Should You Buy, Sell or Hold FormFactor Stock Before Q2 Earnings?

FormFactor FORM is set to report its second-quarter 2026 results on July 29.The company expects second-quarter 2026 earnings to be 61 cents (+/- 4 cents) per share. The Zacks Consensus Estimate for second-quarter 2026 earnings has been steady at 61 cents per share over the past 30 days, suggesting 125.93% growth from the figure reported in the year-ago quarter.FormFactor expects second-quarter 2026 revenues to be $240 million (+/- $5 million). The Zacks Consensus Estimate for second-quarter revenues is pegged at $240.11 million, indicating an increase of 22.63% from the figure reported in the year-ago quarter.Consensus Estimate Trend Image Source: Zacks Investment Research FormFactor’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing once, the average surprise being 19.47%. FormFactor, Inc. Price and EPS Surprise FormFactor, Inc. price-eps-surprise | FormFactor, Inc. QuoteLet’s see how things have shaped up for the upcoming announcement.Factors to Drive FORM’s Q2 ResultsFormFactor’s second-quarter 2026 performance is likely to have been driven by another quarter of record DRAM probe card revenues, supported by accelerating high-bandwidth memory (HBM) demand. FORM guided for another step-up in HBM revenues, primarily due to broader adoption of the company’s differentiated SmartMatrix full-wafer contactor technology by a second customer. The transition from HBM3E to HBM4, with higher stack counts, faster I/O speeds and greater test intensity, is expected to have increased demand for FormFactor’s advanced probe cards while supporting favorable product mix.The Foundry & Logic business is expected to have benefited from sustained demand for networking applications and incremental strength in data center CPU probe cards. AI infrastructure investments continue to increase test complexity and probe-card content, while FormFactor has been expanding relationships with leading hyperscale and AI customers. Continued demand from networking, together with stable PC and mobile activity, is likely to have supported another sequential increase in Foundry & Logic revenues in the to-be-reported quarter.Growing adoption of advanced packaging technologies such as CoWoS and increasing use of chiplet architectures are expected to have benefited FormFactor. As advanced AI processors require more known-good-die testing before packaging, both test intensity and test complexity continue to rise, increasing demand for the company’s high-performance probe cards. These secular trends are likely to have remained an important contributor to second-quarter performance.Meanwhile, margins in the to-be-reported quarter were likely to have been aided by continued manufacturing efficiency initiatives, including better workforce deployment, higher production yields, shorter cycle times and lower manufacturing costs. FormFactor also guided for another sequential improvement in gross margin and earnings per share, reflecting durable operational improvements rather than solely favorable product mix.However, FormFactor continues to face risks from tariffs, export controls, geopolitical tensions and supply-chain disruptions. The Systems business remains project-driven and carries greater revenue variability than the recurring probe-card business, which has been a headwind. These factors are expected to have negatively impacted second-quarter 2026 results.FORM Shares Beat Sector, Valuation StretchedFormFactor shares have appreciated 86.5% year to date (YTD), outperforming the Zacks Computer and Technology sector’s return of 9.6%. FORM has underperformed Cohu COHU but outperformed Teradyne TER and KLA KLAC, YTD. While Cohu shares have jumped 117.9%, Teradyne and KLA shares have appreciated 80.8% and 73.2%, respectively, over the same time frame.FORM Stock’s Price Performance Image Source: Zacks Investment Research FORM stock is overvalued, as suggested by the Value Score of F. In terms of the forward 12-month price-to-sales (P/S), the company is trading at 8.15X compared with the broader sector’s 6.18X. Shares of Cohu, Teradyne and KLA trade at 3.84X, 10.86X and 15.71X, respectively.FORM Stock’s Valuation Image Source: Zacks Investment Research FORM’s Prospects to Ride on AI, HBM and Advanced PackagingThe rapid adoption of AI accelerators, HBM memory, GPUs, custom ASICs and advanced packaging is expected to remain FormFactor’s largest long-term growth driver. Increasing chip complexity requires significantly higher testing intensity, while larger HBM stacks and more sophisticated chiplet architectures increase probe-card content per device. The company expects these industry trends to support sustained market expansion through the remainder of the decade.FormFactor continues to leverage its proprietary MEMS probe technology, SmartMatrix architecture and Lab-to-Fab strategy to deepen engagements with leading semiconductor manufacturers. The company is expanding opportunities in GPUs, networking, custom ASICs, HBM and co-packaged optics (CPO) while also benefiting from long-term collaborations with industry leaders. It targets doubling revenue by 2030 through these secular growth markets and operational leverage.FormFactor’s decade-long investment in silicon photonics, the Triton production platform and the Keystone Photonics acquisition positions the company to benefit from increasing deployment of CPOs in AI data centers. Electro-optical probe cards and optical testing solutions represent an additional long-term growth avenue beyond traditional electrical probe cards.Nevertheless, FormFactor remains exposed to cyclical semiconductor spending and customer-specific investment patterns. Large customers account for a meaningful portion of revenue, making quarterly performance sensitive to shifts in production schedules and technology transitions. Continued innovation is required as customers migrate to HBM5, more advanced chiplet architectures, higher-speed networking and increasingly complex packaging technologies. Export restrictions, tariffs, changing trade policies and geopolitical tensions remain ongoing risks for FormFactor because of its global manufacturing footprint and customer base.ConclusionFormFactor appears well positioned heading into its second-quarter 2026 earnings report, supported by strong demand for AI-driven semiconductor testing, HBM probe cards and advanced packaging solutions, along with continued operational improvements. However, investors should also remain mindful of risks stemming from trade restrictions, geopolitical uncertainty, supply-chain disruptions and the cyclical nature of semiconductor spending. While the company's long-term growth prospects remain encouraging, its premium valuation suggests that sustained execution and continued AI-related demand will be important for supporting future upside.FORM currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable point to start accumulating the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Zacks' Research Chief Names "Stock Most Likely to Double" Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest. This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment Research