls have continued to be issued relating to the Chinese semiconductor manufacturing, advanced computing, and supercomputer industries, which may impact the company's ability to sell and ship products to semiconductor fabrication facilities located in China. The company also faces risks from inflationary pressures, rising interest rates, and the threat of recession, which have increased costs for material, labor and services.

The semiconductor equipment industry is intensely competitive, and in 2025, the ten largest customers represented 60% of total revenue ⁴³; losing a major customer or failing to keep up with competitors' innovations could significantly impact results. The company's IS reporting unit had limited headroom in the annual goodwill impairment test, meaning fair value only narrowly exceeded carrying value, and goodwill associated with the IS reporting unit represented 39% ⁴⁴ of total goodwill allocated across reporting units as of the assessment date, so even modest adverse changes could result in a future goodwill impairment charge. Cohu is subject to U.S. export controls relating to China that may impact its ability to sell products to semiconductor fabrication facilities located there, and these restrictions have encouraged China-based companies to seek substitute products from foreign competitors. The company's international sales, based upon the ship-to location, as a percentage of revenues were 90% ⁴⁵ for fiscal 2025, exposing it to risks of operating in foreign locations including currency fluctuations, geopolitical instability, and trade barriers. As of December 27, 2025, $151.2 million ⁴⁶ or 66.6% ⁴⁷ of cash and cash equivalents was held by foreign subsidiaries, and if these funds are needed for U.S. operations, the company may be required to accrue and pay foreign withholding taxes.

Management's message emphasizes that despite near-term industry weakness, long-term market drivers remain intact, supported by increasing semiconductor complexity, quality demands, test intensity, automation, smart manufacturing initiatives, and the proliferation of electronics across automotive, mobile, industrial, computing, and consumer markets. The company remains focused on building a well-balanced and resilient business model, executing on customer design wins, and developing innovative products. Key strategic priorities include accelerating growth in high-performance computing and physical AI applications, expanding relationships with major customers and leading OSATs, and growing the service and recurring revenue business. Management also highlighted the initiation of a global restructuring program on February 19, 2025, designed to improve profitability while maintaining investment in product development.