FormFactor Stock Plummets on Q4 Miss, Weak Guidance; 'Slow Demand' Persists in Q1

FormFactor Inc (FORM) shares took a significant tumble in extended trading on Wednesday, February 5, 2025, following the company's release of fourth-quarter financial results that fell short of analyst expectations. The stock plummeted by 22.81%, trading at $31.74 at the time of publication. This decline can be attributed to the company's earnings miss and weak guidance for the upcoming quarter, as well as the persistent "slow demand" in high-volume markets like client PCs and mobile handsets.

FormFactor reported fourth-quarter revenue of $189.48 million, which was below the estimated $191.12 million. Additionally, the company's adjusted EPS of 27 cents missed the estimated 29 cents. Despite these setbacks, FormFactor's total revenue increased by 12.7% on a year-over-year basis, driven by significant growth in High Bandwidth Memory (HBM) and DRAM probe-card revenue. HBM grew fourfold in fiscal 2024 compared to the prior year, driven by the adoption of generative AI, while DRAM probe-card revenue reached record levels for the third consecutive quarter.

However, FormFactor's CEO, Mike Slessor, acknowledged that the company experienced sequentially lower fourth-quarter revenue, gross margin, and non-GAAP earnings per share, driven by the forecasted reduction in Foundry & Logic probe-card revenue. This reduction was partially offset by growth in DRAM probe-card revenue, with HBM increasing to approximately half of DRAM revenue. Despite these challenges, FormFactor anticipates an overall demand increase for its products throughout 2025.

FormFactor also announced that it and MBK Partners are acquiring FICT Limited from Advantage Partners. FormFactor will invest $60 million and receive a 20% minority stake and a seat on the company's board. This acquisition builds on the long-term collaboration between the two companies and provides a platform for accelerated development of tomorrow's test and packaging consumables.

FormFactor's outlook for the first quarter of 2025 is less than encouraging, with the company expecting revenue to be in the range of $165 million to $175 million, compared to estimates of $195.81 million. The company anticipates first-quarter adjusted earnings of 3 cents to 11 cents per share, versus estimates of 33 cents per share. Despite these weak guidance figures, FormFactor remains optimistic about its long-term growth prospects, citing the strong demand for its products in the semiconductor industry and the potential for expansion into new markets.

In conclusion, FormFactor's recent earnings miss and weak guidance have led to a significant decline in the company's stock price. However, the company's long-term growth prospects remain promising, driven by the strong demand for its products in the semiconductor industry and the potential for expansion into new markets. FormFactor's investment in FICT Limited also positions the company for future growth in advanced packaging and test consumables. As the company navigates the challenges posed by slow demand in high-volume markets, investors should closely monitor FormFactor's progress and consider the potential long-term benefits of its strategic moves.