While revenue missed estimates this quarter, and both margins and cash flows remained pressured, Aehr delivered where it mattered most – bookings and backlog. Q3 bookings rose 500% sequentially to $37.2 million, which Aehr says puts it on track to reach the upper end of its $60 to $80 million forecast for 2H. Aehr is continuing to see solid momentum in Q4 with $12.2 million in bookings to date, taking its effective backlog above $50 million and supporting the revenue inflection now becoming more visible in Q4.
Additionally, Aehr is continuing to expand capacity, tapping into contract manufacturers to support an additional 20 Sonoma systems per month. This comes on top of the capacity expansion we outlined last week in our analysis Aehr Sees 2H Bookings up 4X vs 1H, Supporting Strong FY27 where Aehr explained it could support 20 of both its wafer-level and package-level systems each month if needed. Importantly, Aehr noted this new capacity could be almost immediately available for shipments.
Aehr had broken out prior to earnings, and using technicals we entered the stock. The same will be true for when we exit the stock. This is not a stock we want to be early to enter or late to exit. Knox will cover more in his upcoming webinar.
Bookings up 500% QoQ, Book-to-Bill of 3.5X
As we had covered just last week prior to Q3’s report, Aehr unofficially guided for bookings to rise roughly 4X to $60 to $80 million in 2H FY26, with the company already off to a strong start to potentially exceeding that forecast.
Bookings rose 500% QoQ in fiscal Q3 to $37.2 million, a fresh quarterly record for the company, and driven by the flurry of orders we covered last week, including the $14 million order from its lead AI processor customer placed one day before quarter-end on February 26. Aehr also offered a look at its book-to-bill ratio, noting it exceeded 3.5X in the quarter, reflecting the strong demand it has been seeing recently across AI processors, ASICs and silicon photonics; while this is not typically a metric provided by the company, combined with the bookings and backlog strength, it reinforces the durability of demand and revenue acceleration in FY26.
Aehr also pointed out that in the first five weeks of fiscal Q4, it received an additional $12.2 million in bookings, with this related to its two orders announced in March, including the new major SiPho customer. Aehr also stated that on April 6, it received an order from a brand-new customer for Sonoma for reliability qualification of a new AI processor, though no other details were given. This brings Aehr’s effective backlog to $50.9 million (from Q3’s ending backlog of $38.7 million, up 113% YoY and 228% QoQ), a new record for the company and offering strong visibility into Q4 and early FY27 revenue.
To circle back to the chart we provided last week for bookings and revenue, there are a few new takeaways. Based on management’s commentary to be on the high end of the $60-80 million bookings forecast, or reasonably assumed at $75 million, Aehr’s Q4 bookings would be estimated at $37.8 million, up less than 2% QoQ. Given that Q3 had seen $12.2 million in bookings in five weeks, there will need to be some acceleration through the end of May, or a few larger orders coming in.
Additionally, we do also see the first sign of revenue inflecting in Q4, with Aehr’s maintenance of 2H revenue guidance of $25 to $30 million implying $17.2 million at midpoint. This still leaves a >$20 million difference between estimated bookings and revenue to flow through to backlog, setting the stage for a strong acceleration into the first half of FY27 as this backlog ships. Further supporting this was commentary we detailed last week on some of the recent orders shipping in FQ1/second half of CY2026, with the AI ASIC customer forecasting “substantial expansion of Sonoma systems purchases beginning in the second half of calendar 2026 and continuing into '27.”
Brief Customer Update
While there have been no major new updates since last week, aside from the limited details on the April 6 order noted above, there were a couple of comments from management around AI and SiC that differed a bit from last quarter’s call.
Aehr said it is actively engaged with multiple additional AI processor companies on benchmarking, and expects “meaningful progress” to be made, though with no clear timeline. Management also said that they have several companies ranging from AI accelerators, edge processors, and CPUs that are providing roadmaps on devices and asking about WLBI capabilities, suggesting there could be some new future engagements or potential orders down the road. Aehr also noted that the benchmark evaluation with a top-tier AI processor supplier is making good progress, but taking longer than expected.
On memory, Aehr said they are in discussions with key HBM suppliers, and “seeing the added potential for HBM insertions with our FOX multi-wafer test and burn-in system road map that extends to flash, high-bandwidth flash, DRAM and HBM memories,” with these opportunities expected to drive orders in FY27 that ramp in FY28.
For ASICs, CEO Gayn Erickson said he was “surprised” at how many “ASIC suppliers don't do production burn-in yet or are talking about doing it,” estimating it could be only 5% or 20% that actually get burnt-in. These comments imply that the ASICs opportunity could be increasingly large if burn-in adoption accelerates, as Aehr’s ASICs customer is one of the key anchors to its strong bookings and FY27 growth forecast.
