Breaking Down Cohu, Inc. (COHU) Financial Health: Key Insights for Investors

You're looking at Cohu, Inc. (COHU) right now and seeing a classic semiconductor cycle story: a company navigating a tough industry patch but making a strong pivot into high-growth areas, which is why the stock has a consensus analyst price target of around $29.33. The latest Q3 2025 results show this tension clearly-while net sales jumped to $126.2 million, a solid 32.5% increase year-over-year, the company still posted a GAAP net loss of $4.1 million. But here's the quick math on their strategic health: Cohu's recurring revenue stream, which was about 55% of Q3 sales, provides a defintely necessary cushion, plus they are capitalizing on the AI boom with products like their High Bandwidth Memory (HBM) inspection systems. With a cash and investments balance of approximately $198.2 million on the books, they have the liquidity to fund that pivot, so the real question for investors is whether the growth in AI and mobile test solutions can outrun the broader capital expenditure slowdown to hit the full-year revenue estimate of roughly $448 million.

Revenue Analysis

You need to know where Cohu, Inc. (COHU)'s money is coming from right now, not last year. The direct takeaway is that Cohu is successfully navigating a tough semiconductor cycle by leaning into high-growth, recurring revenue streams, particularly in the AI space. Their net sales for the third quarter of fiscal year 2025 hit $126.2 million, a strong rebound.

Here's the quick math: that Q3 2025 revenue of $126.2 million represents a 32.4% jump compared to the $95.3 million reported in Q3 2024. This massive year-over-year increase shows the company is capitalizing on specific demand pockets, even as the broader industry faces some headwinds. For the first nine months of 2025, net sales totaled $330.7 million, up from $307.7 million in the same period a year prior, which is a defintely solid 7.5% growth.

• Focus on AI and mobile computing is paying off.
• Recurring revenue is the new bedrock of the business.
• Q4 2025 sales guidance is stable at around $122 million (plus or minus $7 million).

The real story in Cohu, Inc.'s revenue is the shift in composition, which is a key de-risking move for a semiconductor equipment supplier. They are actively growing their non-systems revenue, which is essentially their recurring stream-things like service contracts, software subscriptions, and spare parts. In Q3 2025, this non-systems revenue contributed a significant $70 million to the top line. This means approximately 55% of their total Q3 revenue is now recurring, which is a much more stable, predictable base than relying solely on large, lumpy equipment orders.

The Systems revenue, which covers their equipment like handlers and inspection tools, came in at $56.24 million for Q3 2025. What this estimate hides is the strategic focus within that systems segment. Cohu is seeing acceleration in high-value areas, specifically the AI data center markets with their Neon High Bandwidth Memory (HBM) inspection systems and Eclipse test handlers. This is where the margin opportunity is, so any new design wins here, like the $28 million order for Mobile and Automotive test shipping through Q4 2025, are critical long-term indicators. For a deeper dive into who is betting on this strategic shift, check out Exploring Cohu, Inc. (COHU) Investor Profile: Who's Buying and Why?

Profitability Metrics

You need to know if Cohu, Inc. (COHU) is making money, and more importantly, how efficiently. The short answer is that while the company's core operations are nearing breakeven on a quarterly basis, the trailing twelve months (TTM) still reflect a significant net loss. Cohu's Q3 2025 results show a strong Gross Margin, which is a clear win, but the heavy investment in R&D and restructuring costs are still hitting the bottom line.

Here's the quick math on profitability, using the most recent data available through the end of Q3 2025. We'll use the Trailing Twelve Months (TTM) for the net figure to capture the full year's trend, and the latest quarter (Q3 2025) for the operating ratios, as they show the current run-rate.

The first thing to notice is the Gross Profit Margin. At 43.8% in Q3 2025, Cohu, Inc. is comfortably ahead of the Semiconductor Equipment & Materials industry's 2024 median of 39.6%. This means the company is very good at managing its Cost of Goods Sold (COGS) and maintaining pricing power for its specialized test and handling solutions. That's a solid operational foundation.

