FORMFACTOR INC

FormFactor, Inc. is a leading provider of electrical and optical test and measurement technologies along the full semiconductor product lifecycle, from characterization, modeling, reliability, and design de-bug, to qualification and production test. The company provides a broad range of high-performance probe cards, analytical probes, probe stations, thermal systems, and cryogenic systems to both semiconductor companies and scientific institutions. The semiconductor industry is subject to rapid technological change with a continuous stream of new product introductions and technology enhancements, and the industry has historically been cyclical, characterized by wide fluctuations in product supply and demand. The company operates in two reportable segments: the Probe Cards segment and the Systems segment.

The probe card market is comprised of many domestic and foreign companies and has historically been fragmented. Primary competitors in the probe card market include Japan Electronic Materials Corporation, Korea Instrument Co., Ltd., Micronics Japan Co., Ltd., MPI Corporation, STAr Technologies, Inc., Max One, Technoprobe S.p.A, and TSE Co., Ltd. In the analytical probe market, primary competitors are GGB Industries Inc. and MPI Corporation. In the probe station market, primary competitors are MPI Corporation, Shenzhen Senmeixieer Technology Co., Ltd (Semishare), STAr Technologies, Inc., Tokyo Electron Limited (TEL), and Wentworth Laboratories, Inc. In the thermal subsystems market, the company competes principally against AEM Singapore Pte., ERS Electronic GmbH, and Temptronic Corporation. In the cryogenic systems market, the company competes principally against Bluefors Oy, Lake Shore Cryotronics, Inc, Maybell Quantum Industries Inc., Montana Instruments, and Quantum Design. The company believes it possesses one of the most substantial patent portfolios relevant to its products.

The company generates revenue through the design, manufacture, and sale of multiple product lines, including probe cards, analytical probes, probe stations, thermal systems, cryogenic systems, and related services. Revenue is recognized upon transferring control of products and services. An arrangement may include probe cards, systems, accessories, engineering services, installation services, service contracts, and extended warranty contracts. The company sells its products worldwide through a global direct sales force and through a combination of manufacturers' representatives and distributors. Customers include companies, universities, and institutions that design and develop or manufacture semiconductor and semiconductor related products in the foundry & logic, DRAM, flash, display, sensor, and quantum computer markets.

The Probe Cards segment includes sales of probe cards and analytical probes. Probe cards utilize a variety of technologies including micro-electromechanical systems (MEMS) technologies and are customized to customers' unique wafer and chip designs. The company offers probe cards to test a wide range of semiconductor device types, including logic system-on-chip (SoC) devices, consumer devices, network devices, dynamic random-access memory (DRAM) including high-bandwidth memory (HBM), radio-frequency amplifiers and filters, antenna-in-package devices, analog and mixed-signal integrated circuits, image sensors, co-packaged optical integrated circuits (ICs), NAND flash memory, NOR flash memory, and quantum computing processors. Present technologies enable probe cards with over 150,000 contact elements with spacings as small as 40 microns over geometries as large as an entire 300mm wafer. The company also offers over 50 different analytical probe models for engineering and production testing. For fiscal 2025, Probe Cards segment revenue was $637.898 million ¹.

The Systems segment includes sales of probe stations, thermal systems, and cryogenic systems. Probe stations are a critical tool for the development of new generations of semiconductor and electro-optical processes and designs, and are designed for semiconductor development engineers to capture and analyze data at temperatures from near absolute zero to hundreds of degrees centigrade. Thermal subsystems include thermal chucks and other test systems used in probe stations and other applications where precise temperature management is required. Cryogenic systems include the manufacture of precision cryogenic instruments and semiconductor test and measurement systems, including advanced cryogenic probe systems and dilution refrigerator cryostats used in applications including quantum and superconducting computing applications. For fiscal 2025, Systems segment revenue was $147.095 million ².

During fiscal 2025, the company achieved record annual revenue of $785.0 million ³. The company purchased a manufacturing site in Farmers Branch, Texas, which is expected to begin ramping production in late fiscal 2026. In February 2025, the company acquired a 20% equity interest in FICT Limited for an initial investment of $67.2 million ⁴. In December 2025, the company acquired Keystone Photonics for total consideration of $20.6 million ⁵, net of cash acquired. In June 2025, the company purchased a manufacturing site in Farmers Branch, Texas, comprising four structures and including 50,000 square feet of existing clean room space. During fiscal 2025, the company repurchased and retired 800,000 ⁶ shares of common stock for $26.2 million ⁷ under its stock repurchase programs. In January 2026, the company adopted restructuring plans expected to result in aggregate charges of approximately $30 million to $40 million ⁸.

For fiscal 2025, total revenues were $784.993 million ⁹, compared to $763.599 million ¹⁰ in fiscal 2024 and $663.102 million ¹¹ in fiscal 2023. Net income was $54.361 million ¹² in fiscal 2025, compared to $69.614 million ¹³ in fiscal 2024 and $82.387 million ¹⁴ in fiscal 2023. Diluted EPS was $0.69 ¹⁵ in fiscal 2025, compared to $0.89 ¹⁶ in fiscal 2024 and $1.05 ¹⁷ in fiscal 2023. Gross profit was $308.851 million ¹⁸ in fiscal 2025, compared to $307.923 million ¹⁹ in fiscal 2024. Gross margin was 39.3% ²⁰ in fiscal 2025, compared to 40.3% ²¹ in fiscal 2024. Operating income was $57.070 million ²² in fiscal 2025, compared to $64.780 million ²³ in fiscal 2024.

