FormFactor Q2 2025 slides: Semiconductor test leader outlines path to $850M revenue

Introduction & Market Context

FormFactor Inc. (NASDAQ:FORM), a leading provider of test and measurement technologies for the semiconductor industry, presented its investor overview in July 2025, outlining its strategic position, recent performance, and future targets. The $3.12 billion market cap company has established itself as a critical player in the semiconductor testing ecosystem, particularly as advanced packaging and artificial intelligence applications drive increased demand for sophisticated testing solutions.

The company’s stock has shown strong performance in 2025, with a 48.42% price return over the past six months according to recent data, though it experienced a 3.25% dip in aftermarket trading following its Q2 2025 earnings release.

Quarterly Performance Highlights

FormFactor reported Q2 2025 revenue of $195.8 million, representing a 14.3% increase from Q1 2025 but a slight 0.8% year-over-year decline. The company’s non-GAAP gross margin was 38.5%, down from 39.2% in the previous quarter, while non-GAAP earnings per share improved to $0.27 from $0.23 in Q1.

The Probe Card segment, which constitutes the majority of FormFactor’s business, drove quarterly growth with an 18.7% sequential increase to $162.1 million. However, the Systems segment saw a slight decline of $1.1 million compared to the previous quarter.

For Q3 2025, FormFactor projects revenue of $200 million ± $5 million with a non-GAAP gross margin of 40% ± 1.5%, indicating continued sequential improvement in both revenue and profitability.

As shown in the following chart of FormFactor’s financial performance over recent years, the company has experienced some fluctuation in its results while maintaining a generally positive trajectory:

Strategic Industry Position

FormFactor occupies a strategic position in the semiconductor manufacturing process, situated between front-end wafer fabrication equipment ($95 billion industry, 6% CAGR) and back-end wafer assembly and final test ($3.5 billion industry, 7% CAGR). The company’s focus on wafer test and measurement represents a $2.75 billion industry opportunity with moderate cyclicality compared to other semiconductor segments.

The following diagram illustrates FormFactor’s position in the semiconductor value chain:

FormFactor has achieved recognition as an industry leader, recently being named the #1 Global Supplier in Test Subsystems and Focused Chip Making Equipment by TechInsights. The company has also received awards from major customers including SK hynix and Intel, reinforcing its strong industry relationships.

The company’s industry recognition is highlighted in the following slide:

Financial Targets and Growth Strategy

FormFactor has outlined an ambitious path toward $850 million in annual revenue, up from $764 million in 2024, with significant margin expansion. The target model includes:

• Non-GAAP gross margin improvement from 41.7% to 47.0%
• Non-GAAP operating margin increase from 11.9% to 22.0%
• Non-GAAP EPS growth from $1.15 to $2.00
• Free cash flow increase from $83 million to $160 million

The company’s evolution from a pure probe card provider to a diversified test and measurement leader is illustrated in the following slide:

The detailed financial targets are outlined below:

FormFactor’s growth strategy is supported by several key industry trends, including the increasing importance of advanced packaging as Moore’s Law slows, the exponential growth in semiconductor content driven by AI and 5G applications, and the rising test intensity required to ensure quality in complex semiconductor designs.

The company expects to outpace market growth, projecting a 7%+ CAGR compared to the overall advanced probe card market growth of 5%. This outperformance is attributed to FormFactor’s proprietary technologies, strong customer relationships, and productive R&D investments.

FormFactor’s acquisition strategy has played a key role in its growth and diversification. The company has completed several strategic acquisitions since 2012, including Microprobe ($117M), Cascade Microtech ($352M), and various smaller acquisitions to expand its technology portfolio.

Challenges and Outlook

Despite FormFactor’s optimistic long-term outlook, the company faces near-term challenges. The Q2 2025 results revealed pressure on gross margins, which at 38.5% fell significantly short of the 47% target. Additionally, free cash flow was negative at -$47.1 million in Q2, contrasting with the company’s emphasis on strong cash generation in its presentation.

Tariffs are expected to impact gross margins by 1-1.5 percentage points, and increased operating expenses related to a new manufacturing facility and headcount expansion may pressure profitability in the near term. The company’s capital expenditures have decreased as a percentage of revenue from 8.4% in 2023 to 5.0% in 2024, with a target of 3.5%-4.0%, indicating a shift toward greater capital efficiency.

For Q3 2025, FormFactor expects similar demand levels to Q2 with slightly higher gross margins and operating profit. The company remains committed to its target financial model but acknowledges the path may not be linear.

CEO Mike Slessor emphasized the importance of advanced packaging and chiplets in the company’s strategy, noting, "As front end driven Moore’s Law slows, the innovation and performance offered by advanced packaging and chiplets allows our customers to accelerate their roadmaps."

FormFactor’s position at the intersection of semiconductor growth and advanced packaging positions it well for long-term success, despite near-term margin pressures. Investors will be watching closely to see if the company can execute on its path toward the ambitious financial targets outlined in its July 2025 presentation.

Full presentation:

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