But still, the bottom line is a problem. The TTM Net Profit Margin sits at a loss of -17.22%, which is a stark contrast to the industry's average profit margin of 23.33% in 2025. This gap is mostly explained by two factors: the cyclical downturn in the semiconductor industry and Cohu's aggressive spending on strategic initiatives. The GAAP Net Loss for Q3 2025 was $4.1 million, a significant improvement from the $30.8 million loss in Q1 2025, which shows the trend is moving in the right direction.

Operational Efficiency and Cost Management

Management is defintely aware of the margin pressure and is taking clear steps to fix it. This isn't a passive company waiting for the cycle to turn; they are actively driving change. The focus is on operational efficiency and increasing the higher-margin recurring revenue stream.

• Recurring revenue hit 63% of total revenue in Q1 2025, providing stability in a volatile market.
• Factory utilization improved to approximately 75% in Q2 2025, which helps spread fixed manufacturing costs over more units.
• A global restructuring program, including transitioning manufacturing to more cost-effective locations like the Philippines and Malaysia, is expected to deliver approximately $2.0 million in quarterly cost savings by the end of 2025.

The improvement in the Operating Profit Margin to 0.78% in Q3 2025-nearly breakeven-is a direct result of these cost-management efforts, even while R&D expenses increased due to new product development. The path to sustained profitability relies on these cost savings materializing while the new design-wins, like the $28 million order for Mobile and Automotive test, start to translate into revenue. If you want to dive deeper into the ownership structure behind these numbers, you should check out Exploring Cohu, Inc. (COHU) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

Cohu, Inc. (COHU) maintains an exceptionally conservative balance sheet, relying overwhelmingly on equity to fund its operations and growth. You don't see this kind of capital structure often in a capital-intensive industry, and it signals a very low financial risk profile. Their Debt-to-Equity (D/E) ratio is a clear indicator of this strategy.

As of the third quarter of 2025, Cohu, Inc.'s Debt-to-Equity ratio stood at a remarkably low 0.02. To put that into perspective, the average D/E ratio for the Semiconductor Materials & Equipment industry is around 0.49. Cohu's figure means that for every dollar of equity, the company has only two cents of debt. This is a fortress balance sheet, plain and simple.

Here's the quick math on the pre-financing debt structure from the Q3 2025 balance sheet:

The company's traditional debt levels-short-term debt of $10.95 million and long-term debt of $6.881 million-were minimal against its $831.0 million in total equity. This suggests Cohu, Inc. has historically favored retained earnings and shareholder capital over traditional bank loans or corporate bonds to finance its business, which is a huge liquidity advantage.

The $287.5 Million Convertible Note Issuance

The most important financing event in 2025 was Cohu, Inc.'s strategic move to raise capital through a hybrid instrument: the $287.5 million aggregate principal amount of 1.50% Convertible Senior Notes due 2031, which closed in late September 2025. This is a significant injection of capital that changes the debt landscape.

• Low-Cost Debt: The 1.50% interest rate is an attractive, low-cost way to raise a large sum of money.
• Equity Upside: The notes are convertible into stock at an initial price of approximately $27.1758 per share, representing a 32.50% premium over the stock price at the time.
• Dilution Management: The company used a portion of the proceeds to purchase capped call transactions, which are designed to offset potential share dilution up to a 100% premium.

This issuance is a smart way to balance financing. The notes give Cohu, Inc. the immediate cash and financial flexibility to fund long-term growth initiatives, like R&D and potential acquisitions, without immediately diluting shareholders. It's debt now, but it has a clear path to becoming equity if the stock performs well, which is a much cleaner way to fund growth than taking on high-interest, non-convertible term loans. You can read more about the company's overall position in our full analysis, Breaking Down Cohu, Inc. (COHU) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You want to know if Cohu, Inc. (COHU) has the cash to cover its near-term obligations, and the short answer is yes-defintely. The company maintains a very strong liquidity position, but a closer look at the cash flow statement reveals where that strength is coming from and the operational challenges that still need to be addressed. We need to map the high liquidity ratios against the negative operational cash flow.

This is a classic semiconductor equipment story: capital-intensive, cyclical, and prone to swings in working capital. The key takeaway for the 2025 fiscal year is that Cohu, Inc. has built a substantial financial buffer, but it's been burning cash from operations in the near-term.

