Aehr Test Systems Q1 FY2027 revenue jumps 201%

Management concluded disclosure controls were effective as of September 25, 2026, and reported no material changes in internal control over financial reporting.

Available on EDGAR 11/06/2026 - 05:04 PM EST Accepted by SEC EDGAR 11/06/2026 - 05:03 PM EST Learn about SEC filing dates

Rhea-AI Filing Summary

AEHR TEST SYSTEMS reported first-quarter fiscal 2027 revenue of $33.007 million, up 201% from $10.969 million in the three months ended August 29, 2025, primarily on higher shipments of systems and contactors that the company attributed to strong AI-market demand. Gross margin rose to 47.5% from 33.9%, and net income was $7.181 million versus a $2.084 million net loss.

Customer A accounted for 47.5% of quarterly revenue and Customer B for 25.1%. Operating activities used $3.054 million of cash, compared with $0.282 million in the comparison period. Cash, cash equivalents and restricted cash totaled $105.1 million as of September 25, 2026. The company said existing cash resources and anticipated funds from operations would satisfy its cash requirements for operating activities, capital expenditures and other obligations over the next twelve months.

A fiscal-year-end change created a one-month transition period ended June 26, 2026. Revenue for that period was $638,000 and gross loss was $1.012 million; the company said the period’s results are not necessarily indicative of a full fiscal quarter or year.

2 points · 0 major

MixediHow this balance works

How this balance works

Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.

It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.

Rhea-AI Sentiment measures something else, the tone of the wording.

How the balance worksHow Sentiment works

0 major · 2 points

How the balance works

Positive

• Moderate pointRevenue rose 201% to $33.007 million on higher AI-market shipments.
• Moderate pointNet income reached $7.181 million, versus a $2.084 million loss.

Negative

• Moderate pointCustomer A accounted for 47.5% of quarterly revenue; Customer B accounted for 25.1%.
• Minor pointOperating cash use was $3.054 million, versus $0.282 million in the comparison period.

Filing Explained

The reported increase in outstanding shares reduces existing holders’ percentage ownership, absent offsetting changes.

The Aehr quarterly report says its China patent-infringement cases remain unresolved: first-instance dismissals are on appeal, a separate patent-validity ruling is pending, and the company cannot estimate the financial impact.

For the quarter ended September 25, 2026, Aehr issued common shares under employee plans and repurchased shares for tax withholding on vested restricted stock units.

The balance sheet lists 32,491 thousand common shares on June 26, 2026 and 32,663 thousand on September 25, 2026. In general, issuing additional shares increases the total share count and reduces an existing holder’s percentage ownership, absent offsetting changes.

Key Figures

Revenue: $33.007 million Gross margin: 47.5% Net income: $7.181 million +4 more

7 metrics

Revenue $33.007 million Three months ended September 25, 2026; up 201% from $10.969 million for the three months ended August 29, 2025.

Gross margin 47.5% Three months ended September 25, 2026; 33.9% for the three months ended August 29, 2025.

Net income $7.181 million Three months ended September 25, 2026; net loss of $2.084 million for the three months ended August 29, 2025.

Net cash used in operating activities $3.054 million Three months ended September 25, 2026; $0.282 million used in the comparison period.

Cash, cash equivalents and restricted cash $105.1 million As of September 25, 2026.

Customer A share of revenue 47.5% Three months ended September 25, 2026.

Customer B share of revenue 25.1% Three months ended September 25, 2026.

Key Terms

burn-in, contract liabilities, remaining performance obligations, valuation allowance, +1 more

5 terms

burn-in technical

"test and burn-in equipment used in the semiconductor industry"

Burn-in is a manufacturing test where new devices or components are operated under stress for a set period to surface early failures before products ship. Investors care because effective burn-in reduces returns, warranty costs and reputation risk, and signals production quality; like driving a new car on a rough road to reveal hidden defects before selling it to customers.

contract liabilities financial

"Contract liabilities include payments received in advance of performance"

Contract liabilities are amounts a company has been paid in advance for goods or services it still owes to customers — think of them like gift cards or prepaid subscriptions the company must fulfill later. For investors, they show promised future work or deliveries that will turn into revenue over time, reveal cash already collected, and help assess whether a firm has a backlog of obligations that could affect future earnings and cash flow.

remaining performance obligations financial

"remaining performance obligations, exclusive of customer deposits"

Remaining performance obligations are the work a company still needs to complete for its customers, like finishing a service or delivering a product. It’s important because it shows how much future income the company has coming in from current agreements, giving a clearer picture of its ongoing business.

valuation allowance financial

"record a valuation allowance when"

A valuation allowance is a reserve set aside to reduce the value of certain assets on a company's financial records when there is uncertainty about whether they will generate the expected benefits. It acts like a caution sign, indicating that some assets might not be fully recoverable or worth their recorded amount. This matters to investors because it provides a more realistic picture of a company's financial health and potential risks.

antidilutive financial

"securities that would have an antidilutive effect on net income per share"

Describes a potential common share — such as a convertible bond, convertible preferred, option or warrant — that would, if included in the diluted earnings-per-share calculation, increase (or fail to decrease) reported earnings per share rather than dilute it. Accounting rules require such securities to be excluded from diluted EPS because their assumed conversion would make EPS higher (or make a loss per share smaller), so they are not treated as dilutive when reporting diluted figures.

