FormFactor's 2025 Q1 Earnings Call: Contradictions on HBM Growth, Market Recovery, and Tariff Impacts

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Revenue and Profitability Trends:
- FormFactor reported $171.4 million in revenue for Q1 2025, slightly above the midpoint of their outlook range.
- Non-GAAP gross margin was 39.2%, near the high end of the range.
- The decrease in revenue from Q4 was due to anticipated reductions in demand for DRAM probe cards and systems, while Q2 is expected to see double-digit sequential revenue growth driven by hyperscalers' investments in generative AI and increased demand for high bandwidth memory DRAM probe cards.

DRAM Probe Card Market Dynamics:
- DRAM probe card revenue in Q1 experienced a 9.2% decrease sequentially, driven by lower non-HBM demand due to tightened export controls limiting shipments to China.
- Q2 revenue is expected to return to record levels with sequential growth in HBM applications, driven by continued shipments of probe cards for existing designs and increasing shipments for new designs like HBM4, which are expected to ramp in volume in the second half of 2025.

Foundry and Logic Market Outlook:
- Foundry and logic revenues increased by 2.4% sequentially to $85 million, accounting for 49.8% of total company revenues.
- Stronger demand is expected in Q2 due to seasonal ramps of major mobile application processor designs and a family of client microprocessor designs, driven by advanced packaging requirements for high-performance compute chips.

Impact of Tariffs:
- FormFactor estimated a mid-single-digit million-dollar reduction in revenues and a one percentage point reduction in gross margins for Q2 due to tariffs.
- The company remains in a wait-and-see mode regarding changes to manufacturing footprint and supply chain, with approximately 80% of revenue manufactured in the U.S., making them directly impacted by tariffs on imported goods.