On SiC, Aehr noted this quarter that they are seeing an uptick in activity and customer forecasts, particularly from Japanese and German OEMs for upcoming EV launches. Management said that while they are “not yet counting on significant revenue from this segment to return yet,” they believe SiC “could still be a very good performing segment for us next year.”
Aehr Taking Capacity Another Level Higher via Contract Manufacturing
Aehr’s comments on capacity were some of the most important from last quarter, notably that management highlighted they had the capabilities to ship 20 systems a month at either wafer or package-level and could extend that to 20 of each per month as needed. Commentary from Q3 implied that Aehr’s Fremont facility is capable of supporting that itself, with Aehr now moving to contract manufacturing for an additional leg higher in capacity.
This quarter, CEO Gayn Erickson explained that “in addition to our Fremont expansion, this quarter, we'll begin shipping Sonoma systems from one of our current contract manufacturers, adding capacity of more than 20 additional Sonoma systems per month. This meaningfully increases our ability to support future growth.” Erickson further clarified that Aehr the contract facility would support larger volume orders of Sonoma SKUs, while Fremont would still manufacture both Sonoma and FOX products.
Simply put, turning to these two contract manufacturers for additional production will move Sonoma’s monthly production curve up to 40 per month. One reason for this is that packaged-part engagemetns are implied to be easier to secure, and also can be as large or larger than wafer-level: “the ASP of a production order set in wafer-level burn-in can be $10 million to $20 million in an order, let's say, okay? Package-level can be that big or bigger, too, okay? So when they come in, it looks like, oh, right now, we see demand on both significant. Now the engagement and the work to get a wafer-level burn-in is definitely harder than package level.” This is key as Aehr could now secure and support more large-scale Sonoma deals with a faster shipping cadence, quickly supporting revenue upside.
While Aehr does not publicly disclose pricing, the $5.5 million order from last quarter for multiple systems implies a reasonable range could be around $1 million for a rough estimate of what this capacity could support; at that estimate, this would be around $40 million per month or $480 million annually. This also does not include the potential wafer-level revenue opportunity that we estimated last week to be as high as $960 million to $1.2 billion at full scale each month.
Most importantly, Aehr expects this uplift in Sonoma capacity to immediately be available, with the first products ready to ship to customers this quarter (aka May), with management wanting the contract manufacturers to be ready to ship in full volume by the summer when Sonoma is expected to ramp.
Quick TAM Note
It’s important to share some of Aehr’s brief discussions on its TAM and growth opportunities from more powerful chips, as it was again hinted that Aehr could potentially vault to hundreds of millions in revenue in the future.
As we have covered in detail in our power analysis, Why Power is Critical for Data Centers and their Hyperscaler Customers, GPU generations are getting increasingly more powerful with each cycle. Aehr says that this trend, including the upcoming chips on Nvidia’s roadmap, “break the current tools, and so there's a continuous road map” for Aehr’s solutions, such as Sonoma, which is continuously adapting to support higher power and higher current.
CEO Gayn Erickson also believes there is a natural progression for Aehr offering both wafer and package level, as this versatility “becomes particularly valuable when you have like a package that has multiple processors in it and all the HBM memory, right? So in those particular ones, I mean, the CoWoS substrate is more expensive than the silicon itself or the processor … So I think there's a progression over time where people will move towards wafer-level on the things they can default to package-level where they can't.”
Overall, Aehr believe that package-level burn in supports a multi-hundred million dollar TAM, while wafer-level is higher. Erickson specifically highlighted memory spend for fabs through 2031 and percentage allocated to test budgets, noting the burn-in allocation could be as high as “multiple billions of dollars per year in the next couple of years on an annual basis.” Given this trend and answering his own question about why Aehr is not at $500 million in revenue , Erickson hinted that Aehr has a “very good opportunity to significantly grow our package-level and wafer-level business across the biggest segments that are driving burn-in,” and why they are increasing capacity to this degree.
Financials
Revenue Growth to Accelerate from FQ4
Aehr’s FQ3 revenue ending February was down (43.7%) YoY and up 4.3% QoQ to $10.3 million, missing estimates by (4.9%). The decline was primarily driven by lower shipments of FOX systems and WaferPaks for wafer-level burn-in business, partially offset by stronger demand for the Sonoma systems and burn-in modules from the company’s hyperscaler customer. Systems revenue was down (46%) YoY and up 16% QoQ to $5.8 million. Contactors revenues, which include WaferPak contactors, were down (49%) YoY and (13%) QoQ to $3.0 million. Aehr added that its consumables/WaferPak business “will consistently be at 30% or more of our total revenue, and our margins will increase as sales of these value-add consumables grow.”
