COHU (COHU) Q2 2025: Systems Revenue Jumps 16% on Mobile and Automotive Test Demand

July 31, 2025 | By EarningsIQ Research

COHU’s Q2 marked a decisive inflection, as system orders surged on the back of a $28 million design win in mobile and automotive test, and utilization rates climbed to signal the early stages of industry recovery. The company is leveraging new product launches and geographic expansion, notably in India and precision analog, to diversify growth drivers as recurring revenue steadies. While near-term seasonal headwinds are expected, management’s commentary and order breadth point to a progressive upcycle, with flexible, high-power test platforms positioning COHU for share gains in emerging AI and computing markets.

Summary

• System Orders Drive Inflection: Design wins and a $28M order underpin a shift toward recovery in core markets.
• Utilization and Order Breadth Signal Upturn: Rising test cell utilization and green shoots across segments suggest broadening demand.
• Product Innovation Targets AI and Analog: New handlers and contactors aim to capture next-gen computing, automotive, and precision analog opportunities.

Performance Analysis

COHU delivered Q2 revenue of $107.7 million, in line with guidance, as a sharp pickup in systems revenue offset stable recurring revenues, which comprised 63% of the mix. Non-GAAP gross margin held at 44.4%, reflecting a balanced product mix and disciplined cost controls. The standout driver was a $28 million Eclipse handler order from an existing mobile and automotive customer, with shipments recognized across Q2 and forecasted into Q3 and Q4, setting the stage for a sequential revenue increase of approximately 16% in Q3. Notably, no single customer exceeded 10% of sales in Q2, highlighting a healthy revenue distribution even as large orders materialize.

Test cell utilization—a key proxy for industry health—rose three points sequentially to 75%, with both IDMs (integrated device manufacturers) and OSATs (outsourced semiconductor assembly and test providers) reporting stronger activity. Orders improved across all major end markets except computing, where softness lingered, but automotive and industrial segments saw order growth of over 100%. Cash and investments increased by $8 million, driven by $16 million in operating cash flow, and the balance sheet remains robust with $209 million in liquidity and minimal debt. Operating expenses tracked to plan, and CapEx was modest outside of facility investments.

• System Revenue Acceleration: Sequential systems revenue gains, especially from mobile and automotive, are set to lift Q3 topline.
• Utilization Rate Recovery: A 75% utilization rate signals early upcycle momentum, with IDMs up five points and OSATs up one point QoQ.
• Recurring Revenue Stability: Consumables-driven recurring revenue remains a stable 63% share, supporting downside protection.

Management is guiding Q3 revenue to $125 million plus or minus $7 million, with gross margin steady near 44%, as the product mix shifts toward higher-margin systems and test automation for the mobile end market.

Executive Commentary

Strategic Positioning

1. Mobile and Automotive Test Expansion

COHU secured a pivotal $28 million Eclipse handler order from an existing customer, primarily for mobile and automotive applications. This design win not only expands share at a key account but also supports follow-on business into 2026, underpinning visibility into future demand. Management cited edge AI deployment in mobile and continued ADAS (advanced driver-assistance systems) and infotainment growth in automotive as drivers.

2. New Product Platforms for Flexible Test

The launch of the Eclipse Handler Gen 2.5, a configurable test platform, targets share gains at test subcontractors and fabless semiconductor companies. With the ability to handle a range of applications—from RF discretes to high-power compute devices (up to 3,000 watts)—the platform is positioned as a “future-proof” investment for customers navigating rapid device evolution, including GPUs and AI accelerators.

3. Precision Analog and Display Test Innovation

Qualification of the Ultra-S contactor for a leading IDM opens a $20 million precision analog market opportunity, while the PD3X instrument for Diamond X testers enhances COHU’s position in OLED and AR display driver testing. These wins reflect a deliberate push into higher-value, specialized test segments with longer product cycles and less commoditization risk.

4. Geographic and Customer Diversification

COHU’s first silicon carbide test system order from India marks a new geographic frontier, diversifying its revenue base. The company is also seeing green shoots from dormant automotive customers and broadening its software ARR pipeline, albeit from a small base, with DI Core and Tignes solutions focused on AI-driven process optimization.

