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1. Company Snapshot

1.a. Company Description

FormFactor, Inc.designs, manufactures, and sells probe cards, analytical probes, probe stations, metrology systems, thermal systems, and cryogenic systems to semiconductor companies and scientific institutions.It operates in two segments, Probe Cards and Systems.


The company offers probe cards to test various semiconductor device types, including systems on a chip products, mobile application processors, microprocessors, microcontrollers, and graphic processors, as well as radio frequency, analog, mixed signal, image sensor, electro-optical, dynamic random access memory, NAND flash memory, and NOR flash memory devices; and analytical probes, which are used for a range of applications, including device characterization, electrical simulation model development, failure analysis, and prototype design debugging for universities, research institutions, semiconductor integrated device manufacturers, semiconductor foundries, and fabless semiconductor companies.It also provides probing systems for semiconductor design engineers to capture and analyze accurate data; surface metrology systems for the development, production, and quality control of semiconductor products; thermal subsystems, such as thermal chucks and other test systems used in probe stations and other applications; and precision cryogenic instruments, semiconductor tests, and measurement systems.In addition, the company offers on-site probe card maintenance and service training, seminars, and telephone support services.


The company markets and sells its products through direct sales force, manufacturers' representatives, and distributors in the United States, Taiwan, South Korea, China, Japan, Europe, rest of Asia-Pacific, and internationally.FormFactor, Inc.was incorporated in 1993 and is headquartered in Livermore, California.

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1.b. Last Insights on FORM

FormFactor's recent performance was driven by strong operational improvements, with its DRAM probe cards and systems segment outperforming due to robust demand from South Korea and improving margins. The company's Q3 earnings and revenue surpassed estimates, with guidance pointing to steady growth ahead. Additionally, management raised guidance for the next quarter, forecasting higher sales and EPS, fueled by ongoing AI and data center investment trends. Institutional investors, including Ethic Inc. and Vanguard Personalized Indexing Management LLC, have also shown confidence in the company.

1.c. Company Highlights

2. FormFactor's Q3 2025 Earnings: A Step Closer to Target Model

FormFactor's Q3 2025 revenues came in at $202.7 million, exceeding the midpoint of their outlook range. The company's non-GAAP gross margin stood at 41%, up 250 basis points from 38.5% in Q2, driven by operational efficiency and cost reductions. Non-GAAP EPS was $0.33, beating estimates of $0.25 and the high end of the outlook range of $0.21 to $0.29. The company's favorable performance was driven by double-digit sequential growth in the DRAM probe cards segment, primarily from growth in HBM.

Publication Date: Oct -31

📋 Highlights
  • Q3 Performance Exceeds Expectations:: Revenue reached $202.7M, non-GAAP gross margin hit 41% (up 250 bps from Q2), and non-GAAP EPS was $0.33 (surpassing the $0.29 upper outlook).
  • Q4 Gross Margin Target Set:: Anticipates 42% non-GAAP gross margin (±150 bps), a 100 bps increase from Q3, driven by cost reductions and improved operational efficiency.
  • DRAM Probe Cards Growth:: Q3 revenue from DRAM probe cards hit a record due to HBM demand, with Q4 expected to set another record from DDR5 and LPDDR4 growth.
  • CapEx Investment in Farmers Branch:: $140–170M in CapEx planned by 2026 for the Texas facility to expand low-cost capacity and leverage incentives.
  • Structural Cost Improvements:: Labor and manufacturing cost cuts reduced Q3 operating expenses by $3.5M YoY, with further savings expected in 2026 to reach 47% target gross margins.

Revenue Growth Drivers

The company's revenue growth in Q4 is expected to be driven by legacy DRAM, with a forecasted revenue of $210 million, plus or minus $5 million. As Mike Slessor mentioned, "In the DRAM probe cards segment, we delivered double-digit sequential growth in the third quarter to a new record, primarily from growth in HBM." The company expects continued growth from its HBM business, with HBM4 taking over as the majority of its HBM revenue in Q4.

Gross Margin Expansion

FormFactor is making progress towards its target model, with a non-GAAP gross margin expected to reach 42%, plus or minus 150 basis points in Q4. The company is focused on improving its profitability by optimizing output from its existing infrastructure and better financial discipline. With a current P/E Ratio of 112.08 and EV/EBITDA of 50.24, investors are pricing in high growth expectations. Analysts estimate next year's revenue growth at 7.3%, which may not be sufficient to justify the current valuation.

Investment in New Manufacturing Facility

The company is investing in its new manufacturing facility in Farmers Branch, Texas, which is expected to yield incremental gross margin improvement over the long term. Aric McKinnis mentioned that most of the $140 million to $170 million investment in calendar '26 will be capital expenditures, focused on the build-out of the site and manufacturing equipment. This investment is expected to drive growth and improve the company's competitiveness in the market.

