Kulicke and Soffa's Q3 2026 Earnings Call Flags TCB Growth, Utilization Rate Contradictions

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $375M (guidance for Q4), up 13.5% sequentially; actual Q3 revenue increased 123% year-over-year
• EPS: GAAP EPS $1.29, non-GAAP EPS $1.42 for Q4
• Gross Margin: 47.8% in Q3; expected 48% in Q4

Guidance:

• Revenue for September quarter (Q4) expected to increase 13.5% sequentially to $375 million.
• Gross margin for Q4 expected to be 48%.
• Non-GAAP operating expenses for Q4 expected to be approximately $87.5 million.
• GAAP EPS expected to be $1.29; non-GAAP EPS expected to be $1.42 for Q4.
• Advanced solutions segment revenue target of over $100 million for fiscal 2026 maintained.
• Significant sequential growth in advanced solutions expected in fiscal 2027.
• Targeting completion of Singapore capacity expansion by first fiscal half of 2027.

Business Commentary:

Revenue Growth:

• Kulicke and Soffa reported a 36.2% sequential increase in revenue for the fiscal third quarter, with overall revenue up 123% year-on-year.
• The growth was driven by increased demand in general semiconductor and memory applications, particularly due to AI and data center expansion.

Data Center and AI Demand:

• The company's data center market, which relies on wire bonding technology, continues to grow, with data center being the largest end application for global NAND production.
• This growth is attributed to the expansion of data centers, which requires significant capacity for both traditional and advanced semiconductor assembly technologies.

Automotive and Industrial Market Recovery:

• Automotive and industrial demand improved by 9% sequentially in the fiscal third quarter.
• The recovery is linked to increased demand for high IO and high volume power and mixed signal packaging, as well as high current wedge solutions.

Advanced Solutions Segment Growth:

• Revenue from the advanced solutions segment, which includes thermal compression solutions, exceeded last quarter's record by 20%.
• Growth in this segment is supported by the adoption of complex heterogeneous integration approaches and performance-oriented logic and memory applications.

Capacity Expansion and Strategic Investments:

• Kulicke and Soffa is expanding its production capacity in Singapore, with a target completion by the first fiscal half of 2027.
• The expansion is aimed at supporting the growing capacity and technology needs of customers in the advanced packaging and heterogeneous assembly approaches.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed confidence in sustained demand, stating 'demand continues to improve at a faster pace than previously expected' and 'we feel pretty confident that the strength in the traditional business is going to continue into the first half of fiscal 2027.' They highlighted exceeding expectations with aggressive production ramps and strong sequential growth across segments.

Q&A:

• Question from Krish Sankar (TD Cowen): Are you seeing mid-teens growth across semi, memory, and auto, or is one better?
  Response: General semiconductor and memory are leading, automotive is improving but still lags.

• Question from Krish Sankar (TD Cowen): How should we think about seasonality in March quarter given data center strength?
  Response: Expect some seasonality in Q1 (December quarter), but strength is expected to continue into first half of fiscal 2027.

• Question from Krish Sankar (TD Cowen): What is the expected growth for thermal compression business next year?
  Response: Expect thermal compression business (TCB) to grow significantly, reaching $150-$200 million in fiscal 2027.

• Question from Charles Shi (Needham & Company): Can you elaborate on wire bonding in data center applications, and why wedge bonding is more traditional?
  Response: Data center uses majority of traditionally wire-bonded chips for infrastructure, networking, power, storage; wedge bonding is more focused on automotive, while data center power management drives ball bonding.

• Question from Charles Shi (Needham & Company): What is the growth potential for next year compared to prior cycles?
  Response: Visibility is limited; first half of fiscal 2027 will be very strong, but unlikely to reach the extreme levels of 2021-2022.

• Question from David Duley (Steelhead Securities): What is current total capacity and ability to support higher run rates?
  Response: Capacity for traditional business has increased 4X; can support up to $400 million quarters with flexible model, but not projecting $450 million.

• Question from David Duley (Steelhead Securities): What are investments and opportunities in panel-level and hybrid bonding?
  Response: Significant investment in panel-level projects with strong customer interest; hybrid bonding program accelerated, with first tool delivery planned in first half of fiscal 2027.

