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  • AEHR F1Q26 - AI dreams vs. tariff and gross margin uncertainty? Bull case $65. Bear case $12.

AEHR F1Q26 - AI dreams vs. tariff and gross margin uncertainty? Bull case $65. Bear case $12.

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October 06, 2025

Aehr Test Systems Investment Report - Q1 FY2026 AI Diversification & Market Expansion

AEHR TEST SYSTEMS (AEHR)

🔬💻 Semiconductor Test & Burn-In Leader | Q1 Beat Expectations, Stock Down 16% AH on Guidance Void

Q1 FY2026 Results | $11.0M Revenue Beats Street, EPS $0.01 Beats Consensus, AI 40% of FY25, Backlog $17.5M, No Guidance Reinstated

💰 Market Cap: $780M | 🏢 Employees: 136 | 🌍 Global Semiconductor Test Leader
👨‍💼 CEO Gayn Erickson | 🎯 AI/SiC/GaN Focus | 🏆 FOX-XP Platform Innovation
$26.60
📉 -$5.05 (-15.96%) After Hours
Post-Q1 Earnings
Price Target Scenarios

18-Month Horizon (2026 Targets)

$65.00
Bull Case (+144%)
AI Boom
Volume Ramp
📊 Valuation Calculation:
• 2026E EPS: $2.60 × P/E: 25.0x = $65.00
🚀 Key Assumptions:
AI orders surge • Multiple hyperscalers adopt wafer-level burn-in • SiC recovers faster than expected • Revenue >$150M FY26 • Gross margins expand to 55%+
$40.00
Base Case (+50%)
Steady Progress
Gradual Ramp
📊 Valuation Calculation:
• 2026E EPS: $1.60 × P/E: 25.0x = $40.00
⚖️ Key Assumptions:
2-3 AI customers in production • SiC stabilizes H2 FY26 • Revenue $95-105M FY26 • Gross margins 48-50% • Backlog builds to $30-35M • Profitability returns H2
$12.00
Bear Case (-55%)
Market Failure
Prolonged Losses
📊 Valuation Calculation:
• 2026E EPS: -$0.20 × P/E: N/A = $12.00 (0.4x P/S on $90M revenue)
🔻 Key Assumptions:
AI customers delay production indefinitely • SiC deteriorates further • GaN/photonics too small to matter • Revenue declines to $60-70M FY26 • Unprofitable all year • Backlog continues declining
Bottom Line for Retail Investors
🎯
AI Market Opportunity
World's first wafer-level AI burn-in at major OSAT • Only company with both wafer & package solutions • AI was 40% of FY25 revenue • Lead hyperscaler accelerating orders • Engaging with all major AI players
🔄
Strategic Diversification
Expanding beyond SiC into GaN power, silicon photonics for optical interconnects, hard disk drives, and memory • Shipped FOX-XP to major photonics customer • First GaN production customer secured • Dramatically expanded TAM
📈
Upside Catalysts
Q1 beat consensus • $17.5M backlog building • 5x capacity expansion complete • $24.7M cash, no debt • After-hours selloff potential entry point • World's first wafer-level AI systems at major OSAT • Lead hyperscaler accelerating orders
⚠️
Risk Factors
No guidance due to tariff uncertainty • Q1 revenue down YoY • Gross margin compressed to 37.5% • Backlog $17.5M still low • AI wins mostly evaluations, production timing unclear • SiC recovery delayed to H2/FY27 • Small 136-employee company vs large ATE competitors

📊 Q1 FY2026 "AI Acceleration & Facility Expansion" Performance

$11.0M Q1 Revenue Beats Street, Non-GAAP EPS $0.01 Beats Consensus, Stock -16% AH on No Guidance, Backlog $17.5M, Facility Capacity 5x

💵
$11.0M
Q1 FY2026 Revenue
Beat Street Consensus
📊
$0.01
Q1 Non-GAAP EPS
Beat Consensus
📦
$17.5M
YTD Backlog
$15.5M + $2M Q2 Bookings
💰
$24.7M
Cash & Equivalents
No Debt, Strong Balance

📞 Key Q1 FY2026 Earnings Highlights

🤖
Big Customer Keeps Ordering
Their biggest AI customer ordered more machines with faster delivery times • Customer is speeding up their own AI chip development • 10 companies came to see AEHR's new automated system demo • Testing happening at major testing facility
🌐
First Ever AI Wafer Testing
Shipped first-ever wafer-level AI testing systems to major chip packaging company • Started paid trial with top AI chip maker • Building partnership with world's leading packaging company • More customers talking about high-volume orders
⚡
AI Now 40% of Sales
AI business went from nothing to 40% of revenue in one year • CEO expects more AI growth this year • Talking to ALL major AI companies • Their testing catches real defects • Can test chips in hours instead of days
🏭
Factory Ready for Big Orders
Finished $6.3M factory upgrade • Can now build 5x more machines • No more money needed for expansion • Everything now on one floor • Customers came to see the new facility

📍 CEO Says: "AI was 40% of our business last year from zero. We think it's going to grow this year." CEO says they're talking to every major AI player - Microsoft, Amazon, Google, Meta, chip makers, and GPU companies. "We're really at the leading edge of this market. This is really happening to us."

🎯 Q1 Numbers: $11M revenue beat estimates even though Q1 is always slow • Made $2.6M from consumables showing ongoing business • Profit margins at 37.5% (lower due to small volume) • Shipped systems to hard disk drive leader • Got $1.3M tax credit from IRS

🚀 Expanding Beyond SiC: Upgraded major customer's system to handle 2x more chips at once for optical networking • Shipped systems to hard drive maker with more orders coming • Got first automotive customer for GaN power chips • Shipped 18-wafer system for EV inverters

🔮 New Flash Memory Opportunity: Working with memory companies on new "high-bandwidth flash" tech for AI • This new memory holds 8-16x more data than current tech at same cost • Needs way more power to test (AEHR's specialty) • CEO says "none of their old tools will work" meaning greenfield opportunity • Could help both AI and memory businesses

🚀 Why AEHR Bulls Are Right
🤖
AI Testing Revolution
AI went 0% to 40% of sales in one year • Talking to all major AI players • World's first wafer-level AI testing • Lead customer reordering fast • Tests in hours vs days
💎
Tech Nobody Else Has
Only solution for 3.5kW per wafer (10x industry standard) • Patented tech • 2,500+ systems worldwide • Testing costs $0.12 per chip
📊
Huge New Markets
AI market 3-5x bigger than SiC • New flash memory 8-16x capacity • Photonics with Nvidia/AMD/Intel • GaN broader than SiC
💰
Strong Balance Sheet
$24.7M cash, zero debt • Factory upgrade complete • 5x capacity ready • Q1 beat estimates • 50%+ margins at scale
🐻 Why AEHR Bears Have Valid Concerns
📉
Revenue Still Unpredictable
Q1 revenue down YoY • No guidance given • Backlog only $17.5M • Big equipment makes revenue lumpy • Can't predict order timing
⏰
AI Orders Not Here Yet
AI wins "second half at earliest" • Top trial not production until late 2026 • Many just doing qualification not production • Only trials announced, no real orders
⚠️
Execution Challenges
Only 136 employees juggling too many markets • Flash project "slower than expected" • Margins fell to 37.5% from 54.7% • Competing vs giants with more resources
🎢
Market Not Convinced
Stock down 16% after beat • $780M cap on $59M sales = 13x • Investors want orders not promises • SiC recovery pushed to H2/FY27 • CEO "scrambling as fast as we can"

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.