Outlook and Valuation

3. NewsRoom

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FormFactor Announces Participation in 14th Annual NYC Summit

Dec -05

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Edgestream Partners L.P. Makes New $4.72 Million Investment in FormFactor, Inc. $FORM

Dec -03

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FormFactor Announces Participation at Upcoming Conference

Nov -24

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FormFactor, Inc. (NASDAQ:FORM) Receives Average Rating of “Hold” from Analysts

Nov -19

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FormFactor, Inc. Selects Farmers Branch, Texas as Site for New Advanced Manufacturing Facility

Nov -12

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Zacks Industry Outlook like Lam Research, Cirrus Logic and FormFactor

Nov -07

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3 Stocks to Buy From the Prospering Semiconductor Industry

Nov -06

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AlphaQuest LLC Buys 2,106 Shares of FormFactor, Inc. $FORM

Nov -05

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.50%)

6. Segments

Probe Cards

Expected Growth: 9%

FormFactor's Probe Cards segment growth is driven by increasing demand for advanced semiconductor testing, 5G and IoT device proliferation, and rising adoption of artificial intelligence and machine learning technologies. Additionally, the company's strategic acquisitions and investments in research and development have enhanced its product offerings and expanded its market share.

Systems

Expected Growth: 11%

FormFactor's 11% growth in Systems segment is driven by increasing demand for advanced probe cards in 5G, AI, and IoT applications, as well as the company's strategic acquisitions and investments in emerging technologies, such as heterogeneous integration and 3D stacking.

7. Detailed Products

Probe Cards

FormFactor's probe cards are used to test and validate the performance of semiconductor devices, including memory, logic, and analog devices.

Analytical Probe Systems

FormFactor's analytical probe systems are used to test and analyze semiconductor devices, including failure analysis and debug.

Wafer Probe Cards

FormFactor's wafer probe cards are used to test and validate the performance of semiconductor wafers during the manufacturing process.

MEMS Probe Cards

FormFactor's MEMS probe cards are used to test and validate the performance of micro-electromechanical systems (MEMS) devices.

Logic, RF, and Analog Test Solutions

FormFactor's test solutions are used to test and validate the performance of logic, RF, and analog devices.

Automated Test Equipment (ATE)

FormFactor's ATE solutions are used to automate the testing and validation of semiconductor devices.

8. FormFactor, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

FormFactor, Inc. faces moderate threat from substitutes due to the availability of alternative semiconductor testing and measurement solutions.

Bargaining Power Of Customers

FormFactor, Inc. has a diverse customer base, which reduces the bargaining power of individual customers, giving the company an upper hand in negotiations.

Bargaining Power Of Suppliers

FormFactor, Inc. relies on a few key suppliers for its semiconductor testing and measurement solutions, giving them moderate bargaining power.

Threat Of New Entrants

The semiconductor testing and measurement industry has high barriers to entry, making it difficult for new entrants to compete with established players like FormFactor, Inc.

Intensity Of Rivalry

The semiconductor testing and measurement industry is highly competitive, with several established players competing for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 2.45%
Debt Cost 3.95%
Equity Weight 97.55%
Equity Cost 9.72%
WACC 9.58%
Leverage 2.51%

11. Quality Control: FormFactor, Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Rambus

A-Score: 5.1/10

Value: 0.8

Growth: 8.0

Quality: 9.0

Yield: 0.0

Momentum: 10.0

Volatility: 2.7

1-Year Total Return ->

Stock-Card
Axcelis Technologies

A-Score: 4.7/10

Value: 4.4

Growth: 8.6

Quality: 7.9

Yield: 0.0

Momentum: 3.5

Volatility: 4.0

1-Year Total Return ->

Stock-Card
Teradyne

A-Score: 4.0/10

Value: 4.2

Growth: 4.4

Quality: 6.2

Yield: 0.0

Momentum: 6.0

Volatility: 3.3

1-Year Total Return ->

Stock-Card
MACOM Tech

A-Score: 3.9/10

Value: 2.2

Growth: 6.7

Quality: 3.5

Yield: 0.0

Momentum: 6.0

Volatility: 5.0

1-Year Total Return ->

Stock-Card
Entegris

A-Score: 3.7/10

Value: 2.6

Growth: 6.6

Quality: 6.9

Yield: 0.0

Momentum: 3.0

Volatility: 3.0

1-Year Total Return ->

Stock-Card
FormFactor

A-Score: 2.6/10

Value: 0.6

Growth: 5.2

Quality: 5.4

Yield: 0.0

Momentum: 2.0

Volatility: 2.3

1-Year Total Return ->

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

57.45$

Current Price

57.45$

Potential

-0.00%

Expected Cash-Flows