Current and Quick Ratios: The Liquidity Buffer

The most recent figures confirm Cohu, Inc.'s robust short-term financial health. The Current Ratio, which measures current assets against current liabilities, sits at a strong 4.88 as of November 2025. This means the company has almost five times the assets it needs to cover all liabilities coming due in the next year.

Even more telling is the Quick Ratio (Acid-Test Ratio), which excludes inventory-often the least liquid current asset. Cohu, Inc.'s Quick Ratio is also very high at 3.51. For context, a ratio between 1.5 and 3.0 is generally considered healthy in most sectors. This high number signals that Cohu, Inc. has a significant amount of highly liquid assets-cash, marketable securities, and receivables-ready to meet obligations, even if a sudden market shock freezes inventory movement.

Working Capital and Trend Analysis

Working capital is simply the difference between current assets and current liabilities, and it's your day-to-day operating cushion. Cohu, Inc.'s net current asset value was reported at $391.78 million as of December 2024. While this is a substantial amount, it represents a decline from the prior year's figure of $438.64 million.

Here's the quick math: a decline in working capital, even from a high base, suggests a few things. It can be a sign of increased investment in long-term assets, or it can be due to a slowdown in cash conversion cycles. In Cohu, Inc.'s case, the decline is partly related to a drop in overall current assets, which is common during a cyclical downturn in the semiconductor industry. You need to keep an eye on this trend, but the absolute value is still a massive strength.

Cash Flow Statements Overview (Operating, Investing, and Financing)

Liquidity ratios tell you what you own; cash flow tells you how you're using it. For 2025, the cash flow statement shows a mixed, but strategically sound, picture.

The biggest near-term concern is the cash flow from operations (CFO), which was negative $10.2 million in Q1 2025. This means the core business activities-selling products and services-are not generating enough cash to cover expenses and working capital needs right now. This is why the total cash and investments decreased by $11.2 million during the third quarter of 2025.

But the financing side has been a huge strength. In Q3 2025, Cohu, Inc. successfully completed an offering of convertible senior notes, raising $287.5 million. This move dramatically bolstered the balance sheet and provides the capital needed to weather the operational cash burn and invest in future growth, particularly in areas like High Bandwidth Memory (HBM) inspection systems.

• Q3 2025 Net Sales: $126.2 million.
• Q3 2025 GAAP Net Loss: $4.1 million.
• Q3 2025 Total Cash and Investments: $198.2 million.

The company's strategy is clear: use the strong balance sheet and new financing to bridge the cyclical downturn while focusing on strategic growth areas. You can get more context on their long-term focus here: Mission Statement, Vision, & Core Values of Cohu, Inc. (COHU).

Potential Liquidity Concerns or Strengths

The core strength is the capital structure. The high current and quick ratios, plus the recent financing, mean Cohu, Inc. is not at risk of defaulting on short-term debt. They have a mountain of cash and a low debt-to-equity ratio of 0.01.

The primary risk isn't solvency, but operational efficiency. Negative operating cash flow over multiple quarters means the company is funding its day-to-day business by drawing down its cash reserves or through financing, not through sales. The good news is that management is aware of this, implementing cost reduction measures and restructuring to lower operating expenses, which they expect will lead to a return to positive adjusted EBITDA in the near future.

Next step: Portfolio Manager: Model a 12-month cash runway scenario assuming a flat revenue environment but successful execution of the $48 million Q2 2025 operating expense target.

Valuation Analysis

Is Cohu, Inc. (COHU) overvalued or undervalued? The quick answer is that traditional metrics suggest it is currently undervalued, but you need to look past the noise of negative earnings to see why. The stock closed recently at $21.88, trading significantly below the average analyst price target of $29.33.

The core of Cohu, Inc.'s valuation story right now is a transition from negative to positive earnings, which makes standard ratios tricky. The stock price has been volatile, moving between a 52-week low of $12.57 and a high of $29.08, but it has declined about 14.21% over the last 52 weeks, creating a potential entry point.

