FormFactor (FORM) Up 4% Since Last Earnings Report: Can It Continue?

Core Viewpoint - FormFactor's recent earnings report shows mixed results, with revenues slightly declining year over year, while earnings per share exceeded estimates, indicating potential challenges ahead for the company [2][5]. Financial Performance - FormFactor reported Q2 2025 non-GAAP earnings of 27 cents per share, surpassing the Zacks Consensus Estimate by 10%, but down 23% year over year [2]. - Revenues for the quarter were $195.8 million, beating estimates by 2.87%, but decreased by 0.9% year over year [2]. - The gross margin contracted by 680 basis points year over year to 38.5%, while non-GAAP operating expenses decreased by 13.8% to $52.5 million [5]. Segment Revenue Breakdown - Probe card revenues accounted for 82.8% of total revenues at $162.1 million, down 2.8% year over year [3]. - Foundry and Logic revenues were $99.5 million, down 4.1% year over year, while DRAM revenues decreased by 1.6% to $57.1 million [3]. - Flash revenues increased by 7.8% to $5.5 million, and Systems revenues rose by 9.8% to $33.7 million [3]. Geographic Revenue Trends - Revenues from Taiwan, Japan, South Korea, and Singapore increased by 18.1%, 93.4%, 16.3%, and 48.9% year over year, respectively [4]. - Conversely, revenues from the United States, China, Europe, and the rest of the world declined by 14.6%, 62.5%, 18.2%, and 45.2% year over year, respectively [4]. Cash Flow and Balance Sheet - As of June 28, 2025, cash and cash equivalents totaled $249.3 million, down from $299 million as of March 29, 2025 [6]. - Cash generated from operating activities was $18.9 million, down from $23.5 million in the previous quarter, with free cash flow reported as negative $47.1 million [6]. Future Guidance - For Q3 2025, FormFactor expects revenues of $200 million (+/- $5 million) and a non-GAAP gross margin of 40% (+/- 1.5%) [7]. - The company anticipates non-GAAP earnings of 25 cents (+/- 4 cents) per share for the upcoming quarter [7]. Market Sentiment and Estimates - Since the earnings release, there has been a downward trend in estimates, with the consensus estimate shifting down by 26.95% [8][9]. - FormFactor currently holds a Zacks Rank 4 (Sell), indicating expectations of below-average returns in the coming months [11]. Investment Scores - FormFactor has a subpar Growth Score of D and a Momentum Score of F, while holding a middle 20% score of C on the value side, resulting in an aggregate VGM Score of D [10].