Q1 FY27 · the quarter AEHR reports
Sales
PricedIn$28.0M$18.0M – $37.0M
$18.0M$24.0M$28.0M$31.5M$37.0M
adjusted EPS
PricedIn$0.14$0.02 – $0.26
$0.02$0.09$0.14$0.19$0.26
Middlethe forecast50% range1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside.80% range1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.
All seven AI analysts expect a sales recovery, but differ over how much Sonoma equipment ships immediately. Analyst E is highest on sales; Analyst G is lowest on earnings because fewer shipments must cover substantial operating costs, while Analyst D gets more profit from stronger volume and restrained costs.
The analysts expect first-quarter fiscal 2027 sales of $28,000,000.00 as existing orders begin shipping.
Sales$28.0M+155% on Q1 FY26 ($11.0M)50% range$24.0M – $31.5M80% range$18.0M – $37.0M
Adjusted EPS$0.14+1300% on Q1 FY26 ($0.01)50% range$0.09 – $0.1980% range$0.02 – $0.26
Investment and cash generation
Base case
Capital spending$1.00M
Free cash flow$0.94M
Free cash flow: operating cash flow less capital spending.
Equipment and tooling support current production, not a new factory. Inventory for second-quarter deliveries and slower customer collections absorb cash now. Base cash capital spending is $1,000,000.00 and free cash flow is $940,000.00. Free cash flow means operating cash flow less capital spending, not an adjusted company cash measure. Spending allocations are analyst estimates; unallocated spending stays unallocated.1 of 7
- Analyst FBuilding Sonoma systems ahead of second-quarter deliveries and higher receivables.
The first quarter begins the step-up from orders to deliveries. The analysts expect AI processor testing to drive the increase, with initial Sonoma shipments adding to wafer-level systems and the contactors used to connect chips during testing.
Management said most Sonoma deliveries would fall in the second quarter. That leaves the first quarter sensitive to the timing of a few expensive systems: the annual report warns that sales often arrive near quarter-end.
The central sales forecast implies growth from the preceding quarter of +49%. Existing manufacturing space and qualified outside assembly support shipments without requiring another factory expansion.
Analyst E allows more early Sonoma sales, while Analyst G leaves more deliveries for later and carries substantial operating costs. Cash is less settled than earnings: inventory for the coming shipment peak and unpaid customer bills can absorb the profit.
Adjusted earnings per share of $0.14 depend on higher sales covering operating costs. Interest income helps, while accounting taxes and additional employee shares limit the gain.
Sales by quarter
Q3 FY25$18.3M+142%
Q4 FY25$14.1M−15%
Q1 FY26$11.0M−16%
Q2 FY26$9.9M−27%
Q3 FY26$10.3M−44%
Q4 FY26$18.8M+34%
Q1 FY27$28.0M+155%
Each percent is on the same quarter a year earlier. The last row is the PricedIn forecast.
The quarter forecast, line by line
The lines as the company's statement shows them. The forecast columns are the tab's PricedIn forecast, one analyst's whole plan, the analyst nearest the middle of the seven on both sales and earnings per share, so the lines add up to the numbers above. Sales growth is the change on the same quarter a year earlier. Earnings per share is the headline's: the company's own for the reported quarter, and for a forecast quarter that analyst's own, worked from its lines with the company's adjustments. GAAP EPS is net income over diluted shares; under it, each adjustment is its effect on net income after tax, to adjusted net income and the adjusted figure: for a forecast as that analyst states it, for a reported period from the company's own table where we hold it, and — where we do not.
What it rests on
- Delivery timing
- Most Sonoma deliveries are scheduled for the following quarter.
And then the bulk of them actually get delivered in the second quarter.
July earnings call - Quarter-end exposure
- A few late shipments can change the quarter.
A substantial portion of net sales typically is realized near the end of each quarter.
Annual report risk factors - Assembly readiness
- Outside production qualified for direct customer shipments.
During its fourth fiscal quarter, the Company signed off on the qualification of direct shipments of Sonoma systems to customers.
Annual report business review - Limited expansion
- Management did not anticipate more near-term facility expansion.
Importantly, we do not expect and anticipate additional capital expenditures for facility expansion in the near future.
