FormFactor FORM shares have jumped 110.7% year to date (YTD), outperforming the Zacks Computer and Technology sector’s appreciation of 17%. The outperformance can be attributed to record DRAM revenues, driven by an accelerating high-bandwidth memory (HBM) demand and sharp margin expansion. However, FORM’s prospect remains dependent on continuing AI infrastructure spending. Heavy investments in the Farmers Branch manufacturing expansion are likely to keep margins under pressure.
Nevertheless, we believe FORM’s share price is well-poised to appreciate, driven by strong demand for HBM as well as an expanding AI exposure beyond memory into networking, GPUs and custom ASICs. These factors are expected to strengthen FORM’s competitive position against broader semiconductor competitors, including Teradyne TER, Cohu COHU and KLA KLAC YTD. Shares of Cohu, KLA and Teradyne have returned 141.4%, 90.5% and 85.8%, respectively. So, what should investors do with the stock? Let’s dig deep to find out.
FORM Stock’s Price Performance
Image Source: Zacks Investment Research
AI & Strong HBM Demand Aids FORM’s Prospect
FormFactor is one of the biggest beneficiaries of the AI infrastructure buildout through its leadership in HBM probe cards. The company expects another record DRAM revenue growth in the second quarter of 2026 as a second major customer ramps up adoption of FORM’s SmartMatrix technology. The company also highlighted that the transition from HBM3 to HBM4 and eventually HBM5 increases test intensity and market-share opportunities.
FormFactor is now winning business across networking chips, data-center CPUs, GPUs and custom ASICs. Management noted that networking growth helped a leading high-performance computing customer become a 10% customer for the first time. FORM also secured additional GPU design wins, expects production shipments in the second half of 2026 and is deepening engagements with hyperscalers on custom ASICs. This broadens AI exposure and reduces dependence on any single product category.
FormFactor is also benefiting from the emergence of co-packaged optics (CPO), an important AI networking technology. The company raised its 2026 CPO revenue outlook toward the high end of the previously guided $10-$20 million range, citing faster production ramps and growing demand for Triton production-test systems developed with Advantest and Tokyo Electron. Through its Triton production-test platform and Keystone Photonics acquisition, FORM expects accelerating CPO adoption to become another long-term growth driver.
FormFactor sits at the intersection of two of the industry's strongest secular trends - high-performance computing and advanced packaging. As chips become more complex, advanced packaging, HBM stacks and chiplet architectures require substantially more testing, increasing probe card demand. At Investor Day, FormFactor outlined plans to double revenue by 2030 while more than doubling non-GAAP earnings, supported by AI infrastructure growth, advanced packaging adoption and higher test intensity.
FORM’s Earnings Estimate Revision Shows Positive Trend
FormFactor’s guided second-quarter 2026 revenues to $240 million (plus or minus $5 million), with non-GAAP gross margin expected at 49.5% (plus or minus 1.5%), and non-GAAP earnings projected at 61 cents (plus or minus 4 cents) per share.
The Zacks Consensus Estimate for second-quarter 2026 earnings is pegged at 61 cents per share, up 10.9% over the past 60 days and indicating 125.93% growth over the year-ago quarter’s reported figure. The consensus mark for second-quarter 2026 revenues is pegged at $240.1 million, suggesting 22.6% growth from the year-ago quarter’s reported figure.
FormFactor, Inc. Price and Consensus
FormFactor, Inc. price-consensus-chart | FormFactor, Inc. Quote
The Zacks Consensus Estimate for 2026 earnings is pegged at $2.40 per share, up 5.7% over the past 60 days and indicating 84.62% growth over 2025’s reported figure. The consensus mark for 2026 revenues is pegged at $958.05 million, suggesting 22.1% growth from 2025’s reported figure.
FORM Shares Are Trading at a Premium
FormFactor shares are trading at a premium as suggested by a Value Score of F.
In terms of the forward 12-month price-to-sales (P/S), the company is trading at 9.23X compared with the broader sector and peers. The broader sector is trading at 6.98X while Cohu, Teradyne and KLA trade at 4.28X, 11.24X and 17.47X, respectively.
FORM Stock’s Valuation
Image Source: Zacks Investment Research
Conclusion
FormFactor is benefiting from the rapid expansion of AI infrastructure, leveraging its leadership in semiconductor probe cards and wafer-level testing technologies. As hyperscalers and chipmakers invest heavily in AI servers, the demand for HBM, GPUs, networking chips and custom AI accelerators continues to rise, significantly increasing the need for advanced semiconductor testing solutions. Momentum is also supported by co-packaged optics programs, including the Triton production-test ramp and the Keystone Photonics acquisition that expands optical probing capability. These factors justify a premium valuation.
FormFactor currently sports a Zacks Rank #1 (Strong Buy), which implies that investors should start accumulating the stock right now. You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).