Stock Analysis · Cohu Inc (COHU)

Overview

Cohu is a semiconductor equipment company. In simple terms, it sells the machines, software, contactors, handlers, inspection tools, and related services used to test and inspect chips before they are shipped to customers. Its products help semiconductor manufacturers and outsourced assembly and test providers check whether chips work properly, especially in demanding markets such as automotive, industrial, communications, and computing.

The business is more specialized than large wafer-fabrication equipment companies. Cohu is focused mainly on the “back-end” of the chip production chain: test handling, test interfaces, inspection, and yield-related software. That means its results are closely tied to semiconductor production volumes, customer spending cycles, and product mix in markets where reliability matters.

Based on recent company disclosures, revenue is reported in one operating segment, but it can still be understood through its main business lines:

• Semiconductor test equipment and related systems: approximately 45% to 55% of revenue in recent years. This includes test handlers and other equipment used to automate chip testing.
• Test contactors, probe-related interfaces, and consumables: approximately 25% to 35%. These are recurring-use components that physically connect chips to test systems and usually create a steadier replacement cycle than large equipment sales.
• Aftermarket services, spares, upgrades, software, and inspection-related offerings: approximately 15% to 25%. This includes maintenance, parts, productivity tools, and yield-improvement support.

Geographically, Cohu has broad exposure to Asia because much of global semiconductor assembly and test capacity is located there. That international footprint is normal for the industry, but it also means demand can be affected by regional spending patterns, export controls, and customer concentration.

The long-term appeal of the company rests on a straightforward idea: as chips become more complex and are used in safety-critical applications such as vehicles and industrial systems, testing becomes more important, not less. Cohu is positioned in that part of the semiconductor chain rather than in chip design itself.

The multiyear picture shows how hard the industry downturn was. Revenue fell sharply from the 2021 peak into 2024, while operating expenses did not decline as fast, pushing the company from healthy profitability into losses. The more recent recovery in sales matters because Cohu’s earnings are highly sensitive to scale.

Key Figures

Cohu is a mid-sized semiconductor equipment company with above-average share price volatility, which is common in cyclical parts of the chip industry. The overall factor profile is mixed: recent momentum is very strong, but value, quality, and especially long-term growth measures still rank poorly versus the sector. That combination usually points to a rebound phase rather than a fully proven turnaround.

Growth

Cohu operates in a sector with clear long-term demand drivers. Semiconductor content continues to increase in vehicles, factory automation, power management, connectivity, and AI-related infrastructure. More chips in more products generally means more testing steps, tighter quality requirements, and greater use of automated handlers and interfaces. This is particularly relevant in automotive and industrial electronics, where failure costs are high and reliability standards are strict.

The company’s strategy also makes sense on paper. Cohu has spent years building a broader portfolio across handlers, contactors, inspection, and software so it can serve more of the test cell instead of just one component. That wider offering can help deepen customer relationships and create cross-selling opportunities. The service and consumables side is also important because it can soften the impact of weak capital-equipment cycles.

Recent sales trends suggest the business has moved out of its deepest contraction. Year-over-year revenue was deeply negative through 2024, then turned positive and accelerated into 2026, with growth recently running well above the sector median. That is encouraging, but it follows a very low base after a severe downturn, so the key question is whether demand is normalizing temporarily or beginning a more durable upcycle.

Cash generation has also improved from the low point. Free cash flow turned negative during the downturn and has recovered back into positive territory. That matters because equipment businesses need enough financial flexibility to keep funding research and development through weak periods. A return to positive cash flow is a helpful sign, even if it is still below stronger past levels.

A meaningful catalyst is the company’s exposure to automotive and industrial semiconductors, areas where testing intensity can be high because chips must meet stricter durability standards. Another growth lever is the transition toward more advanced packaging and more complex devices, which can increase the need for specialized handling, contact, and inspection solutions. Recent company communications have also highlighted improving order activity and recovery conditions in parts of the test market, which supports the idea that the worst of the cycle may be behind it.

Risks

This article is for informational purposes only and does not constitute financial advice. Some content is AI-generated. See Disclaimer