October 2025 earnings call
Scenarios Explained: Base, Low, and High
Basethe middle forecast
Q1-FY2027
Sales$28.0M
Adjusted EPS$0.14
Capital spending$1.00M
Free cash flow$0.94M
FCF walk and spending detail
Forecast dollars. Free cash flow is operating cash flow less capital spending.
| GAAP net income | $2.44M |
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| Stock-based compensation expense | $2.10M |
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| Depreciation and amortization of intangibles and right-of-use assets | $0.80M |
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| Deferred income taxes | $0.60M |
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| Receivables and inventory up, payables and deferred revenue up | −$4.00M |
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| Operating cash flow | $1.94M |
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| Less capital spending | −$1.00M |
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| Free cash flow | $0.94M |
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- GAAP net income
- Forecast assumption: $28.0 million of sales at 43.9 percent gross margin, $10.3 million of operating expense and $1.05 million of interest income, less a 20 percent book tax charge. Chosen because it is the same income that produces the $0.14 adjusted earnings per share after adding $2.4 million of stock compensation and acquisition amortization.
- Stock-based compensation expense
- Forecast assumption at the recent quarterly run rate of about $1.9 million, rising with headcount.
- Depreciation and amortization of intangibles and right-of-use assets
- Forecast assumption at the recent run rate of about $0.9 million a quarter.
- Deferred income taxes
- Forecast assumption: the book tax charge is non-cash while cash taxes are minimal, so most of the charge is added back.
- Receivables and inventory up, payables and deferred revenue up
- Forecast assumption: a quarter of about 2.6 times the year-earlier revenue builds receivables and inventory faster than payables and customer deposits.
Capital spending
The Fremont remodel is finished, so capital spending is modest and mostly small equipment and tooling for the existing floor; about sixty percent of the quarter's spending cannot be tied to a disclosed project and is left unallocated rather than invented.
| principal manufacturing facility located in Fremont, California | $0.40M |
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| Unallocated capital spending | $0.60M |
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| Total capital spending | $1.00M |
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principal manufacturing facility located in Fremont, California Forecast assumption: a small amount of test equipment, tooling and clean-room upkeep for the existing plant, not the company's plan.
Final assembly and testing are performed at the Company’s principal manufacturing facility located in Fremont, California.
Cash used in operating activities was $3.3 million for fiscal 2026.
Three ways the base case happens
These levers explain the outcome together.
- **Initial Sonoma deliveries arrive.** Customer requests called for shipments to begin in the first quarter. Accepted systems add sales and help cover fixed costs this quarter; building the remaining order absorbs cash before the larger delivery peak.
WatchConfirmation of accepted Sonoma shipments in the 2 November 2026 release.
Analyst reasoning
- Analyst EThe customer forecast and requested first-quarter shipments support the steep fiscal 2027 ramp and early Sonoma revenue, later confirmed by the record backlog.
- **Wafer-level customers keep buying.** Existing processor and optical programs underpin the backlog. Systems and associated contactors add sales alongside Sonoma. Their mix supports earnings, without assuming a memory production windfall this quarter.
WatchContinued wafer-level system and contactor shipments in the first-quarter results.
Analyst reasoning
- Analyst GThe existing processor and optical programs convert much of backlog into revenue.
- **Costs rise less than sales.** Completed facilities limit new construction; operating spending still supports the ramp. More gross profit covers engineering, service and administration. Equipment purchases remain modest, but receivables and inventory prevent all earnings becoming cash.
WatchOperating costs and inventory disclosed with the first-quarter results.
Analyst reasoning
- Analyst EOperating leverage with modest capital spending
Sales of $28,000,000.00 and adjusted earnings per share of $0.14 require initial Sonoma deliveries, continuing wafer-level demand and costs that remain controlled as production rises. The base does not bring the main second-quarter shipment peak forward. Cash generation also needs collections and supplier funding to offset part of the inventory build.
Highabout 1 chance in 10 of better
Q1-FY2027
Sales$37.0M+32% vs base
Adjusted EPS$0.26+86% vs base
Capital spending$1.30M
Free cash flow$2.19M
FCF walk and spending detail
Forecast dollars. Free cash flow is operating cash flow less capital spending.
| GAAP net income | $6.07M |
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| Stock-based compensation expense | $2.10M |
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| Depreciation and amortization of intangibles and right-of-use assets | $0.80M |
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| Deferred income taxes | $1.52M |
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| Receivables and inventory up, payables and deferred revenue up | −$7.00M |
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| Operating cash flow | $3.49M |
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| Less capital spending | −$1.30M |
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| Free cash flow | $2.19M |
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- GAAP net income
- Forecast assumption: $37.0 million of sales at 45.5 percent gross margin and $10.3 million of operating expense, less a 20 percent tax charge; this income supports the $0.25 high-case adjusted earnings per share.