Management reiterated the 2H FY2026 revenue guidance of $25 million to $30 million given during FQ2 results and now expects to be on the high side of the range. The FQ4 revenue estimates have been revised higher by 7.3% since the announcement of results. Analysts expect FQ4 revenue to grow by 22.3% YoY and 67.1% QoQ to $17.2 million. Revenue growth is further expected to accelerate to 44.6% YoY in FQ1, then to 97.8% and 134.4% in the next two quarters.
Looking ahead, due to the strong AI-related demand, the company’s FY2027 revenue is expected to ramp significantly and accelerate to 71.7% YoY to $83.2 million from an expected decline of (17.9%) for FY2026 ending May. While there will be slight changes to these estimates as the management announced during the earnings call that they will change the fiscal year from the last Friday of May to the last Friday of June effective after the fiscal year ends on May 29, 2026.
The company’s new FY2027 will begin on June 27, 2026, and end on June 25, 2027. As a result, there will be one month of financial results from May 30, 2026, to June 26, 2026, which will be reported as a transition period when the company files the 10-Q report in the FQ1 ending September 2026.
Margins
The company’s margins are under pressure due to the lower revenue and unfavourable product mix.
- FQ3 gross profits were $3.4 million or 32.7% of revenue compared to $7.3 million or 39.2% of revenue in the same period last year. The adjusted gross margin was 36.5% compared to 42.7% in the same period last year. The decline was due to lower revenue and a less favorable product mix as last year's quarter included a higher proportion of higher-margin WaferPak revenue.
- FQ3 adjusted operating loss was ($2.5 million) or (24.7%) of revenue compared to an adjusted operating income of $1.5 million or 8.2% of revenue in the same period last year. The decrease in margins was primarily due to lower revenue.
- FQ3 adjusted net loss was ($1.5 million) or (14.8%) of revenue compared to an adjusted net income of $1.98 million or 10.8% of revenue in the same period last year. Management expects to return to profitability on a non-GAAP basis in FQ4.
Adjusted EPS beat of 28.6%
The company’s FQ3 adjusted EPS came at ($0.05) compared to $0.07 in the same period last year and beat estimates by 28.6%. Analysts expect adjusted EPS to be ($0.04) for FQ4, though Aehr expects to return to profitability on an adjusted basis in the quarter.
Looking forward, analysts expect adjusted EPS to be ($0.11) for the FY2026 ending May and improve significantly to $0.13 in FY2027 and $0.26 in FY2028.
Cash Flow and Balance Sheet
The company’s cash flows have been weak due to current losses. However, it should improve in the coming quarters as the revenue is expected to ramp significantly in FY2027.
- FQ3 operating cash outflow was ($3.7 million) or (35.8%) of revenue compared to ($1.6 million) or (8.8%) of revenue in the same period last year.
- FQ3 free cash outflow was ($3.8 million) or (36.5%) of revenue compared to ($3.3 million) or (17.8%) of revenue in the same period last year.
- The company had cash of $36.9 million and no debt at the end of the quarter. During FQ3 the company raised $10.5 million in gross proceeds through the sale of 269,000 shares. Since the end of FQ3, they raised another $19.5 million gross proceeds through the sale of 477,000 shares and thereby increasing the cash to $56.4 million.
- On April 8, the company entered into an equity distribution agreement with William Blair and Craig-Hallum Capital Group, in connection with the offer and sale of up to $60 million of the company’s stock through an at-the-market offering program.
- Inventories were down (3.7%) QoQ to $41.2 million.
Conclusion
Q3’s fundamentals did not improve, yet the signs and signals are flashing for Q4 to be the long-awaited turnaround for Aehr with revenue expected to accelerate sharply to 22.3% YoY and non-GAAP profitability to return.
Bookings surged 500% QoQ to $37.2 million, with Aehr reporting a book-to-bill ratio of 3.5X in the quarter, underscoring the strength of demand. Q4’s bookings to date of $12.2 million take Aehr’s effective backlog to $50.9 million, and combined with the >$20 million gap between implied bookings and revenue in Q4, Aehr is offering strong visibility into the upcoming revenue acceleration into the first part of fiscal 2027. Capacity expansion further supports this with additional capacity of 20 Sonoma systems per month coming online almost immediately.
As stated, we will use technicals to guide or entries or exits with this stock reserved for the Advanced tier, which requires strong risk management discipline.
Damien Robbins, Equity Analyst at I/O Fund contributed to this analysis.
Please note: The I/O Fund conducts research and draws conclusions for the Fund’s positions. We then share that information with our readers. This is not a guarantee of a stock’s performance. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis.
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