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FORM Drops 12% Post Q3 Earnings: Should You Buy the Stock on the Dip?
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Key Takeaways
FORM shares fell 11.65% despite strong Q3 results as weak Q4 guidance raised profitability concerns.
FORM expects Q4 revenues of $285 million, with EPS falling 8.7% sequentially.
FORM's Farmers Branch facility aims for $400M in annual capacity by 2027, supporting AI and HBM demand.
FormFactor (FORM - Free Report) shares dropped 11.65% on Thursday following third-quarter 2026 results despite reporting better-than-expected earnings and revenues. The selloff appears to reflect investor concerns about slowing near-term revenue growth, capacity constraints, normalization of unusually strong gross margins and earnings, and temporary profitability pressures associated with the company’s new Farmers Branch manufacturing facility. Nevertheless, we believe the dip offers an investing opportunity due to rising demand for AI semiconductor testing, expanding opportunities in GPUs and custom ASICs, growing high-bandwidth memory (HBM) complexity, and accelerating adoption of co-packaged optics. So, what should investors do with the stock? Let’s dig deep to find out.
FORM to Remain Under Pressure Due to Weak Q4 Guidance
FormFactor expects fourth-quarter revenues of $285 million, plus or minus $10 million, indicating just 1.6% sequential growth at the midpoint compared with 8.6% growth in the third quarter. The company projects non-GAAP earnings of 95 cents per share, down 8.7% sequentially from $1.04. Non-GAAP gross margin is expected to decline from 56.5% to 54%, while operating expenses are projected to rise from $64.4 million to approximately $69 million. The combination of slower revenue growth, higher operating expenses and declining profitability likely weighed on investor sentiment despite the company’s impressive third-quarter performance.
FormFactor also acknowledged that its existing manufacturing footprint is approaching maximum production capacity after achieving nearly 40% year-over-year revenue growth without significant facility expansion. Although manufacturing efficiency improvements have increased output, opportunities for further productivity gains are diminishing. The new Farmers Branch facility is expected to provide additional capacity, but its production capability will ramp gradually throughout 2027.
The Farmers Branch manufacturing expansion presents near-term execution and profitability challenges. FormFactor expects its 2027 non-GAAP gross margin to remain near the current normalized baseline of 53%, as higher production volumes and operational improvements offset temporary inefficiencies associated with the factory ramp. Moreover, the company expects approximately $25-$30 million in preproduction expenses in 2026, with certain costs shifting from operating expenses to cost of revenues as production begins.
The Zacks Consensus Estimate for fourth-quarter 2026 earnings is pegged at 80 cents per share, unchanged over the past 60 days and indicating 74% growth over the year-ago quarter’s reported figure. The consensus mark for fourth-quarter 2026 revenues is pegged at $278.8 million, suggesting 29.6% growth from the year-ago quarter’s reported figure.
The Zacks Consensus Estimate for 2026 earnings is pegged at $3.05 per share, unchanged over the past 30 days and indicating 134.6% growth over 2025’s reported figure. The consensus mark for 2026 revenues is pegged at $1.03 billion, suggesting 31.7% 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 6.46X compared with the Zacks Computer and Technology sector’s 5.6X. Peers, including Cohu (COHU - Free Report) , Teradyne (TER - Free Report) and KLA (KLAC - Free Report) trade at 3.50X, 7.79X and 11.50X, respectively.
FORM Stock’s Valuation
Image Source: Zacks Investment Research
Facility Expansion & Strong HBM Demand Aids FORM’s Prospect
FormFactor’s nearly 300,000-square-foot Farmers Branch manufacturing facility is a major long-term growth catalyst. The company has completed initial assembly and testing qualifications and shipped its first production probe card to a leading customer. FORM expects the facility to reach approximately $400 million in annualized probe-card production capacity by the end of 2027. The expansion should alleviate existing production constraints and enable FormFactor to address growing opportunities across GPUs, advanced CPUs and custom ASICs. The facility’s modular design also provides flexibility for additional capacity expansion beyond 2027.