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

How much revenue did AEHR report in its first quarter of fiscal 2027?

AEHR reported $33.007 million in revenue for the three months ended September 25, 2026. Revenue was up 201% from $10.969 million in the three months ended August 29, 2025, primarily on higher shipments of systems and contactors attributed to strong AI-market demand.

What were AEHR's net income and earnings per share?

AEHR reported net income of $7.181 million, or $0.22 per basic share and $0.21 per diluted share, for the three months ended September 25, 2026. The comparable period ended August 29, 2025 had a net loss of $2.084 million, or $0.07 per share.

Why does AEHR compare its September 2026 quarter with the period ended August 29, 2025?

AEHR changed its fiscal year-end to the Friday in June nearest June 30, effective in fiscal 2027. It used the three months ended August 29, 2025 as a meaningful comparison, stating there were no significant seasonal or other factors that would materially affect comparability with the September 2026 quarter.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 25, 2026

or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______________ to ______________

Commission File Number 000-22893

AEHR TEST SYSTEMS

(Exact name of Registrant as Specified in its Charter)

California		94-2424084
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
400 Kato Terrace, Fremont, CA		94539
(Address of Principal Executive Offices)		(Zip Code)

(510) 623-9400

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock par value of $0.01 per share	AEHR	The NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

There were 32,794,791 shares of the Registrant’s Common Stock outstanding as of November 2, 2026.

TABLE OF CONTENTS

	Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	25
Item 4. Controls and Procedures	25
PART II OTHER INFORMATION
Item 1. Legal Proceedings	26
Item 1A. Risk Factors	26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3. Defaults Upon Senior Securities	26
Item 4. Mine Safety Disclosures	26
Item 5. Other Information	26
Item 6. Exhibits	27
SIGNATURES	28

2

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

AEHR TEST SYSTEMS

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

		September 25,				June 26,				May 29,
(In thousands, except par value)		2026				2026				2026
ASSETS
Current assets:
Cash and cash equivalents		$	104,902			$	112,308			$	116,358
Accounts receivable			26,630				15,946				17,473
Inventories			53,120				44,410				41,354
Prepaid expenses and other current assets			11,225				9,745				9,263
Total current assets			195,877				182,409				184,448
Property and equipment, net			8,820				8,814				8,940
Goodwill			10,719				10,719				10,719
Intangible assets, net			9,157				9,453				9,552
Deferred tax assets, net			25,120				24,766				23,829
Operating lease right-of-use assets, net			8,812				8,838				8,901
Other non-current assets			277				306				305
Total assets		$	258,782			$	245,305			$	246,694
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable		$	12,504			$	6,353			$	6,754
Accrued expenses and other current liabilities			6,295				5,214				5,283
Operating lease liabilities, short-term			653				592				626
Deferred revenue, short-term			7,944				6,698				5,192
Total current liabilities			27,396				18,857				17,855
Operating lease liabilities, long-term			9,151				9,202				9,256
Deferred revenue, long-term			86				56				34
Other long-term liabilities			37				38				38
Total liabilities			36,670				28,153				27,183
Commitments and contingencies (Note 6)
Shareholders equity:
Preferred stock, $0.01 par value: Authorized: 10,000 shares;
Issued and outstanding: none			-								-
Common stock, $0.01 par value: Authorized: 75,000 shares;
Issued and outstanding: 32,663 shares, 32,491 shares and 32,480 shares at September 25, 2026, June 26, 2026, and May 29, 2026, respectively			327				325				325
Additional paid-in capital			247,669				249,888				249,477
Accumulated other comprehensive loss			(136	)			(132	)			(105	)
Accumulated deficit			(25,748	)			(32,929	)			(30,186	)
Total shareholders' equity			222,112				217,152				219,511
Total liabilities and shareholders equity		$	258,782			$	245,305			$	246,694

