ADVANTEST CORPORATION Q2 FY2027 earnings call

• SoC Tester Demand Surge: Demand is exceptionally strong across all device segments within the compute market. While GPU and custom ASIC demand remains high, CPU demand has emerged as a significant third pillar, largely driven by Agentic AI and increased inference workloads requiring more CPUs per system.
• Capacity Expansion Acceleration: Production capacity expansion is proceeding faster than initially planned. The company aims to reach 10,000 units of annual SoC tester capacity significantly ahead of the original fiscal '28 target, with a specific timeline expected to be disclosed in the next quarter.
• Market Share Gains: Advantest's SoC tester market share increased from 56% in fiscal '24 to an estimated 66% in fiscal '25. Management expresses high confidence in reaching and potentially exceeding the 70% market share threshold in the near future, citing the industry adoption of the 93K platform as a standard.
• Margin Management: Despite inflationary pressures on component costs (particularly DDR memory), the company maintains healthy operating margins. Strategies include leveraging new configurations, licensing, and instrumentation to reprice products without direct price hikes, offsetting cost increases.
• Future Capacity Aspirations: Beyond the immediate goal of 10,000 units, management is actively discussing further expansion, potentially doubling capacity to 20,000 units, which will likely be detailed in the upcoming Mid-Term Plan 4.

The provided transcript does not contain specific financial figures or revenue contribution percentages for individual product segments. Management highlights that the SoC tester business is the primary driver of growth, with demand elevated across GPU, custom ASIC, and CPU segments. The ATE Total Addressable Market (TAM) has experienced a Compound Annual Growth Rate (CAGR) of approximately 50% or higher in recent years, driven by these compute market segments.

• Full Year Revenue Guidance Revised Upward: Full-year guidance was raised despite maintaining the CY '26 SoC touch market outlook unchanged. This revision is attributed to stronger-than-expected expectations for both Q3 and Q4, driven by accelerated capacity expansion and increased shipment volumes.
• Second Half Growth Expectations: Management anticipates continued revenue growth in the second half of the fiscal year, with Q4 expected to be particularly strong for both SoC and memory systems due to the ability to ship more systems as capacity ramps up.
• Long-Term TAM Outlook: The ATE TAM CAGR is expected to remain robust at mid-to-high 50s through 2029, driven by sustained demand in GPU, custom ASIC, and CPU sectors. Specific quantitative TAM growth rates will be provided in the Q3 earnings call in January.

• Component Cost Inflation: Rising prices for components, specifically DDR memory, pose a margin pressure risk. While currently absorbed through pricing strategies and inventory management, continued spot price increases could impact profitability.
• Memory Supply Chain Constraints: Global shortages of high-end HBM and server DRAM may indirectly affect equipment supply chains. However, management notes that the industry has historically collaborated to ensure component availability for equipment suppliers to prevent broader shortages.
• Data Reliability Risks: Analysts relying on indirect data sources such as Taiwanese SPE import data or Malaysian export statistics for tracking performance may face inaccuracies, as these metrics do not always correlate directly with company sales due to logistical and statistical noise.

Q: What drives the upward revision in SoC tester revenue, and when will capacity reach 10,000 units? / A: Douglas Lefever cited elevated demand across GPU, custom ASIC, and notably CPU segments due to Agentic AI. Sanjeev Mohan added that while CPU test times are significant, the volume boost from inferencing ratios is key. Regarding capacity, Lefever stated the 10,000-unit target is being accelerated well before the original fiscal '28 plan, with a precise timeline to be shared in the next quarter.

Q: How will the ATE market grow through 2027, and what about emerging technologies like CPO? / A: Lefever noted the ATE TAM CAGR has been over 50% and expects similar drivers (GPU, ASIC, CPU) to sustain this growth through 2029. On Co-Packaged Optics (CPO), he acknowledged lengthy test times provide a tailwind, but it remains small compared to the $11B+ SoC market. He agreed with analysts that growth trends could extend 4-5 years, with details coming in the Mid-Term Plan 4.

Q: Can the company achieve its 70% SoC market share target soon, and what are the drivers? / A: Lefever confirmed the path above 70%, noting a rise from 56% in '24 to 66% in '25. He predicted meaningful share gains in '26 and '27, driven by incumbent customer expansion and winning new accounts where the 93K is becoming the industry standard. An official statement on this milestone is expected around April.

Q: Why was full-year guidance raised if the market outlook was unchanged, and how is pricing affected? / A: Sanjeev Mohan explained that Q3 and Q4 revenues are expected to increase sequentially due to faster capacity expansion allowing for higher shipments. He clarified that pricing remains competitive; the company absorbs component cost inflation through value-added configurations and licensing rather than raising base prices, maintaining healthy margins.

Q: Is there a difference in market share between x86 and ARM-based CPUs, and how does memory shortage impact you? / A: Lefever stated Advantest is well-positioned across both x86 and ARM CPU markets using the same 93K tester, so architectural shifts don't negatively impact them. Regarding memory shortages, he emphasized that the industry collaborates to secure component supplies for equipment makers. While tight, their strong supplier relationships mitigate risks, though they acknowledge the scarcity of HBM and server DRAM.