The company is positioned to capitalize on rising demand for advanced semiconductor testing as AI workloads drive adoption of high-performance GPUs and hyperscaler-developed custom ASICs. Increasing chip complexity, higher-speed interfaces, rising power density and advanced chiplet packaging architectures are expanding the need for high-performance MEMS probe-card technologies. As Farmers Branch adds capacity, FormFactor expects to gain meaningful market share across GPU and custom ASIC applications in 2027.
Increasing HBM complexity represents another compelling long-term opportunity for FormFactor. Although HBM probe-card revenues declined sequentially in the third quarter because of customer product-mix adjustments, FORM expects continued strong growth supported by development programs for next-generation HBM4E and HBM5 architectures. Higher memory speeds, increasingly complex stacked designs and demanding production-test requirements should support demand for advanced probing solutions. FormFactor’s SmartMatrix DRAM probe-card architecture provides differentiated high-speed testing capabilities with improved productivity and parallelism. The company's strength in final-stack testing also positions it to benefit from evolving HBM architectures, potentially offsetting concerns related to specification changes
These factors are expected to strengthen FORM’s competitive position against broader semiconductor competitors, including Teradyne, Cohu and KLA on a trailing 12-month basis. Shares of Cohu, KLA and Teradyne have returned 124.5%, 38.5% and 63%, respectively, compared with FORM’s 77.4% return.
FORM Stock’s Price Performance
Image Source: Zacks Investment Research
Meanwhile, FormFactor's expanding relationships with leading semiconductor test equipment providers like Teradyne and Advantest strengthen its competitive advantages. Improving operating model provides another reason for long-term optimism. FormFactor expects Farmers Branch to become gross-margin accretive after its initial ramp is completed. The company continues to target a longer-term operating model of $1.6 billion in revenues, 55% gross margin and $5 in non-GAAP earnings per share.
Conclusion
FormFactor’s sharp post-earnings decline appears to be primarily due to near-term earnings normalization and manufacturing capacity limitations rather than a deterioration in underlying semiconductor testing demand. The company’s expanding exposure to AI processors, custom ASICs, advanced HBM architectures and optical interconnect technologies provides multiple avenues for sustained growth. Moreover, the Farmers Branch expansion and improving manufacturing efficiencies strengthen its long-term competitive positioning.
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FORM Drops 12% Post Q3 Earnings: Should You Buy the Stock on the Dip?
Key Takeaways
FormFactor (FORM - Free Report) shares dropped 11.65% on Thursday following third-quarter 2026 results despite reporting better-than-expected earnings and revenues. The selloff appears to reflect investor concerns about slowing near-term revenue growth, capacity constraints, normalization of unusually strong gross margins and earnings, and temporary profitability pressures associated with the company’s new Farmers Branch manufacturing facility. Nevertheless, we believe the dip offers an investing opportunity due to rising demand for AI semiconductor testing, expanding opportunities in GPUs and custom ASICs, growing high-bandwidth memory (HBM) complexity, and accelerating adoption of co-packaged optics. So, what should investors do with the stock? Let’s dig deep to find out.
FORM to Remain Under Pressure Due to Weak Q4 Guidance
FormFactor expects fourth-quarter revenues of $285 million, plus or minus $10 million, indicating just 1.6% sequential growth at the midpoint compared with 8.6% growth in the third quarter. The company projects non-GAAP earnings of 95 cents per share, down 8.7% sequentially from $1.04. Non-GAAP gross margin is expected to decline from 56.5% to 54%, while operating expenses are projected to rise from $64.4 million to approximately $69 million. The combination of slower revenue growth, higher operating expenses and declining profitability likely weighed on investor sentiment despite the company’s impressive third-quarter performance.
FormFactor also acknowledged that its existing manufacturing footprint is approaching maximum production capacity after achieving nearly 40% year-over-year revenue growth without significant facility expansion. Although manufacturing efficiency improvements have increased output, opportunities for further productivity gains are diminishing. The new Farmers Branch facility is expected to provide additional capacity, but its production capability will ramp gradually throughout 2027.
