PDF Solutions reaffirms 21%-23% revenue growth target for 2025 while expanding AI and analytics platform

Earnings Call Insights: PDF Solutions (PDFS) Q3 2025

MANAGEMENT VIEW

* John Kibarian, CEO, stated that "Bookings in the third quarter were strong as we continue to realize the benefits from our investments in product development and customer support." He highlighted a contract extension with a large customer involving Exensio characterization software and eProbe machines, noting two additional machines shipped to a production site under a subscription model.
* The company licensed Tiber AI Studio from Intel, integrating it into Exensio to create Exensio Studio AI. Kibarian described, "Tiber AI Studio enables engineers to build and manage hundreds of thousands of AI models... this integration is designed to enable engineers to use Exensio to both train models as well as deploy them."
* Kibarian emphasized an 8-figure contract with a large IC manufacturer for Exensio as its primary analytics platform and another 8-figure secureWISE contract with a major equipment OEM. He added, "Contributions to revenue from our Cimetrix connectivity and control software were the strongest since the acquisition closed at the end of 2020."
* On market share, Kibarian shared, "more equipment is now shipped with our software installed on it than internally developed software of any single equipment vendor."
* Adnan Raza, CFO, stated, "with our Q3 results, we achieved another record for quarterly revenue. Our bookings for this quarter totaled over $100 million... greater than the prior 2 quarters combined." He added, "We ended Q3 with backlog of $292 million, which is 25% higher than last quarter and 22% higher than the same period a year ago."

OUTLOOK

* Management reaffirmed its prior guidance of 21% to 23% annual revenue growth for 2025. Raza confirmed, "Given the strong business activity, the growth in our backlog and the customer opportunities in front of us, we reaffirm our prior guidance of 21% to 23% annual revenue growth range for this year."
* Kibarian indicated that further details about long-term targets and the next phase of growth will be shared at the upcoming Analyst Day and user conference.

FINANCIAL RESULTS

* Total revenue for Q3 2025 was $57.1 million, up 10% over last quarter and 23% year-over-year. Analytics revenue reached $54.7 million, marking a 12% increase from the prior quarter and 22% year-over-year.
* Integrated Yield Ramp revenue represented 4% of total revenue and was $0.5 million lower compared to the prior quarter, but up $0.8 million year-over-year.
* Gross margins were 76%, described by Raza as "slightly ahead of last quarter, and down 1% versus last year's comparable quarter, which had meaningful perpetual software revenue in that quarter."
* Operating expenses grew 3% sequentially. EPS for the quarter amounted to $0.25, with year-to-date EPS at $0.64, $0.06 ahead of the comparable period last year.
* Operating cash flow for the quarter was $3.3 million, with $35.9 million in cash, cash equivalents, and short-term investments at quarter end. CapEx was $6.3 million, lower than Q2 and Q1 figures.

Q&A

* Blair Abernethy, Rosenblatt Securities: Asked when eProbe machines under the lease model would generate revenue. Raza replied, "We expect within the next quarter or the quarter after, depending on the timing of those qualifications and the customer acceptances to start converting and generating the revenue."
* Abernethy: Asked about the DFI pipeline. Kibarian responded, "quite strong... we do have probably closer to 5 where we are actively engaged in discussion."
* Abernethy: Inquired about secureWISE go-to-market progress. Kibarian detailed broader adoption, "we started doing is selling it much more broadly into the fabs as well as into the equipment vendors, creating collaboration across them."
* Clark Wright, D.A. Davidson: Questioned customer concentration and secureWISE's role in expanding the base. Kibarian explained, "secureWISE... allows us the collaboration across a number of those customers."
* Wright: Asked about 2026 outlook. Kibarian stated, "We haven't given guidance for 2026 yet... We hope to have a strong 2026 on top of a very good bookings 2025."
* Auguste Richard, Northland Capital Markets: Queried about systems at production sites. Kibarian said, "we've put two in the first site... minimum number is two."
* Andrew Wiener, Samjo Capital: Asked about test complexity and timing of opportunity realization. Kibarian noted, "we would expect... we will also lag our partners in that regard" and pointed to pilots and production deployments ongoing.

SENTIMENT ANALYSIS

* Analysts' tone was slightly positive, focusing on execution, timing of revenue recognition, customer concentration, and pipeline strength. Questions emphasized confidence in guidance and upcoming product launches.
* Management maintained a confident and positive tone, with repeated references to strong bookings, backlog growth, and product integration successes. Kibarian stated, "We believe the integration of Tiber AI Studio with Exensio... is an important capability required to close this gap."
* Compared to the previous quarter, both analysts and management demonstrated increased confidence, especially regarding new contracts and platform expansion. Management's tone was more assertive about platform relevance and market share gains.

QUARTER-OVER-QUARTER COMPARISON

* Revenue increased from $51.7 million in Q2 to $57.1 million in Q3. Analytics revenue climbed from $48.8 million to $54.7 million. Backlog rose from $233 million to $292 million, reflecting substantial bookings momentum.
* Gross margin remained stable at 76%. EPS improved from $0.19 in Q2 to $0.25 in Q3.
* Management confidence strengthened, highlighting not only revenue and backlog growth but also broader platform adoption and major contract wins. Analysts’ focus shifted toward the timing of new product integrations and customer expansion, as well as the pipeline for future growth.

RISKS AND CONCERNS

* Management identified the risk that geographic diversification of manufacturing could drive up production costs and slow innovation. Kibarian addressed this by emphasizing, "We see AI-driven collaboration as a critical capability to enable cost-effective and efficient manufacturing in many of these new locations."
* The company continues to invest ahead of revenue in areas like the acquisition of secureWISE and eProbe machine build-out, with expectations that profits generated from these investments will benefit the balance sheet in 2026 and beyond.
* Analysts raised questions about customer concentration, timing of revenue recognition, and scalability of new AI-driven offerings.

FINAL TAKEAWAY

PDF Solutions reported record quarterly revenue and bookings, driven by large contracts for its Exensio and secureWISE platforms, as well as robust growth in its analytics business. Management reaffirmed full-year revenue growth targets and outlined continued integration of AI capabilities and industry platform expansion, positioning the company for further growth in 2026 and beyond. The company’s strong backlog, expanding customer base, and recurring software-driven revenue streams underscore its outlook for sustained performance.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/pdfs/earnings/transcripts]

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