Aehr Test Systems' Earnings Calls Unveil Contradictions in AI Revenue Timelines, Market Forecasts, and Strategic Shifts

Business Commentary:

Key Theme: Booking and Revenue Outlook - The company reinstated guidance for the second half of fiscal 2026. For the period (Nov 29, 2025 - May 29, 2026), revenue is expected between $25 million and $30 million. Based on customer forecasts, bookings are expected between $60 million and $80 million, providing visibility for strong bookings in the second half. - The $60-$80 million bookings forecast is primarily driven by AI processor markets (wafer-level and package-part burn-in), with some contribution from silicon photonics and hard disk drive segments, but minimal silicon carbide or GaN.

Key Theme: AI Processor Market Expansion - Wafer-level burn-in is seeing significant engagement. The lead AI wafer-level customer is discussing additional capacity and transitioning to fully integrated 300mm automation. Two other AI processor companies have plans for wafer-level benchmark evaluations. - Package-part burn-in is also accelerating. The lead AI package-part customer is forecasting substantial growth. A substantial forecast from this customer for AI ASIC production capacity is expected to drive very strong bookings in fiscal 2026 and significant revenue growth in fiscal 2027. - The AI processor market represents a much larger addressable market than the prior silicon carbide focus. While conservative estimates are being used, the potential for Aehr's AI business to reach hundreds of millions of dollars in a few years is seen as substantial.

Key Theme: Product Development and Market Penetration - The wafer-level benchmark with a global leader in NAND flash was completed. The customer is validating correlation internally. Development for a next-generation solution for high-bandwidth flash (HBF) is proposed, leveraging the Fox XP platform, but requires over a year of development post-customer commitment. - The silicon photonics lead customer has firmed up its production ramp, now expected to begin early next fiscal year (aligned with AI processor platforms). A second major customer has a forecast with delivery planned for May 2026. - The Sonoma system is seeing strong demand. In the first six weeks of Q3, orders totaled over $5.5 million, exceeding the total Q2 Sonoma orders and highlighting accelerating demand. This includes orders for higher-power configurations and new design-specific burn-in modules.

Key Theme: Operational Performance and Financials - Q2 revenue was $9.9 million, down 27% from $13.5 million in the prior year period, primarily due to lower shipments of wafer packs. - Non-GAAP gross margin was 29.8%, down from 45.3% a year ago, reflecting lower sales volume and a less favorable product mix (lower proportion of higher-margin wafer pack revenue). - Cash position improved to $31 million at quarter end, up from $24.7 million, due to proceeds from its at-the-market equity program. The company intends to use the ATM selectively.

Key Theme: Strategic Positioning and Market Diversification - The company is shifting from a revenue concentration in silicon carbide for electric vehicles to a more diversified base, expanding into AI processors, gallium nitride, data storage, silicon photonics, and flash memory. - This diversification is a response to macro trends like AI and electrification, aiming to drive revenue growth and increase profitability. The progress provides improved visibility into future demand. - The company is in a unique position to offer both wafer-level and package-part solutions for AI, with the Sonoma system having the largest installed base for high-temp operating life (HTOL) testing, creating a potential for cannibalization between the two segments.