- Stock-based compensation expense
- Forecast assumption, same run rate for the quarter.
- Depreciation and amortization of intangibles and right-of-use assets
- Forecast assumption.
- Deferred income taxes
- Forecast assumption: the tax charge is non-cash.
- Receivables and inventory up, payables and deferred revenue up
- Forecast assumption: a much larger shipment quarter consumes more working capital.
Capital spending
Higher sales require slightly more equipment and tooling; a large part of the spending cannot be tied to a disclosed project and is left unallocated.
| principal manufacturing facility located in Fremont, California | $0.52M |
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| Unallocated capital spending | $0.78M |
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| Total capital spending | $1.30M |
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principal manufacturing facility located in Fremont, California Forecast assumption: more test equipment and tooling as the plant adds a shift.
Final assembly and testing are performed at the Company’s principal manufacturing facility located in Fremont, California.
Cash used in operating activities was $3.3 million for fiscal 2026.
Three ways the high case happens
These levers explain the outcome together; each is not a separate one-in-ten event.
- **Customers take systems earlier.** A few high-value deliveries can move a quarter materially. Earlier acceptance adds current sales and spreads fixed costs more widely. Collections may lag the new receivables.
WatchMore first-quarter systems accepted than the initial delivery cadence suggested.
Analyst reasoning
- Analyst GCurrent customers pull forward capacity
- **Existing AI and optical demand accelerates.** Qualified programs can add production demand without waiting for an entirely new market. Additional systems and contactors raise this quarter's sales and profit; the case does not require later-year memory capacity.
WatchStronger processor and optical deliveries in the first-quarter release.
Analyst reasoning
- Analyst EFaster AI and optical production ramps
- **Mix and factory use improve.** Contactors and higher volume support gross profit. A richer mix and better use of existing production lift earnings. Modest extra tooling and advance inventory consume part of the cash gain.
WatchHigher gross profit alongside stronger deliveries and customer deposits.
Analyst reasoning
- Analyst EHigher consumables mix and manufacturing utilization
Together, earlier deliveries, stronger existing AI and optical demand and better factory use lift sales to $37,000,000.00 and adjusted earnings per share to $0.26. Analyst E stretches furthest, with sales of $42,000,000.00 and adjusted earnings per share of $0.30, on faster production ramps and stronger cash collection supported by deposits. The associated cash case carries capital spending of $1,300,000.00 and free cash flow of $2,190,000.00. More shipments also create more receivables; higher earnings do not eliminate that funding need.
Production capability already exists. The immediate upside is shipping and accepting more current demand, not assigning a later memory ramp to this quarter.
The seven highs run from $34.0M (Analyst B) to $42.0M (Analyst E).
First sign2 November 2026 · after the close · 17:00 ET: stronger accepted deliveries accompanied by better gross profit.
Lowabout 1 chance in 10 of worse
Q1-FY2027
Sales$18.0M−36% vs base
Adjusted EPS$0.02−86% vs base
Capital spending$0.40M
Free cash flow−$4.35M
FCF walk and spending detail
Forecast dollars. Free cash flow is operating cash flow less capital spending.
| Reported-basis net loss | −$2.81M |
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| Stock-based compensation | $1.86M |
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| Depreciation and amortization | $0.70M |
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| Deferred income tax benefit | −$0.20M |
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| Accounts receivable | −$1.00M |
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| Inventories | −$4.00M |
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| Accounts payable and customer deposits | $1.50M |
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| Operating cash flow | −$3.95M |
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| Less capital spending | −$0.40M |
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| Free cash flow | −$4.35M |
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- Reported-basis net loss
- Low-case adjusted loss of $0.02 times 32.6 million basic shares, less $2.161 million add-backs. Negative reported and adjusted income excludes all incremental awards.
- Stock-based compensation
- Forecast equity compensation remains noncash despite weaker sales.
- Depreciation and amortization
- Forecast includes acquired-asset amortization; do not add that separately again.
- Deferred income tax benefit
- Reverse assumed noncash tax benefit, rather than treating it as a receipt.
- Accounts receivable
- Collections trail even a smaller shipment ramp; direct cash-movement estimate.
- Inventories
- Committed components accumulate ahead of delayed deliveries.
- Accounts payable and customer deposits
- Forecast $1 million supplier-credit increase plus $0.5 million deposits; no balancing plug.