The company is benefiting from growth driven by exposure to end markets supporting artificial intelligence-related infrastructure, including high-bandwidth memory (HBM). The company is collaborating with certain customers to transition from the lab to the fab with co-packaged optics, which is poised to revolutionize chip-to-chip communication in the data center. As silicon photonics matures and moves to high-volume-production in the coming years, the company expects that its leadership positions in combined electrical and optical test may provide new growth. The acquisition of Keystone Photonics in December 2025 strengthened the company's position at the forefront of AI infrastructure demand and the explosive market growth in silicon photonics, extending its integrated test system leadership and leveraging its unique lab-to-fab position as SiPh and co-packaged optics manufacturers leap from concept to high-volume production.

The company is making meaningful progress in establishing customer engagements to further diversify its customer base. The company has invested, and intends to continue to invest, considerable resources in proprietary probe card design tools and processes. The company also focuses on leveraging ongoing investments across all advanced probe card markets to realize synergies and economies of scale to benefit its competitiveness, time-to-market, and overall profitability. The company's equity investment in FICT Limited, a provider of semiconductor test and high-performance computing industries with complex multi-layer organic substrates, printed circuit boards, and related leading-edge technologies and services, represents a growth vector.

The company's gross margins declined year over year in fiscal 2025 compared to fiscal 2024, though third and fourth quarters of fiscal 2025 have shown meaningful improvement in gross margins compared to the first half of fiscal 2025 and second half of fiscal 2024. The decrease in gross margin in fiscal 2025 was due to higher manufacturing costs, which included a 1.4% gross margin impact from increased costs for tariffs. In January 2026, the company adopted restructuring plans that are intended to better align cost structure and support gross margin improvement to its target financial model, while also aligning manufacturing capabilities with current and anticipated business needs and strategic priorities.

The company purchased a manufacturing site in Farmers Branch, Texas, which is being built-out for an expected production ramp beginning late in the fourth quarter of fiscal 2026. The company has a new manufacturing facility in Farmers Branch, Texas that is currently in the build-out phase and is expected to support probe card production beginning in late fiscal 2026. The company's current manufacturing operations in Carlsbad and Baldwin Park, California are consolidating to other sites, which the company expects to be largely completed by the end of fiscal 2026. As of December 27, 2025, the company had 2,153 regular full-time employees ²⁴.

The company expects factory start-up costs for the Farmers Branch site to be between $20.0 million to $25.0 million ²⁵ over fiscal 2026. Estimated capital expenditures for the ramp of the Farmers Branch manufacturing site are $140.0 million to $170.0 million ²⁶. On April 24, 2025, the Board of Directors authorized a new two-year program to repurchase up to $75.0 million ²⁷ of outstanding common stock. As of December 27, 2025, $70.9 million ²⁸ remained available for future repurchases under this program. The company does not intend to pay dividends in the future.

The company faces headwinds from trade restrictions for the export of advanced U.S. semiconductor technology to China, which has caused decreasing demand from Chinese customers. Approximately 7% ²⁹ of fiscal 2025 revenue and 14% ³⁰ of fiscal 2024 revenue was derived from sales to customers in China. The company is subject to risks from increasing tariffs and other trade barriers affecting the United States and China, and trade tensions and conflicts between the United States and other countries. The company's operations are subject to the evolving geopolitical landscape and the increasingly stringent regulatory environment in jurisdictions where it operates, particularly between the U.S. and China.

The company faces constraints from its dependence on a small number of customers, with one customer, SK hynix Inc., representing 22.9% ³¹ of total revenues in fiscal 2025. The company also faces risks from the cyclical nature of the semiconductor industry, which has in the past and may in the future adversely impact sales. The company's international sales as a percentage of revenues were 81% ³² for fiscal 2025, exposing it to operational, economic, financial, and political risks abroad, including currency exchange rate fluctuations.

The company derives a substantial portion of revenues from a small number of customers; one customer, SK hynix Inc., represented 22.9% ³³ of total revenues in fiscal 2025, and the loss of any key customer could significantly reduce revenues. The company is subject to risks from increasing trade restrictions and tariffs, particularly between the U.S. and China, with approximately 7% ³⁴ of fiscal 2025 revenue derived from sales to customers in China, and these restrictions have caused decreasing demand from Chinese customers. The company faces risks from the cyclical nature of the semiconductor industry, which has historically experienced significant downturns that could cause operating results to decline dramatically. The company depends on sole or limited source suppliers for some components and materials, and the partial or complete loss of a supplier could cause production delays. The company's manufacturing facilities are located in seismically active areas in California and Oregon, and a significant seismic event could have a materially negative impact on operations.

Management's message emphasizes that fiscal 2025 was highlighted by achieving record annual revenue of $785.0 million ³⁵, benefiting from growth driven by exposure to end markets supporting artificial intelligence-related infrastructure, including HBM, and making meaningful progress in establishing customer engagements to further diversify the customer base. Key strategic priorities include the ramp of the new manufacturing site in Farmers Branch, Texas, which is expected to begin production in late fiscal 2026, the integration of the Keystone Photonics acquisition to strengthen the company's position in silicon photonics and co-packaged optics, and the execution of restructuring plans announced in January 2026 intended to better align cost structure and support gross margin improvement to the company's target financial model.