Contradiction Point 1

Growth Outlook for Advanced Solutions (TCB) Business

Contradiction in projected growth rates and targets for the TCB segment.

Krish Sankar (TD Cowen) - Krish Sankar (TD Cowen)

2026Q3: Advanced solutions (TCB) are expected to grow significantly in FY 2027, targeting $150–$200 million, up from over $100 million in FY 2026. - Lester Wong(Interim CEO and CFO)

Are you seeing mid-teens growth across semi, memory, and auto industries, how should we think about December and March quarter seasonality, and is next year’s growth for the advanced solutions TC business around 20% or accelerating? - David Duley (Steelhead Securities)

2026Q2: The investment is driven by confidence in the bright future for fluxless TCB... The plan to fill capacity involves both taking market share (e.g., in memory and HBM) and entering new markets (e.g., with fabless customers). The memory business rebound is primarily driven by expansion at Chinese memory OSATs. - Lester Wong(Interim CEO and CFO)

Contradiction Point 2

Capacity Expansion and Revenue Run Rate Targets

Contradiction regarding the company's ability and plans to support a specific quarterly revenue run rate.

David Duley (Steelhead Securities) - David Duley (Steelhead Securities)

2026Q3: Traditional wire bonding capacity has increased 4X over two quarters... A $450 million run rate is not currently anticipated, but the company has supported $400 million quarters before and can ramp if needed. - Lester Wong(Interim CEO and CFO)

What is the current total capacity for wire and wedge bonding, and can you support a $400–$450 million quarterly run rate, and what are your investments and opportunities in panel-level and hybrid bonding? - David Duley (Steelhead Securities)

2026Q2: The investment is driven by confidence in the bright future for fluxless TCB... The plan to fill capacity involves both taking market share (e.g., in memory and HBM) and entering new markets (e.g., with fabless customers). The memory business rebound is primarily driven by expansion at Chinese memory OSATs. - Lester Wong(Interim CEO and CFO)

Contradiction Point 3

Utilization Rate Data

Inconsistent reporting on utilization rates across key regions.

Krish Sankar (TD Cowen) - Krish Sankar (TD Cowen)

2026Q3: Strength is expected to continue into the first half of fiscal 2027 due to high utilization rates (>95% in China, ~90% in memory and general semi)... - Lester Wong(CFO)

Given the strong growth in September, are you seeing it across the board, like mid-teens growth for semi, memory, and auto industry, or is one better than the other? Also, how should we think about December and March quarter seasonality? And on the advanced solutions TC business, is next year’s growth around 20% or does it accelerate? - David Duley (Steelhead Securities)

2026Q1: China is over 90% (in the high 80s/90s). Rest of Asia is around 80%... North America is over 80%. - Lester Wong(CFO)

Contradiction Point 4

Growth Outlook for Memory and General Semiconductor Segment

Contradiction on whether automotive and industrial are recovering or still lagging.

Krish Sankar (TD Cowen) - Krish Sankar (TD Cowen)

2026Q3: General semiconductor and memory are leading the growth, with automotive and industrial improving sequentially after headwinds. - Lester Wong(Interim CEO and CFO)

Is the strong growth observed in September uniform across all areas, or are some performing better? - Sreekrishnan Sankarnarayanan (TD Cowen)

2025Q4: Automotive and industrial are lagging but expected to see sequential growth into Q1 (December quarter). The market is lagging but recovering... - Lester Wong(Interim CEO, Executive VP of Finance & IT and CFO)

Contradiction Point 5

Advanced Solutions (TCB) Revenue Growth Target

Shift from a specific year-over-year growth target to a more qualitative "significant" growth target.

What are your key takeaways from the earnings results? - Krish Sankar (TD Cowen)

2026Q3: Advanced solutions (TCB) are expected to grow significantly in FY 2027, targeting $150–$200 million, up from over $100 million in FY 2026. - Lester Wong(CFO)

Given the strong growth in September, are you seeing mid-teens growth across semi, memory, and auto industries, how should we think about December and March seasonality, and is next year’s growth for advanced solutions TC business around 20% or accelerating? - Sreekrishnan Sankarnarayanan (TD Cowen)

2026Q1: The estimate is based on current visibility and customer discussions, though there is still macro uncertainty. It reflects solid current expectations with potential upside. - Lester Wong(CFO)