Capital spending
Forecast equipment purchases are scaled down with activity and allocated sixty percent to test equipment and forty percent to machinery. These are assumptions, not a company spending plan; development payroll remains an operating expense.
| Test equipment | $0.24M |
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| Machinery and equipment | $0.16M |
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| Unallocated capital spending | $0 |
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| Total capital spending | $0.40M |
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Test equipment Analyst allocation for applications and qualification tools; no company forecast split exists.
Test equipment
Machinery and equipment Analyst estimate for assembly and production equipment; assumes no new large facility build.
Machinery and equipment
Our liquidity and cash flows may also be affected by the timing of large system shipments, investments in inventory and working capital, capital expenditures, acquisition-related cash uses, and investments in product development and market expansion.
Three ways the low case happens
These levers explain the outcome together; each is not a separate one-in-ten event.
- **Sonoma acceptance slips.** Late system deliveries can miss the accounting cutoff. Sales and earnings fall this quarter even if the order survives. Finished equipment remains in inventory, delaying cash recovery.
WatchUnaccepted or postponed systems in the 2 November 2026 update.
Analyst reasoning
- Analyst GProduction deliveries and customer acceptance slip
- **Wafer-level shipments disappoint.** Demand depends on a small group of processor customers. A pause removes sales that would otherwise cushion the initial Sonoma ramp, leaving fewer contactors and systems to contribute profit.
WatchA lead customer's orders or deliveries pause.
Analyst reasoning
- Analyst Fno follow-on wafer-level AI orders
- **Fixed costs outlast the shortfall.** Engineering, sales and legal work continue when deliveries move. Lower volume and an unfavorable mix reduce gross profit without an equivalent cost cut. Equipment spending can ease, but inventory commitments keep cash under pressure.
WatchCosts remain firm while inventory rises and sales miss.
Analyst reasoning
- Analyst EFixed operating costs and working-capital investment then compress margins and cash flow
Together, delayed acceptance, weaker wafer-level shipments and poor cost coverage produce sales of $18,000,000.00 and adjusted earnings per share of $0.02. Analyst F goes furthest on sales, to $17,000,000.00, allowing a larger delivery shortfall; Analysts E and G go furthest on adjusted earnings per share, each at −$0.02, with fixed costs persisting. The associated cash case has capital spending of $400,000.00 and free cash flow of −$4,348,000.00, as committed inventory absorbs cash despite fewer shipments.
Orders can be rescheduled with limited penalties, and much of a quarter's sales arrives near its end. This is a joint delivery-and-profit setback, not three separate one-in-ten events.
The seven lows run from $17.0M (Analyst F) to $24.0M (Analyst B).
First sign2 November 2026 · after the close · 17:00 ET: delayed first-quarter acceptance or inventory built ahead of unshipped orders.
Surfaced outlier views
For Q1-FY2027 the seven analysts sit within 7.1% of the PricedIn number on sales and within 21.4% on adjusted EPS. The furthest, and why:
Analyst E · Q1-FY2027: sales $30.0M, the highest of the seven (PricedIn $28.0M)
WhyAnalyst E gives more weight to customers requesting initial Sonoma shipments in this quarter and to already-qualified outside assembly. Its stronger sales do not produce the highest earnings: operating expenses of $10,844,000.00 absorb part of the benefit, and it includes accounting tax and employee-share dilution.
The customer forecast and requested first-quarter shipments support the steep fiscal 2027 ramp and early Sonoma revenue, later confirmed by the record backlog.
Analyst G · Q1-FY2027: adjusted EPS $0.11, the lowest of the seven (PricedIn $0.14)
WhyAnalyst G leaves the main Sonoma deliveries for the following quarter and applies an execution discount to the first shipment wave. Operating expenses of $10,300,000.00 leave little operating profit on its smaller sales base; it also includes tax expense rather than a recurring tax benefit.
The evidence does not establish a cash collection schedule that would make me replace my first-quarter cash outflow with a cash inflow.
Analyst C · Q1-FY2027: sales $27.0M and adjusted EPS $0.14, near the PricedIn numbers of $28.0M and $0.14, by a different route
WhyAnalyst C reaches near-central sales and earnings through weaker operating profit but a tax benefit. Its operating income is $1,275,000.00, while its signed income-tax line is −$250,000.00; that benefit supports earnings despite less operating profit than the central plan.
I assumed only a small continuing benefit in fiscal 2027 and 2028 and a neutral tax by fiscal 2029; if benefits persist at the recent pace, adjusted earnings per share would beat my middle.