5. Manufacturing and Cost Structure Optimization

Finalizing the transfer of manufacturing from the US and Europe to Asia is expected to drive further cost efficiencies, supporting the company’s ability to invest in R&D and maintain competitive operating expenses as revenue scales, with a target of $49 million in quarterly opex at $130 million revenue run-rate.

Key Considerations

COHU’s Q2 results and outlook reveal a company at the early stage of an industry upturn, leveraging design wins and new platforms to capture share in recovering and emerging markets. However, the trajectory remains non-linear, with management signaling typical Q4 seasonality and the need for continued execution in new verticals.

Key Considerations:

• Design Win Leverage: The $28 million Eclipse handler order is a bellwether for COHU’s ability to expand wallet share at strategic accounts and drive multi-quarter revenue visibility.
• Product Configurability as Differentiator: Eclipse’s single-platform, multi-application design is resonating with customers seeking capital efficiency and future-proofing in a volatile device landscape.
• Precision Analog and Display Test as Growth Vectors: Success in qualifying new contactors and display instruments opens access to less cyclical, higher-value markets.
• Geographic Expansion and Customer Base Broadening: Entry into India and reactivation of dormant automotive accounts mitigate over-reliance on any single market or customer.
• Cost Efficiency Initiatives: Ongoing manufacturing relocation and restructuring underpin margin resilience and future investment capacity.

Risks

COHU faces risks tied to the cyclicality of semiconductor capital spending, with Q4 expected to see a mid-single-digit sequential pullback due to typical seasonality. Execution risk remains in scaling new product platforms and winning qualification in high-growth verticals like AI infrastructure. Additionally, changes in tax methodology and macroeconomic volatility could impact quarterly results, while competitive dynamics in handler and test systems may pressure pricing and margins if industry recovery stalls.

Forward Outlook

For Q3 2025, COHU guided to:

• Revenue of approximately $125 million, plus or minus $7 million
• Gross margin near 44%
• Operating expenses around $50 million, including $2 million in variable R&D

For full-year 2025, management maintained its annual tax provision but flagged a Q3 one-time true-up due to R&D capitalization changes. Management expects Q4 to show a typical seasonal slowdown, with a mid-single-digit sequential pullback, but remains optimistic for a progressive recovery into 2026 as utilization and orders improve across segments.

• Revenue mix shifting toward systems, especially mobile test automation
• Operating expense discipline as restructuring benefits phase in

Takeaways

COHU is executing on a recovery playbook, leveraging large design wins and new product launches to capture share as end markets rebound. The strategic focus on configurability, precision analog, and display test positions the company for above-market growth, while operational discipline and geographic expansion support resilience.

• Inflection Point Confirmed: System order momentum and utilization gains mark a clear transition off the industry bottom, with visibility into continued demand.
• Innovation Drives Share Opportunity: Flexible, high-power handlers and new contactor qualifications open doors in AI, automotive, and analog segments.
• Monitor Execution in New Verticals: Sustained order breadth and successful customer qualifications in next-gen computing and precision analog will be critical to maintaining momentum through 2026.

Conclusion

COHU’s Q2 performance and Q3 outlook reflect a company moving decisively into recovery mode, with strategic design wins, product innovation, and operational discipline laying the groundwork for sustainable growth. Investors should watch for continued breadth in order activity and successful scaling of new platforms as key signals of execution strength.

Industry Read-Through

COHU’s results provide evidence that semiconductor capital equipment demand is rebounding, particularly in mobile, automotive, and precision analog test. Rising utilization rates and green shoots from previously dormant customers suggest a progressive upcycle for the broader test and handler industry. The emphasis on flexible, high-power handlers and AI-driven process control reflects a sector-wide pivot toward supporting next-generation computing and edge AI deployments. Competitors and suppliers should expect intensifying competition for design wins in AI, automotive, and display test, with product configurability and power handling emerging as key differentiators.

COHU Technology Semiconductor Equipment Test Systems Automotive AI Recurring Revenue Design Wins