Here's the quick math on key valuation multiples based on the most recent 2025 fiscal year data:

• Price-to-Earnings (P/E) Ratio: The trailing P/E is negative, around -13.66, because Cohu, Inc. had a negative TTM (Trailing Twelve Months) earnings per share (EPS) of approximately -$1.57. This ratio is useless for valuation when a company is losing money.
• Forward P/E Ratio: This is more telling, sitting at about 38.98. This is based on the forecast that EPS will turn positive to $0.62 next year, which is a key growth signal.
• Price-to-Book (P/B) Ratio: At approximately 1.20, this is a strong indicator of undervaluation. A P/B this close to 1.0 suggests the market is valuing the company's equity only slightly above its net tangible assets, which is low for a semiconductor equipment company.
• Enterprise Value-to-EBITDA (EV/EBITDA): This is also highly negative, around -200.15, because TTM EBITDA is negative. Again, ignore this ratio for now; it simply confirms the current operating losses.

The low Price-to-Book ratio is defintely the signal to watch. It suggests you are not paying a significant premium for future growth, but rather buying the underlying business assets cheaply. The market capitalization is roughly $1.00 billion, with an enterprise value of about $856.67 million.

Cohu, Inc. is not a dividend stock. The TTM dividend payout is $0.00, meaning the dividend yield is 0.00%. This is common for growth-focused technology companies that reinvest all capital back into the business, so don't expect income from this position.

The Wall Street consensus leans positive, with an average price target of $29.33, representing a potential upside of over 32% from the current price. While some analysts rate it a Hold, the overall consensus is a Moderate Buy or Strong Buy, driven by the expected turnaround in earnings for the next fiscal year. This optimism is tied to the semiconductor cycle recovery, which you can read more about in the full post: Breaking Down Cohu, Inc. (COHU) Financial Health: Key Insights for Investors.

To be fair, the stock is volatile, but the technical picture shows a 50-day moving average of $21.96, which is right near the current price, suggesting a consolidation phase. The real risk is whether the projected earnings turnaround actually materializes in 2026. If it does, the stock is undervalued.

Next Step: Check the Q4 2025 guidance for any signs of the projected EPS of $0.62 being at risk, as this is the linchpin of the bull case.

Risk Factors

You're looking for the unvarnished truth on Cohu, Inc. (COHU)'s risk profile, and the core takeaway is this: while the company is strategically pivoting into high-growth areas like AI, the cyclical nature of the semiconductor industry remains a major headwind, compounded by internal cost pressures. We need to map these near-term risks to the actions Cohu is taking.

The biggest external risk is the inherent volatility of the semiconductor capital equipment market. This downturn is not new; Cohu saw its 14th consecutive quarter of revenue contraction in Q1 2025. While Q3 2025 net sales hit $126.2 million, up 32.4% year-over-year, the company's guidance still anticipates a potential revenue pullback in Q4 2025. This unpredictability means capital expenditure (CapEx) decisions by major customers can shift quickly, slamming Cohu's system sales.

Internally, financial and operational risks are clear in the 2025 reports. The company is still running at a loss on a GAAP basis, reporting a net loss of $47.7 million for the first six months of fiscal 2025. Gross margin is under pressure, declining to 43.7% in Q2 2025 from 44.8% due to higher costs from manufacturing transitions and a less favorable sales mix. That's a tight spot.

• Market Cyclicality: Unpredictable customer CapEx spending.
• Gross Margin Erosion: Transition costs and unfavorable product mix.
• Geopolitical Risk: Operating in foreign locations and supply chain disruptions.
• Customer Concentration: Loss of a key customer order is a significant risk.

Here's the quick math on the operational risks: R&D expenses rose to $23.2 million in Q2 2025, or 21.5% of sales, as they push new product development. That investment is necessary for future growth, but it eats into current profitability. Plus, integrating acquisitions, like Tignis in Q1 2025, always carries the risk of not achieving the full anticipated benefits or incurring unanticipated costs.