Watch
2 November 2026 · after the close · 17:00 ET: check accepted Sonoma deliveries, wafer-level sales, operating costs and inventory. A shipment beat with rising unpaid bills is different from a cash-generation beat.
Q2 FY27 · the quarter after
Sales
PricedIn$42.0M$30.0M – $60.0M
$30.0M$38.0M$42.0M$52.0M$60.0M
adjusted EPS
PricedIn$0.27$0.10 – $0.46
$0.10$0.20$0.27$0.36$0.46
Middlethe forecast50% range1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside.80% range1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.
The analysts agree that Sonoma makes this the major shipment quarter, and most sales forecasts are close together. Earnings differ much more: Analyst A discounts package-level margins, Analyst C retains a tax benefit, and Analysts F and D allow component pressure while relying on volume to cover overhead.
The analysts expect second-quarter fiscal 2027 sales of $42,000,000.00 as the main Sonoma deliveries arrive.
Sales$42.0M+325% on Q2 FY26 ($9.9M)50% range$38.0M – $52.0M80% range$30.0M – $60.0M
Adjusted EPS$0.27−775% on Q2 FY26 (−$0.04)50% range$0.20 – $0.3680% range$0.10 – $0.46
Investment and cash generation
Base case
Capital spending$0.70M
Free cash flow$5.80M
Free cash flow: operating cash flow less capital spending.
Test tools, contactor machinery and Taiwan support fit-out serve the delivery peak and customer evaluations. Shipping inventory releases cash, but receivables and used customer deposits offset that benefit. Base cash capital spending is $700,000.00 and free cash flow is $5,800,000.00. This is operating cash flow less capital spending, not adjusted company cash. Category allocations and unallocated amounts are analyst estimates.1 of 7
- Analyst BNet working capital outflow as accounts receivable increases with the surge in second-quarter revenue to $42.0 million and customer deposits convert into recognized revenue, partially offset by inventory reductions as Sonoma systems ship.
The second quarter is the shipment test. Management placed most of the large Sonoma package-level program here, so the forecast depends more on customer acceptance and delivery schedules than on finding an entirely new customer.
These machines bring volume but a less favorable profit mix than wafer-level systems and contactors. The July call also warned of higher prices for some power supplies; the analysts do not treat that component increase as an increase in every system's entire cost.
The central forecast has gross margin of +42% and operating margin of +15%. Higher sales help cover overhead even when package-level mix restrains gross margin.
Analyst A applies the strongest package-mix penalty among the detailed quarter plans. Analyst C instead combines stronger gross profit with a tax benefit, producing substantially higher earnings on a similar delivery schedule. Inventory leaving the factory helps cash, but new customer receivables still consume it.
Adjusted earnings per share of $0.27 require the shipment peak to cover rising operating costs. The earnings disagreement is chiefly about product mix, component costs and whether taxes are an expense or a benefit.
What it rests on
- Delivery concentration
- The bulk of Sonoma deliveries is expected this quarter.
And then the bulk of them actually get delivered in the second quarter.
July earnings call - Component pressure
- Some power-supply suppliers raised prices.
they've raised their prices 40% if you want to get them.
July earnings call - Acceptance risk
- Customers can reschedule orders with limited penalties.
Most customer purchase orders are subject to cancellation or rescheduling by the customer with limited penalties, and, therefore, backlog at any particular date is not necessarily indicative of actual sales for any succeeding period.
Annual report risk factors - Outside assembly
- Direct Sonoma customer shipments were qualified.
During its fourth fiscal quarter, the Company signed off on the qualification of direct shipments of Sonoma systems to customers.
Annual report business review
Scenarios Explained: Base, Low, and High
Basethe middle forecast
Q2-FY2027
Sales$42.0M
Adjusted EPS$0.27
Capital spending$0.70M
Free cash flow$5.80M
FCF walk and spending detail
Forecast dollars. Free cash flow is operating cash flow less capital spending.
| Net income (loss) | $6.98M |
|---|
| Stock-based compensation expense | $1.90M |
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| Depreciation and amortization | $0.88M |
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| Deferred income taxes | $0.30M |
|---|
| Working capital and other operating assets and liabilities | −$3.56M |
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| Operating cash flow | $6.50M |
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| Less capital spending | −$0.70M |
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| Free cash flow | $5.80M |
|---|
- Net income (loss)
- Base case GAAP net income for the second quarter of fiscal 2027, consistent with $9.18 million of non-GAAP net income ($0.27 per diluted share on 34.0 million shares) less $1.90 million of stock-based compensation and $0.296 million of intangible amortization.
