Cohu, Inc. Q1 2025 Earnings: Navigating Challenges with Strategic Gains Ahead

Cohu, Inc. (NASDAQ: COHU) reported its fiscal first-quarter 2025 results, delivering a mixed financial picture but signaling optimism for recovery through strategic acquisitions, operational restructuring, and a focus on high-growth markets. While the company faced a widening GAAP net loss, its non-GAAP metrics improved, and management outlined a clear path to profitability in Q2 2025. Here’s what investors need to know.

Financial Performance: GAAP Losses, but Non-GAAP Improvements

Cohu’s Q1 net sales reached $96.8 million, a slight increase from Q4 2024’s $94.1 million but down 9% year-over-year (YoY) compared to Q1 2024. The GAAP net loss of $30.8 million ($0.66 per share) reflected one-time costs, including a $6.6 million restructuring charge and a $34.9 million cash outflow for the Tignis acquisition. However, non-GAAP results showed resilience:
- Non-GAAP net loss narrowed to $0.8 million ($0.02 per share), an improvement from Q4’s $7.1 million loss.
- Gross margin held steady at 44.2% (non-GAAP), while Adjusted EBITDA narrowed to a loss of $2.0 million, better than Q4’s $2.1 million deficit.

Strategic Momentum: Tignis Integration and Design Wins

The Q1 results underscored progress in Cohu’s strategic shift toward recurring revenue streams (now 63% of total revenue) and AI-driven solutions:
1. Tignis Acquisition Synergy: The January 2025 acquisition of Tignis, a leader in AI/ML process monitoring, is already bearing fruit. Cohu secured new customers for Tignis software demonstrations, signaling potential for long-term revenue growth in advanced semiconductor manufacturing.
2. Design Wins: Key wins included a multi-unit order for High Bandwidth Memory (HBM) inspection systems and a power probe card design win, critical for advanced packaging and memory testing.
3. Market Expansion: Cohu expanded its handler customer base in China and secured a Diamond win at a European fabless communications IC supplier, highlighting its geographic diversification.

Operational Restructuring and Cost Discipline

To address margin pressures, Cohu is restructuring underutilized Asian factories, aiming to reduce operating expenses to $48 million in Q2 2025—a 23% sequential decline from Q1’s $69.6 million (GAAP). CEO Luis Müller emphasized:
> “We are optimistic about the business prospects of our design-wins, the pickup in recurring orders, and expansion into new market segments.”

Future Outlook: Q2 Guidance and Long-Term Drivers

Cohu’s Q2 2025 sales guidance of $106 million ± $7 million reflects confidence in sequential growth of ~10%, driven by:
- Recurring revenue growth: Up 28% quarter-over-quarter, with service contracts and software subscriptions bolstering stability.
- HBM inspection systems: Multi-unit orders are expected to contribute significantly to Q2 sales.

Management projects:
- Gross margin to improve to ~45% in Q2.
- Adjusted EBITDA to turn positive to 4% of sales, a stark contrast to Q1’s -2% figure.

Risks and Challenges

• Semiconductor Cyclicality: Cohu operates in a volatile industry. Test cell utilization dropped to 72% (down 1% sequentially), reflecting ongoing capacity adjustments.
• Liquidity Management: While cash reserves remain robust at $200.8 million, the Tignis acquisition and share repurchases ($8.6 million in Q1) highlight capital allocation priorities.
• Tariff Exposure: Cohu reported limited direct impact due to customers bearing tariffs, but geopolitical risks persist.

Conclusion: A Strategic Turnaround in Motion

Cohu’s Q1 2025 results paint a picture of a company navigating near-term headwinds while positioning itself for long-term growth. Key takeaways for investors:
- Recurring Revenue Engine: At 63% of total revenue, this segment’s 28% QoQ growth signals resilience in a cyclical industry.
- Margin Recovery: The path to positive Adjusted EBITDA in Q2 2025 (projected at 4% of sales) is achievable, supported by cost-cutting and higher-margin HBM sales.
- Strategic Acquisitions: The Tignis acquisition is a strategic win, expanding Cohu’s footprint in AI-driven process monitoring—a high-growth area in semiconductor manufacturing.

While near-term volatility persists, Cohu’s focus on operational discipline, market diversification, and high-margin opportunities positions it to capitalize on a potential semiconductor recovery. For investors willing to ride out the industry cycle, Cohu’s $200 million cash cushion and 28% recurring revenue growth provide a solid foundation for future gains.

In a sector where execution is key, Cohu’s Q2 outlook—bolstered by design wins and AI integration—suggests it’s on the right path to turning its financial trajectory around.