Aehr Test Systems earnings

Management highlights

### Market Diversification Progress - Two years ago, over 95% of revenue came from silicon carbide for electric vehicles; today, almost 95% of fiscal 2026 revenue comes from non-EV/silicon carbide end markets, led by high-growth AI and data center infrastructure. - Management expects both AI and optical/silicon photonics markets to grow significantly in fiscal 2027, with early signs of recovery in the silicon carbide market and new growth opportunities in gallium nitride (GaN) and silicon-based power semiconductors. ### Wafer-level Burn-in Business Updates - Demand for AI-related wafer-level burn-in continues to accelerate: the lead AI processor customer has doubled their installed systems, moved all production burn-in screening to Air Test's systems, and forecasts significant further growth. A recent completed benchmark test for a second top-tier AI processor supplier exceeded expectations, and the customer now plans pilot production validation for their current high-volume device (originally only planned for next-generation products), representing significant near- and long-term revenue opportunity. - Silicon photonics wafer-level burn-in is seeing strong growing momentum aligned with AI data center optical IO adoption: the lead customer is placing follow-on orders for fully automated systems, and a new major global networking customer ordered two test cells within 12 months of initial engagement, shortening the sales cycle as the company's solution gains broader market adoption. - For power semiconductors: the company has completed over a dozen GaN wafer pack designs currently sampling to customers, completed the world's first 300-millimeter GaN wafer-level burn-in solution, and won its first silicon MOSFET wafer-level burn-in system order and first Taiwan-based silicon carbide customer, beating competitor Semi Nexus Test. The company recently received approximately $8 million in new silicon carbide orders in the past month. - Memory (NAND flash and high bandwidth memory DRAM) is a key 2027 development focus: benchmark testing with a top global NAND flash supplier is complete, and the company is in ongoing discussions with multiple memory suppliers to develop system enhancements, with a target of securing orders in fiscal 2027 for revenue ramp in fiscal 2028. ### Package-level Burn-in Business Updates - Package-level burn-in for AI processors gained momentum, with record follow-on orders for Sonoma systems from the lead hyperscale AI customer, who is forecasting additional purchases for a new higher-power second device. - The company recently launched an enhanced high-power Sonoma configuration that supports up to 2,000 watts per device, adds full automation for continuous flow operation, and enables seamless transition from qualification to high-volume production, improving customer throughput and return on investment. ### Operational and Capacity Expansion - To support growing demand, the company has expanded manufacturing capacity: Sonoma systems are now shipping from a Southeast Asian contract manufacturer, adding capacity for over 20 additional Sonoma systems per month. The company recently signed a new lease to expand its Hsinchu, Taiwan office to increase local sales and customer support for the region's growing semiconductor production. - The company strengthened its balance sheet in fiscal 2026, raising approximately $100 million primarily via an ATM program, ending the quarter with $116.5 million in total cash, cash equivalents, and restricted cash, providing sufficient working capital to scale for growing demand. - The ongoing patent litigation against Semi Nexus Test (formerly Semite) for patent infringement across multiple global jurisdictions continues, with recent positive news that the Beijing patent office upheld two of the company's core Chinese patents relevant to the case.

Guidance

- For fiscal 2027 ending June 25, 2027, management guides total revenue between $130 million and $150 million, representing 160% to 200% year-over-year growth from fiscal 2026's $50 million total revenue. - Non-GAAP pre-tax profitability is expected to be between 18% and 22% of total revenue for fiscal 2027. - Management notes that the guidance range does not include any potential revenue from memory programs or the newly benchmarked top-tier AI processor customer, so additional order wins would represent upside to the current guidance range. The company is not capacity constrained even at the $150 million revenue level, and is positioned to raise guidance if additional orders materialize. - The product mix assumption for the fiscal 2027 guidance is ~70% AI, ~15-20% silicon photonics, with the remainder from power semiconductors and other miscellaneous end markets, with no memory revenue included in the base guidance.