- Stock-based compensation expense
- Non-cash employee and director equity compensation expense for the second quarter.
- Depreciation and amortization
- Non-cash depreciation of property and equipment (~$0.40 million), intangible amortization ($0.296 million), and right-of-use asset amortization (~$0.184 million).
- Deferred income taxes
- Non-cash deferred income tax provision utilizing federal and state net operating loss carryforwards.
- Working capital and other operating assets and liabilities
- Net working capital outflow as accounts receivable increases with the surge in second-quarter revenue to $42.0 million and customer deposits convert into recognized revenue, partially offset by inventory reductions as Sonoma systems ship.
Capital spending
We forecast $0.70 million of capital expenditures in the second quarter of fiscal 2027, allocated across Note 3 categories with $0.07 million unallocated for furniture, fixtures, and general capital additions.
| Test equipment | $0.32M |
|---|
| Machinery and equipment | $0.21M |
|---|
| Leasehold improvements | $0.10M |
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| Unallocated capital spending | $0.07M |
|---|
| Total capital spending | $0.70M |
|---|
Test equipment Forecast assumption for test equipment supporting artificial intelligence and memory benchmark activities in the second quarter.
Test equipment 3,523 2,898
Machinery and equipment Forecast assumption for WaferPak contactor assembly equipment.
Machinery and equipment 4,375 3,846
Leasehold improvements Forecast assumption for completion of the Hsinchu, Taiwan support office fit-out.
Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Leasehold improvements are amortized over the lesser of their estimated useful lives or the term of the related lease. Furniture and fixtures, machinery and equipment, and test equipment are depreciated on a straight-line basis over their estimated useful lives. The ranges of estimated useful lives are generally as follows:
Although AIR remains a capital-like company with only $2.1 million in capital expenditures in fiscal 2026, this enhanced financial position provides the working capital and flexibility to pursue larger customer opportunities and scale production to meet customer demand.
Cash, cash equivalents, and restricted cash were $116.5 million as of May 29, 2026, compared to $26.5 million as of May 30, 2025. We believe that our existing cash resources and anticipated funds generated from operations will satisfy our cash requirements to fund our operating activities, capital expenditures and other obligations for the next twelve months.
Three ways the base case happens
These levers explain the outcome together.
- **The main Sonoma order ships.** Management explicitly concentrated deliveries in the second quarter. Accepted deliveries drive the sales peak and spread overhead across more machines. Finished inventory falls, while unpaid invoices absorb cash.
WatchThe 2 November 2026 outlook confirms the delivery schedule.
Analyst reasoning
- Analyst GThe second quarter carries the heaviest package-level deliveries
- **Wafer-level products cushion package mix.** Sonoma has lower margins and faces power-supply cost pressure. Continuing wafer-level and contactor shipments support gross profit, but do not remove the package-heavy quarter's margin penalty.
WatchA product-mix update alongside the second-quarter outlook.
Analyst reasoning
- Analyst FSonoma carries lower product margin than wafer-level systems and WaferPaks.
- **Overhead grows more slowly than deliveries.** Engineering, service, commissions and legal costs remain necessary. The larger gross-profit pool lifts earnings despite those costs. Routine tools support production; receivables delay conversion of profit into cash.
WatchOperating spending stays controlled as shipments accelerate.
Analyst reasoning
- Analyst AOperating cost grows by roughly forty percent as engineering, service and commissions are added, holding non-GAAP pre-tax margin near twenty percent
Sales of $42,000,000.00 and adjusted earnings per share of $0.27 require the concentrated Sonoma delivery schedule to hold, wafer-level products to provide some mix support and operating costs to grow more slowly than gross profit. Inventory conversion helps fund equipment purchases, but customer collections must keep pace enough to prevent receivables absorbing the whole profit.
Highabout 1 chance in 10 of better
Q2-FY2027
Sales$60.0M+43% vs base
Adjusted EPS$0.46+70% vs base
Capital spending$0.85M
Free cash flow$8.15M
FCF walk and spending detail
Forecast dollars. Free cash flow is operating cash flow less capital spending.
| Net income (loss) | $9.65M |
|---|
| Stock-based compensation expense | $1.95M |
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| Depreciation and amortization | $0.90M |
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| Deferred income taxes | $0.45M |
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| Working capital and other operating assets and liabilities | −$3.95M |
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| Operating cash flow | $9.00M |
|---|
| Less capital spending | −$0.85M |
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| Free cash flow | $8.15M |
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- Net income (loss)
- High case GAAP net income for the second quarter of fiscal 2027, consistent with $11.90 million of non-GAAP net income ($0.35 per diluted share on 34.0 million shares) less $1.95 million of stock-based compensation and $0.296 million of intangible amortization.
