Aehr Test ((AEHR)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Aehr Test Systems’ latest earnings call conveyed a mixed sentiment with notable achievements and challenges. The company is making strides in expanding into new markets, such as AI processors and gallium nitride, which are promising for future growth. However, these advancements are tempered by a decline in revenue and gross margin, alongside legal and market risks in China. Although the strong bookings and backlog offer some positivity, the overall sentiment remains cautious due to current market challenges.
AI Processor Market Entry
Aehr has made a significant leap by securing its first AI processor customer for wafer-level burn-in using their high-power FOX-XP solution. This development is both a technological and commercial breakthrough, marking a pivotal step for the company in tapping into the burgeoning AI processor market.
Expansion into Gallium Nitride Market
The company has entered the high-growth gallium nitride market by receiving an initial production purchase order from a leading automotive semiconductor supplier. This strategic move underscores Aehr’s commitment to diversifying its market presence and capitalizing on emerging opportunities.
Silicon Photonics Developments
Progress in silicon photonics is evident with Aehr’s high-power FOX-XP system that enables the testing of over 8,000 devices in parallel. This advancement indicates a strong market potential for chip-to-chip communication, positioning Aehr as a key player in this sector.
Significant Bookings and Backlog
Aehr’s effective backlog has reached $26.6 million, driven by new AI processor customers and additional bookings in the third quarter. This robust backlog provides a cushion against current market volatility and supports the company’s growth trajectory.
Revenue Decline
The second quarter saw a revenue decline to $13.5 million, down 37% from $21.4 million in the same quarter last year. This drop is primarily attributed to a downturn in the silicon carbide market, impacting overall financial performance.
Legal Challenges and Market Risks in China
Aehr is facing intellectual property infringement issues and geopolitical risks in China, which pose significant challenges. These factors are affecting potential orders, particularly in the silicon carbide segment, and are a concern for future growth.
Gross Margin Decline
The non-GAAP gross margin has decreased to 45.3% from 51.6% last year. This decline is due to a lower revenue level and changes in product mix, reflecting the financial pressures the company faces.
Forward-Looking Guidance
Despite the challenges, Aehr is optimistic about its future. The company has reaffirmed its fiscal 2025 revenue guidance of at least $70 million, with a non-GAAP net profit before taxes of no less than 10% of revenue. They are banking on market diversification into AI processors, gallium nitride power semiconductors, and other sectors to drive future growth.
In summary, Aehr Test Systems’ earnings call highlights a balanced outlook with both achievements and obstacles. While the company’s entry into new markets and strong backlog are promising, current revenue and margin challenges, coupled with legal and geopolitical risks, temper enthusiasm. Investors will be keenly watching how Aehr navigates these complexities in the coming quarters.