The Farmers Branch manufacturing expansion presents near-term execution and profitability challenges. FormFactor expects its 2027 non-GAAP gross margin to remain near the current normalized baseline of 53%, as higher production volumes and operational improvements offset temporary inefficiencies associated with the factory ramp. Moreover, the company expects approximately $25-$30 million in preproduction expenses in 2026, with certain costs shifting from operating expenses to cost of revenues as production begins.
The Zacks Consensus Estimate for fourth-quarter 2026 earnings is pegged at 80 cents per share, unchanged over the past 60 days and indicating 74% growth over the year-ago quarter’s reported figure. The consensus mark for fourth-quarter 2026 revenues is pegged at $278.8 million, suggesting 29.6% 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 $3.05 per share, unchanged over the past 30 days and indicating 134.6% growth over 2025’s reported figure. The consensus mark for 2026 revenues is pegged at $1.03 billion, suggesting 31.7% 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 6.46X compared with the Zacks Computer and Technology sector’s 5.6X. Peers, including Cohu (COHU - Free Report) , Teradyne (TER - Free Report) and KLA (KLAC - Free Report) trade at 3.50X, 7.79X and 11.50X, respectively.
FORM Stock’s Valuation
Image Source: Zacks Investment Research
Facility Expansion & Strong HBM Demand Aids FORM’s Prospect
FormFactor’s nearly 300,000-square-foot Farmers Branch manufacturing facility is a major long-term growth catalyst. The company has completed initial assembly and testing qualifications and shipped its first production probe card to a leading customer. FORM expects the facility to reach approximately $400 million in annualized probe-card production capacity by the end of 2027. The expansion should alleviate existing production constraints and enable FormFactor to address growing opportunities across GPUs, advanced CPUs and custom ASICs. The facility’s modular design also provides flexibility for additional capacity expansion beyond 2027.
The company is positioned to capitalize on rising demand for advanced semiconductor testing as AI workloads drive adoption of high-performance GPUs and hyperscaler-developed custom ASICs. Increasing chip complexity, higher-speed interfaces, rising power density and advanced chiplet packaging architectures are expanding the need for high-performance MEMS probe-card technologies. As Farmers Branch adds capacity, FormFactor expects to gain meaningful market share across GPU and custom ASIC applications in 2027.
Increasing HBM complexity represents another compelling long-term opportunity for FormFactor. Although HBM probe-card revenues declined sequentially in the third quarter because of customer product-mix adjustments, FORM expects continued strong growth supported by development programs for next-generation HBM4E and HBM5 architectures. Higher memory speeds, increasingly complex stacked designs and demanding production-test requirements should support demand for advanced probing solutions. FormFactor’s SmartMatrix DRAM probe-card architecture provides differentiated high-speed testing capabilities with improved productivity and parallelism. The company's strength in final-stack testing also positions it to benefit from evolving HBM architectures, potentially offsetting concerns related to specification changes
These factors are expected to strengthen FORM’s competitive position against broader semiconductor competitors, including Teradyne, Cohu and KLA on a trailing 12-month basis. Shares of Cohu, KLA and Teradyne have returned 124.5%, 38.5% and 63%, respectively, compared with FORM’s 77.4% return.
FORM Stock’s Price Performance
Image Source: Zacks Investment Research
Meanwhile, FormFactor's expanding relationships with leading semiconductor test equipment providers like Teradyne and Advantest strengthen its competitive advantages. Improving operating model provides another reason for long-term optimism. FormFactor expects Farmers Branch to become gross-margin accretive after its initial ramp is completed. The company continues to target a longer-term operating model of $1.6 billion in revenues, 55% gross margin and $5 in non-GAAP earnings per share.
Conclusion
FormFactor’s sharp post-earnings decline appears to be primarily due to near-term earnings normalization and manufacturing capacity limitations rather than a deterioration in underlying semiconductor testing demand. The company’s expanding exposure to AI processors, custom ASICs, advanced HBM architectures and optical interconnect technologies provides multiple avenues for sustained growth. Moreover, the Farmers Branch expansion and improving manufacturing efficiencies strengthen its long-term competitive positioning.
FormFactor currently sports a Zacks Rank #1 (Strong Buy), which implies that investors should accumulate the stock on the dip. You can see the complete list of today’s Zacks #1 Rank stocks here.