COHU, INC. - Form 10-Q Summary
Business Context and Reporting Period
Company: COHU, INC.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 27, 2026 (Second Quarter of Fiscal 2026)
Business Overview: Cohu is a global supplier of equipment and services optimizing semiconductor manufacturing yield and productivity. The company operates in a single reportable segment: Semiconductor Test & Inspection. Revenue is driven by capital equipment sales (systems) and recurring products (non-systems, services, and consumables).
Key Financial Metrics
| Metric (in thousands) | Q2 2026 | Q2 2025 | YTD 6mo 2026 | YTD 6mo 2025 |
|---|---|---|---|---|
| Net Sales | $149,002 | $107,680 | $274,121 | $204,477 |
| Gross Margin % | 45.4% | 43.7% | 45.8% | 43.7% |
| Operating Income (Loss) | $292 | $(17,236) | $(10,862) | $(44,562) |
| Net Loss | $(159) | $(16,880) | $(12,227) | $(47,684) |
| Diluted EPS | $(0.00) | $(0.36) | $(0.26) | $(1.02) |
| Cash & Equivalents | $219,608 | $227,053 | $219,608 | $227,053 |
| Short-term Investments | $278,559 | $256,928 | $278,559 | $256,928 |
| Total Debt (Gross) | $304,403 | $305,089 | $304,403 | $305,089 |
| Operating Cash Flow (YTD) | $20,754 | $5,865 | $20,754 | $5,865 |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 38.4% year-over-year (Q2) and 34.1% year-over-year (YTD). Growth was driven by strong demand in AI-based computing applications, industrial, and automotive semiconductor markets, offsetting weakness in consumer and mobile markets.
- Profitability Improvement: The company narrowed its net loss significantly. Q2 2026 net loss was $0.2 million compared to $16.9 million in Q2 2025. Operating income turned positive ($0.3 million) in Q2 2026 from a loss of $17.2 million in the prior year.
- Margin Expansion: Gross margin improved to 45.4% in Q2 2026 from 43.7% in Q2 2025, attributed to a favorable product mix and higher manufacturing utilization.
- Restructuring: Restructuring charges decreased to $0.6 million in Q2 2026 from $1.2 million in Q2 2025, reflecting the substantial completion of the 2025 strategic restructuring program.
- Interest Income/Expense: Interest income increased to $3.9 million (Q2) due to higher investment balances from convertible note proceeds. Interest expense rose to $1.6 million (Q2) due to the issuance of $287.5 million in convertible senior notes in late 2025.
Guidance, Outlook, and Risks
Management Commentary: Management notes a bifurcated industry environment. While automotive and consumer markets show improvement, customers remain cautious with capacity investments. Conversely, demand for AI, high-performance computing, and data center applications remains strong. The company continues to manage cost structures while investing in product development for AI-driven solutions.
Convertible Notes: The company issued $287.5 million of 1.50% convertible senior notes due 2031. These notes became convertible by holders from July 28, 2026, through September 8, 2026, as the stock price exceeded 130% of the conversion price ($27.18) for the required period.
Risks and Contingencies:
- Goodwill Impairment: The Interface Solutions (IS) reporting unit had less excess fair value over carrying value in the last annual test. While no impairment was triggered as of June 27, 2026, adverse changes in market conditions could result in a material non-cash impairment charge.
- Inventory Reserves: The company recorded $3.2 million in excess and obsolete inventory charges in Q2 2026. Future reductions in customer forecasts could necessitate additional charges.
- Foreign Currency: Fluctuations in foreign exchange rates (particularly Euro, Yen, and Ringgit) impact reported earnings and equity. A 10% appreciation of the USD would result in a $33.4 million negative translation adjustment.
- Tax Valuation Allowances: The company maintains valuation allowances against substantially all net deferred tax assets in the U.S., Switzerland, and Malaysia due to a lack of sustainable earnings history.
Investor Verification Checklist
- Convertible Note Conversion: Verify the extent of conversions occurring during the window (July 28 - Sept 8, 2026) and the resulting dilution or cash outflow.
- Inventory Levels: Monitor inventory balances ($140.3 million) against sales trends to assess the risk of future write-downs.
- Goodwill Valuation: Review future quarterly reports for any interim impairment testing triggers, specifically regarding the Interface Solutions segment.
- Operating Cash Flow Sustainability: Confirm that the strong operating cash flow ($20.8 million YTD) is sustainable given the cyclical nature of semiconductor capital spending.
- Share Repurchase Program: Note that $22.8 million remains available under the repurchase program, though no shares were repurchased in the current period.