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

3

Table of Contents

AEHR TEST SYSTEMS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
(In thousands, except per share data)		2026				2025				2026
Revenue		$	33,007			$	10,969			$	638
Cost of revenue			17,344				7,250				1,650
Gross profit (loss)			15,663				3,719				(1,012	)
Operating expenses:
Research and development			4,143				2,849				1,164
Selling, general and administrative			5,473				4,717				1,819
Restructuring charges			-				219				-
Total operating expenses			9,616				7,785				2,983
Income (loss) from operations			6,047				(4,066	)			(3,995	)
Interest income, net			899				179				301
Other income (expense), net			(19	)			1,051				21
Income (loss) before income tax benefit			6,927				(2,836	)			(3,673	)
Income tax benefit			(254	)			(752	)			(930	)
Net income (loss)		$	7,181			$	(2,084	)		$	(2,743	)
Net income (loss) per share:
Basic		$	0.22			$	(0.07	)		$	(0.08	)
Diluted		$	0.21			$	(0.07	)		$	(0.08	)
Shares used in per share calculations:
Basic			32,619				29,923				32,485
Diluted			33,520				29,923				32,485

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

4

Table of Contents

AEHR TEST SYSTEMS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
(In thousands)		2026				2025				2026
Net income (loss)		$	7,181			$	(2,084	)		$	(2,743	)
Other comprehensive income (loss), net of tax:
Net change in cumulative translation adjustment			(4	)			31				(27	)
Comprehensive income (loss)		$	7,177			$	(2,053	)		$	(2,770	)

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

5

Table of Contents

AEHR TEST SYSTEMS

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

														Accumulated
										Additional				Other								Total
		Common Stock								Paid-in				Comprehensive				Accumulated				Shareholders’
(In thousands)		Shares				Amount				Capital				Loss				Deficit				Equity
Balances, May 29, 2026			32,480			$	325			$	249,477			$	(105	)		$	(30,186	)		$	219,511
Issuance of common stock under employee plans			11				-				13				-				-				13
Shares repurchased for tax withholdings on vesting of restricted stock units			-				-				(71	)			-				-				(71	)
Stock-based compensation			-				-				469				-				-				469
Net loss			-				-				-				-				(2,743	)			(2,743	)
Foreign currency translation adjustment			-				-				-				(27	)			-				(27	)
Balances, June 26, 2026			32,491				325				249,888				(132	)			(32,929	)			217,152
Issuance of common stock under employee plans			228				2				335				-				-				337
Shares repurchased for tax withholdings on vesting of restricted stock units			(56	)			-				(4,474	)			-				-				(4,474	)
Stock-based compensation			-				-				1,920				-				-				1,920
Net income			-				-				-				-				7,181				7,181
Foreign currency translation adjustment			-				-				-				(4	)			-				(4	)
Balances, September 25, 2026			32,663			$	327			$	247,669			$	(136	)		$	(25,748	)		$	222,112

														Accumulated
										Additional				Other								Total
		Common Stock								Paid-in				Comprehensive				Accumulated				Shareholders’
(In thousands)		Shares				Amount				Capital				Loss				Deficit				Equity
Balances, May 30, 2025			29,877			$	299			$	145,758			$	(126	)		$	(23,060	)		$	122,871
Issuance of common stock under employee plans			118				1				169				-				-				170
Shares repurchased for tax withholdings on vesting of restricted stock units			(22	)			-				(328	)			-				-				(328	)
Stock-based compensation			-				-				1,734				-				-				1,734
Net loss			-				-				-				-				(2,084	)			(2,084	)
Foreign currency translation adjustment			-				-				-				31				-				31
Balances, August 29, 2025			29,973			$	300			$	147,333			$	(95	)		$	(25,144	)		$	122,394

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

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AEHR TEST SYSTEMS

Condensed Consolidated Statements of Cash Flows

(Unaudited)

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
(In thousands)		2026				2025				2026
Cash flows from operating activities:
Net income (loss)		$	7,181			$	(2,084	)		$	(2,743	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation expense			1,880				1,671				448
Depreciation and amortization			707				743				228
Deferred income taxes			(354	)			(761	)			(937	)
Amortization of operating lease right-of-use assets			200				179				63
Changes in operating assets and liabilities:
Accounts receivable			(10,686	)			1,140				1,492
Inventories			(9,037	)			218				(3,035	)
Prepaid expenses and other assets			(1,367	)			1,576				(484	)
Accounts payable			6,230				(2,401	)			(219	)
Accrued expenses			998				505				(76	)
Deferred revenue			1,275				(863	)			1,529
Operating lease liabilities			(164	)			(215	)			(88	)
Income taxes payable			83				10				10
Net cash used in operating activities			(3,054	)			(282	)			(3,812	)
Cash flows from investing activities:
Purchases of property and equipment			(49	)			(1,391	)			(4	)
Net cash used in investing activities			(49	)			(1,391	)			(4	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee plans			337				170				13
Shares repurchased for tax withholdings on vesting of restricted stock units			(4,474	)			(328	)			(71	)
Payments for common stock issuance costs related to the public offering			(161	)			-				(176	)
Net cash used in financing activities			(4,298	)			(158	)			(234	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(5	)			9				-
Net decrease in cash, cash equivalents and restricted cash			(7,406	)			(1,822	)			(4,050	)
Cash, cash equivalents and restricted cash, beginning of period(1)			112,458				26,480				116,508
Cash, cash equivalents and restricted cash, end of period (1)		$	105,052			$	24,658			$	112,458
Supplemental disclosure of non-cash flow information:
Net transfer of equipment between inventory and property and equipment		$	367			$	-			$	-
Right of use assets obtained in exchange for operating leases liabilities		$	174			$	-			$	-