Segment performance

For full fiscal 2026: Total revenue was $50 million, down 15% year-over-year. AI-related reliability and production wafer-level/package-level burn-in for accelerators, CPUs, and network processors represented approximately 71% of total annual revenue. Optical device test and burn-in for data center infrastructure accounted for another 20% of full-year 2026 revenue, with power semiconductors (including silicon carbide and gallium nitride) making up the remaining 9%. For the fourth quarter of fiscal 2026: Total revenue was $18.8 million, up 34% from $14.1 million in the prior year quarter. Over 80% of Q4 revenue came from AI processors and silicon photonics burn-in, compared to 56% in the prior year quarter. Consumable revenue (wafer packs) was $5.8 million, representing 31% of total Q4 revenue, compared to 30% in the prior year quarter. Bookings for Q4 2026 were $60.7 million, up over 500% from $11.1 million in the prior year quarter, driven by orders for Sonoma package-level and Fox wafer-level burn-in systems for AI and silicon photonics applications. End-of-quarter backlog hit a record $80.6 million, up from $15.2 million at the end of fiscal 2025.

Risks & headwinds

- Ongoing patent litigation against Semi Nexus Test will continue to incur additional legal expenses in upcoming quarters as the company defends its intellectual property rights globally. - Component supply constraints exist: for example, power supply manufacturers have raised prices by up to 40% for components needed for Sonoma systems, creating sourcing challenges that require advance procurement of long-lead items. - Business revenue is inherently lumpy, so the company has prioritized scalable, flexible capacity via contract manufacturing to avoid overbuilding fixed permanent infrastructure that would hurt profitability during cyclical downturns. - Memory market revenue is still in development, and the company has not yet secured committed customer agreements for memory programs, so revenue from this segment is not expected until at least fiscal 2028 at the earliest.

Analyst Q&A

• Q: What is the expected 2027 fiscal product mix, will there be any memory revenue, and what is the company's top-line revenue capacity? /

  A: The product mix for fiscal 2027 is expected to be roughly 70% AI, 15-20% silicon photonics, with the remainder from power semiconductors and other areas. No memory revenue is included in the base $130-$150 million guidance range, so any memory revenue would be upside. The company's total capacity is measured in hundreds of millions of dollars annually: 20 Sonoma systems per month can be produced at the Southeast Asian contract manufacturer, and the Fremont facility can additionally support up to ~20 wafer-level systems per month, with flexible contract manufacturing used to avoid overbuilding fixed cost infrastructure. Total effective capacity can support hundreds of millions in annual revenue without permanent fixed cost increases. (337 characters)

• Q: What is the update on engagement for wafer-level burn-in with the company's lead hyperscale AI package-level burn-in customer, and how is GaN adoption progressing? /

  A: The lead hyperscale customer is already ramping the second Sonoma-based device (delayed slightly, but still expected to ramp in fiscal 2027) and is now evaluating wafer-level burn-in for a third higher-complexity device. Wafer-level burn-in offers major yield advantages for multi-chip packages, where package-level burn-in can lead to discarding multiple good chips along with one failed device. For GaN, the company has completed 12 different device designs across multiple end markets (automotive, data center, infrastructure), and all require wafer-level burn-in for reliability screening; the market is smaller than AI or memory but expected to grow steadily as a meaningful segment. (376 characters)

• Q: Is the $41 million April Sonoma order from the lead hyperscaler a different customer than the AI customer that just completed wafer-level benchmark testing, and what would be the potential size of a wafer-level order for that customer? /

  A: It is the same customer: the $41 million order is for package-level Sonoma systems for their second device, while the third device is being evaluated for potential wafer-level adoption, which is not expected to come in until after fiscal 2027. Wafer-level systems have a higher average selling price and better margins than package-level systems, because they include more proprietary IP and deliver large yield improvement benefits that far offset the higher system price to customers. If the customer moves forward with wafer-level adoption for the third device, the total order value would be higher than the recent package-level order. (361 characters)

• Q: Is any revenue from the recently benchmarked AI customer included in the 2027 guidance, and how many memory suppliers is the company engaged with? /

  A: Only negligible, noise-level revenue from this potential customer is included in the base guidance, so any meaningful order from this customer would be large upside to the current outlook. The company is engaged with 2-3 NAND flash memory suppliers and 2 high bandwidth memory DRAM suppliers, covering most of the large global major memory manufacturers. The company is still waiting for committed customer sponsorship to move forward with full memory product development, and no material memory revenue is expected in fiscal 2027. (302 characters)