Cohu 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, and welcome to Cohu's second quarter 2026 earnings call.

Our agenda begins with Luis Müller, Cohu's President and CEO, who will provide a business update, followed by a financial review and outlook from Jeff Jones, our Senior Vice President and Chief Financial Officer. Following our prepared remarks, we will open up the call for your questions. If you need a copy of our earnings release, it can be found on our website at cohu.com or by contacting Cohu Investor Relations. A slide presentation accompanying today's call is also available in the investor relations section of the website. Replays of this call will be accessible via the same page after the conclusion of the call. During this call, we will be making forward-looking statements that reflect management's current expectations concerning Cohu's future business.

These statements are based on the information available to us at this time, but they are subject to rapid and sometimes abrupt changes. We encourage everyone to review the forward-looking statement section of our slide presentation and the earnings release, as well as Cohu's filings with the SEC, including the most recently filed Form 10-K and Form 10-Q. Our comments are current as of today, July 30th, 2026, and Cohu does not assume any obligation to update these statements for events occurring after the call. Additionally, we will discuss certain non-GAAP financial measures during this call. Please refer to our earnings release and slide presentation for reconciliation to the most comparable GAAP measures. Now I'd like to turn the call over to Luis Müller, Cohu's President and CEO.

Luis? Good afternoon, and thank you for joining Cohu's second quarter 2026 earnings call.

We delivered a strong quarter with sales of $149 million, up 38% year-over-year, and recurring revenue of approximately 53% of total. These results reflect solid execution across the company and continued customer adoption of our solutions. Our Q2 results show progress in areas where we have focused investments, advanced thermal test handlers for AI processors, HVM inspection, flexible ATE platforms for power and connectivity devices, and software analytics. Cohu is benefiting from durable demand drivers in AI infrastructure and edge computing, where customers are investing to address increasing power levels, production yield, and increased factory productivity. Estimated semiconductor test serialization improved sequentially to 80% at the end of the second quarter, typically a turning point for test CapEx by our core IDM customer base.

The strongest segments were computing and industrial, with test serialization in the low 80s, followed by automotive and mobile in the high 70s. Bookings generally follow utilization trends, and in the second quarter, computing led with 46% of total system orders, representing an impressive 150% increase year-over-year, driven by Eclipse growth in high-performance computing. With utilization above 80%, industrial was the next largest growth area, with orders up 87% year-over-year. The balance included consumer up 29% year-over-year, mobile essentially flat year-over-year, and automotive down 24% year-over-year in a segment that continues to struggle in this recovery cycle. Let me now review the quarter by product line, starting with the areas where we see the strongest customer traction. Starting with our test handlers.

Building on the momentum from Q1, we continue to expand our position in high-performance computing through the adoption of our Eclipse handler, enabled by advanced active thermal control for extreme power and next-generation JEDEC Max devices used in data centers. The Eclipse delivers a configurable thermal handler that can be used across multiple device generations, helping customers reduce capital risk, extend the value of their installed base, and support faster production ramps. Our high-power thermal control technology remains a key differentiator, improving test quality and first-pass yield. During Q2, high-performance computing customers also expanded adoption of Cohu's PAICe prescriptive analytics software, reinforcing our strategy to improve equipment efficiency and customer value. Separately, we are increasing our presence and infrastructure at OSATs in Southeast Asia to support fabless and hyperscaler programs as they move from qualification to our production ramp.

Overall, this momentum reinforces an expanding high-performance computing customer pipeline that we now estimate at approximately $850 million annually. This includes about $190 million in qualified annual opportunity across four customers, $250 million in active qualification across five customers. Approximately $445 million in early-stage engagement across 10 additional customers. Based on this progress, we are raising our fiscal 2026 high-performance computing revenue estimate to between $100 million and $110 million. To support this demand, we are working with supply partners to increase capacity, and we're expanding our internal manufacturing in Malaysia. We expect this expansion to double output by year-end and support another step-up in capacity by mid-2027. Now turning to our inspection in metrology. During Q2, we shipped additional final inspection systems for HBM3, HBM4, and HBM4E devices to a U.S.-based IDM with a strong forecast into the second half of 2026.

HBM is the memory backbone of AI training and inference infrastructure, and we continue to invest to stay ahead of customer roadmaps into HBM5 and beyond. We recently qualified Neon at a Taiwan-based OSAT, establishing a strategic foothold in a high-volume outsourced assembly environment where we can pursue additional advanced package, mobile, and AI-adjacent inspection opportunities. We also released a new vision inspection sensor with shortwave infrared capability that detects inner cracks in complex silicon devices. This gives customers a step-change improvement in outgoing quality for advanced packages and further reinforces Neon as a reference platform for silicon inspection applications. Moving to semiconductor test. Demand is increasingly tied to two AI-enabling requirements, efficient power delivery and high-speed connectivity across edge devices, vehicles, industrial equipment, and connected infrastructure. These systems depend on precise power management to achieve peak performance while controlling energy consumption, heat, and operating costs.

Customers are increasingly adopting Gallium Nitride power devices for their efficiency and power density advantages. At the same time, AI-enabled devices require seamless connectivity. The industry is investing in both ground-based and non-terrestrial networks, including satellite constellations and high-altitude platforms that extend coverage globally. Together, GaN power and advanced connectivity represent an estimated $340 million annual addressable market opportunity over the midterm. During Q2, we continued to engage with leading power and RF customers on Diamondx configurations for GaN, mobile front-end, and advanced connectivity applications. Switching to software analytics. We built on last quarter's momentum and moved from early production wins toward a repeatable pattern: land a first deployment, prove measurable value, and expand within that account. This business delivered the first $1 million revenue quarter, and orders increased an impressive 140% year-over-year. First, land and expand is working.

Last quarter, we noted that a leading high-performance computing chipmaker had committed to deploying our predictive maintenance technology across its test handler fleet. We are now progressing toward what is expected to become our largest software deployment to a single customer, with expansion planned during the second half of the year. Second, we are deploying agentic AI where the data lives. Semiconductor manufacturers operate under strict data sovereignty requirements, and most cannot send process, yield, or equipment data to a public cloud. In Q2, we advanced our on-site AI appliance, which runs modern AI models and autonomous agents entirely inside the customer's network with no data leaving the factory. These agents can conduct investigations across equipment, maintenance, and test data more frequently and at a lower cost than manual analysis.

These deployments are important because they convert Cohu's install base into a recurring software revenue opportunity while helping customers improve uptime, yield learning, and factory productivity. Moving to our interface solutions. This is a key element of our recurring revenue stream and about 19% of Cohu consolidated revenue in Q2. Our high-speed interface technologies continue to gain traction in silicon photonics test. We booked $500,000 in interface solutions used in optical engine test and are pursuing additional customer engagements tied to emerging requirements for co-packaged optical devices. In parallel, we remain focused on increasing share of our core semiconductor customer base where new applications and replacement of incumbent technologies create opportunities for additional Cohu content. In summary, Q2 demonstrated progress across the strategic priorities we outlined earlier this year.

Scaling high-performance computing handler adoption, advancing inspection solutions, expanding Diamondx into power and connectivity, converting software pilots into production deployments, and broadening interface solution adoption into optical and advanced semiconductor devices. I want to thank our customers for their partnership, our employees for their execution, and our shareholders and supply chain partners for their continued support. With that, I will turn the call over to Jeff to review our financial results and outlook in more detail.