- Stock-based compensation expense
- Non-cash stock-based compensation expense in the upside case.
- Depreciation and amortization
- Non-cash depreciation, intangible amortization ($0.296 million), and right-of-use asset amortization.
- Deferred income taxes
- Non-cash deferred tax provision utilizing net operating loss carryforwards.
- Working capital and other operating assets and liabilities
- Higher accounts receivable increase on $49.0 million of second-quarter revenue, partially offset by inventory drawdowns and new customer deposits.
Capital spending
In the upside case, second-quarter capital expenditures are $0.85 million, with $0.08 million unallocated for furniture and fixtures.
| Test equipment | $0.39M |
|---|
| Machinery and equipment | $0.26M |
|---|
| Leasehold improvements | $0.12M |
|---|
| Unallocated capital spending | $0.08M |
|---|
| Total capital spending | $0.85M |
|---|
Test equipment Additional lab test equipment for new pilot production programs.
Test equipment 3,523 2,898
Machinery and equipment Expanded WaferPak contactor tooling.
Machinery and equipment 4,375 3,846
Leasehold improvements Taiwan office and Fremont lab improvements.
Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Leasehold improvements are amortized over the lesser of their estimated useful lives or the term of the related lease. Furniture and fixtures, machinery and equipment, and test equipment are depreciated on a straight-line basis over their estimated useful lives. The ranges of estimated useful lives are generally as follows:
Although AIR remains a capital-like company with only $2.1 million in capital expenditures in fiscal 2026, this enhanced financial position provides the working capital and flexibility to pursue larger customer opportunities and scale production to meet customer demand.
Cash, cash equivalents, and restricted cash were $116.5 million as of May 29, 2026, compared to $26.5 million as of May 30, 2025. We believe that our existing cash resources and anticipated funds generated from operations will satisfy our cash requirements to fund our operating activities, capital expenditures and other obligations for the next twelve months.
Three ways the high case happens
These levers explain the outcome together; each is not a separate one-in-ten event.
- **More scheduled systems reach acceptance.** The company has qualified direct shipments from outside assembly. More accepted Sonoma systems add current sales and fixed-cost coverage. Receivables rise as customers receive the equipment.
WatchThe outlook signals a larger accepted shipment peak.
Analyst reasoning
- Analyst GCurrent customers pull forward capacity
- **Wafer-level orders convert faster.** The completed benchmark creates a possible new production customer. Pilot or follow-on systems and contactors add sales in the quarter if they ship and qualify in time; a benchmark alone is insufficient.
WatchA production purchase order with near-term delivery dates.
Analyst reasoning
- Analyst ENew production wins from benchmark customers
- **Mix offsets component inflation.** Wafer-level products and contactors can earn more than package systems. More profitable products and better utilization lift earnings above the volume-only case. Added tools support output, while deposits can partly fund receivables.
WatchStronger contactor mix and cash deposits alongside shipments.
Analyst reasoning
- Analyst Gwith higher throughput and mix overcoming component inflation.
Jointly, a fuller Sonoma delivery peak, stronger wafer-level orders and better mix lift sales to $60,000,000.00 and adjusted earnings per share to $0.46. Analyst A takes shipment volume furthest, with sales of $63,000,000.00, combining more deliveries with a better mix than its base. Analyst C takes adjusted earnings per share furthest, to $0.55, retaining more favorable profit and tax assumptions. The associated cash case has capital spending of $850,000.00 and free cash flow of $8,150,000.00. Extra equipment supports output, while larger receivables still require funding.
Outside assembly makes extra deliveries possible, but capacity alone is not an order. Customers must request, accept and ultimately pay for the added systems.
The seven highs run from $49.0M (Analyst B) to $63.0M (Analyst A).
First sign2 November 2026 · after the close · 17:00 ET: a stronger shipment outlook, followed by production orders during the quarter.