To be fair, Cohu is not just sitting on its hands. They are actively mitigating these risks with clear, actionable strategies. The global restructuring program is a core defense, aiming to transition manufacturing to more cost-effective locations like the Philippines and Malaysia, which should yield approximately $2.0 million in quarterly cost savings once fully implemented. That's real money. They also secured a major $28 million design-win order for their new Eclipse handler, shipping through Q4 2025, which helps stabilize the near-term revenue picture.

The strategic shift is defintely the long-term play. Cohu is expanding its focus to mobile and AI-based computing applications, with new products like the Neon HBM inspection system and the Eclipse handler targeting the high-growth AI data center markets. This product and market diversification is their best hedge against the cyclicality of their traditional segments. The balance sheet still shows a healthy current ratio of 5.2, indicating robust short-term liquidity, which gives them breathing room to execute this transition.

For a deeper dive into the valuation and strategic frameworks, you should check out the full post at Breaking Down Cohu, Inc. (COHU) Financial Health: Key Insights for Investors.

Next Step: Finance: track the realization of the $2.0 million quarterly savings in Q4 2025 filings.

Growth Opportunities

You're looking for a clear map of Cohu, Inc.'s (COHU) future, and the picture is one of strategic pivot, moving past cyclical headwinds toward high-growth, secular markets. The core takeaway is that Cohu is actively re-engineering its business model to capitalize on the massive demand for High Bandwidth Memory (HBM) and AI-driven process control, which should defintely smooth out the volatile semiconductor cycles.

The company's full-year 2025 revenue is estimated to be around $448.08 million, with earnings projected at a loss of -$1.87 per share, reflecting a challenging start to the year but a clear turnaround is in motion. This is a transition year, but the recent Q3 2025 net sales of $126.2 million, a 32.4% year-over-year jump, already show the momentum building.

Key Growth Drivers and Product Innovation

Cohu's near-term growth is tied directly to its success in next-generation semiconductor testing, particularly for AI accelerators and high-performance computing (HPC). This isn't just incremental improvement; it's a focus on specialized, high-margin equipment. The firm's HBM revenue forecast for 2025 was recently raised to between $10 million and $11 million, driven by orders for its Neon inspection platform.

Here's where the action is:

• AI/HBM Market: The Neon inspection platform is securing significant orders for High Bandwidth Memory (HBM) inspection, a critical step for advanced AI chips.
• Automated Handling: The Eclipse automated test handler platform, which addresses a $200 million market opportunity, recently secured a $28 million design-win order for mobile and automotive end-markets.
• Advanced Testing: New products like the ULTRA-S contactor are expanding Cohu's reach into precision analog IC test.

Strategic Initiatives and Financial Outlook

The biggest strategic move in 2025 was the acquisition of Tignis, Inc. in January for $34.9 million, net of cash received. This wasn't a vanity purchase; it was a clear move to integrate AI-driven data analytics software into their core offering, creating a stronger competitive moat around process control and yield optimization. Cohu is essentially selling a solution, not just a machine.

Also, management is tightening the ship. They initiated a global restructuring program expected to deliver quarterly cost savings of approximately $2.0 million by the end of 2025, which will help the bottom line as revenue ramps up. This focus on operational efficiency is crucial for margin recovery. Another stabilizing factor is the recurring revenue (service contracts, software subscriptions), which accounted for about 63% (or $68 million) of Q2 2025 total revenue, providing a resilient base against the semiconductor industry's notorious cycles.

Competitive Advantages

Cohu's competitive edge is its technological leadership in a highly specialized niche. They have a diversified product portfolio that serves key high-growth markets like automotive, 5G, and advanced packaging. Plus, the Tignis acquisition gives them a proprietary edge in predictive and prescriptive automation, which is highly valued by chipmakers looking to maximize yield.

The company is positioned to grow because it is embedded in the supply chain for the most technologically demanding chips. You can see how these factors play out in the full financial picture in our detailed analysis: Breaking Down Cohu, Inc. (COHU) Financial Health: Key Insights for Investors.

Here's the quick math on the shift:

The company is trading a near-term earnings drag for a stronger, more specialized long-term revenue profile. The next step is watching Q4 2025 guidance for further clarity on the Eclipse and Neon platform revenue ramp.