Lowabout 1 chance in 10 of worse
Q2-FY2027
Sales$30.0M−29% vs base
Adjusted EPS$0.10−63% vs base
Capital spending$0.90M
Free cash flow$1.00M
FCF walk and spending detail
Forecast dollars. Free cash flow is operating cash flow less capital spending.
| net income | $1.70M |
|---|
| stock-based compensation | $2.10M |
|---|
| depreciation and amortization | $0.70M |
|---|
| deferred income taxes | $0.40M |
|---|
| inventories and receivables | −$3.00M |
|---|
| Operating cash flow | $1.90M |
|---|
| Less capital spending | −$0.90M |
|---|
| Free cash flow | $1.00M |
|---|
- net income
- Low case: sales about 30 million dollars.
- stock-based compensation
- Run rate.
- depreciation and amortization
- Run rate.
- deferred income taxes
- Deferred tax use.
- inventories and receivables
- Inventory held for slipped deliveries.
Capital spending
No company split; left unallocated.
| Unallocated capital spending | $0.90M |
|---|
| Total capital spending | $0.90M |
|---|
Importantly, we do not expect and anticipate additional capital expenditures for facility expansion in the near future.
Three ways the low case happens
These levers explain the outcome together; each is not a separate one-in-ten event.
- **Sonoma acceptance moves later.** The delivery peak depends on one large customer schedule. Missing acceptance removes sales and earnings from this quarter. Completed equipment remains on hand, slowing cash recovery.
WatchManagement moves the concentrated deliveries beyond the quarter ending 25 December 2026.
Analyst reasoning
- Analyst APackaged Sonoma systems slip out of the December quarter
- **Follow-on wafer orders fail to fill the gap.** New demand must qualify and become a firm shipment. Fewer higher-margin systems and contactors leave sales lower and the remaining mix more package-heavy.
WatchWeak follow-on processor orders alongside the delivery update.
Analyst reasoning
- Analyst GSlower follow-on processor and optical system orders
- **Costs remain despite weaker shipments.** Fixed costs do not fall immediately with sales. Component pressure and ongoing development, sales and legal costs reduce earnings. Tool purchases continue even while inventory turns slowly.
WatchOperating costs stay high and inventory fails to decline.
Analyst reasoning
- Analyst EContinued research, sales and legal spending
The combined downside is sales of $30,000,000.00 and adjusted earnings per share of $0.10. Sonoma acceptance moves later, wafer-level follow-ons fail to fill the gap, and costs remain. Analyst A's larger shipment delay takes sales furthest down, to $27,000,000.00. Analyst E's continued spending and weaker cost coverage take adjusted earnings per share lowest, to $0.05. The associated cash case has capital spending of $900,000.00 and free cash flow of $1,000,000.00. Individual cash outcomes differ because some analysts keep inventory tied up while others assume collections release cash.
A real order can still miss a quarter. The annual report distinguishes backlog from recognized sales, and concentrated deliveries make that distinction especially important here.
The seven lows run from $27.0M (Analyst A) to $35.0M (Analyst B).
First sign2 November 2026 · after the close · 17:00 ET: management postpones Sonoma deliveries in its second-quarter outlook.
Surfaced outlier views
For Q2-FY2027 the seven analysts sit within 7.1% of the PricedIn number on sales and within 29.6% on adjusted EPS. The furthest, and why:
Analyst A · Q2-FY2027: sales $45.0M, the highest of the seven (PricedIn $42.0M)
WhyAnalyst A places the bulk of Sonoma deliveries in this quarter, making its sales stronger than the central forecast but not unique among peers. It also assumes a larger package-mix penalty: gross profit of $17,550,000.00 and operating expenses of $11,400,000.00 limit earnings despite the delivery peak.
The same answer shows most of that package business is lower-margin than wafer-level and consumable revenue.
Analyst C · Q2-FY2027: adjusted EPS $0.35, the highest of the seven (PricedIn $0.27)
WhyAnalyst C combines the same concentrated Sonoma schedule as many peers with stronger gross profit and a continuing tax benefit. Its gross profit is $19,830,000.00 and its signed income-tax line is −$400,000.00. Those assumptions, rather than a uniquely large sales forecast, explain the earnings premium.
I assumed only a small continuing benefit in fiscal 2027 and 2028 and a neutral tax by fiscal 2029; if benefits persist at the recent pace, adjusted earnings per share would beat my middle.
Watch
2 November 2026 · after the close · 17:00 ET: watch the second-quarter delivery outlook and component-cost commentary. Through the quarter ending 25 December 2026, production orders, customer acceptance and receivable collections distinguish the cases.