(1) Includes restricted cash within prepaid expenses and other current assets and other non-current assets.

See accompanying Notes to Condensed Consolidated Financial Statements (unaudited)

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AEHR TEST SYSTEMS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

Aehr Test Systems (the “Company”) was incorporated in California in May 1977 and develops and manufactures test and burn-in equipment used in the semiconductor industry. The Company’s principal products are the FOX-XP, FOX-NP, and FOX-CP wafer contact and singulated die/module parallel test and burn-in systems, the Sonoma, Tahoe and Echo packaged parts burn-in products, the WaferPak full wafer contactor, the DiePak carrier, the WaferPak aligner, the DiePak autoloader, and test fixtures.

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim reporting. Accordingly, the unaudited Condensed Consolidated Financial Statements do not include certain information and footnote disclosures normally included in the annual Consolidated Financial Statements. In the opinion of management, the unaudited Condensed Consolidated Financial Statements for the interim periods presented have been prepared on a basis consistent with the May 29, 2026 audited Consolidated Financial Statements and reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the condensed consolidated financial position and results of operations as of and for such periods indicated. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended May 29, 2026.

Principles of Consolidation

The Company’s Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries and all significant intercompany accounts and transactions have been eliminated upon consolidation.

Change in Fiscal Year

On April 2, 2026, the Company’s board of directors approved a change in the Company’s fiscal year-end from the 52- or 53-week period ending on the Friday in May nearest May 31 to the 52- or 53-week period ending on the Friday in June nearest June 30. The change became effective beginning in fiscal year 2027, which began on June 27, 2026 and will end on June 25, 2027. This Quarterly Report on Form 10-Q includes unaudited financial information for the period from May 30, 2026 to June 26, 2026, which represents the one-month transition period resulting from the change in fiscal year-end. The audited financial information for this transition period will be included in the Company’s Annual Report on Form 10-K for the fiscal year ending June 25, 2027.

Financial information for the three months ended September 26, 2025 has not been included in this Form 10-Q because: (i) the three months ended August 29, 2025 provide a meaningful comparison to the three months ended September 25, 2026; (ii) there are no significant seasonal or other factors that would materially impact comparability of information if the results for the three months ended September 26, 2025 were presented in lieu of results for the three months ended August 29, 2025; and (iii) it was not practicable or cost justified to prepare such information.

Critical Accounting Policies and Use of Estimates

The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the year ended May 29, 2026. There have been no significant changes to the Company’s critical accounting policies during the three months ended September 25, 2026. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting estimates in these Condensed Consolidated Financial Statements include valuation of inventory at the lower of cost or net realizable value, valuation of intangible assets and impairment of long-lived assets and goodwill. Actual results could differ from those estimates.

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Concentration of Credit Risk

Financial instruments which subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company performs credit evaluations of its customers’ financial condition and generally requires no collateral. The Company had revenues from individual customers in excess of 10% of total revenues as follows:

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
		2026				2025				2026
Customer A			47.5	%		*					46.4	%
Customer B			25.1	%		*				*
Customer C		*					42.6	%		*
Customer D		*					21.8	%		*
Customer E		*					11.6	%			39.9	%

The Company had gross accounts receivable from individual customers in excess of 10% of gross accounts receivable as follows:

		September 25,				June 26,				May 29,
		2026				2026				2026
Customer A			44.3	%			17.2	%			18.8	%
Customer B			22.7	%			21.1	%			19.3	%
Customer F		*					38.3	%			35.0	%

* Amount was less than 10% of total gross accounts receivable

Recent Accounting Pronouncements Adopted

In July 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-05, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets. The new guidance allows companies to apply a practical expedient when estimating credit losses on current accounts receivable and contract assets. The Company has adopted the guidance, and the adoption did not have a material impact on its Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, an accounting standard update to improve income statement expense disclosures. The standard requires more detailed information related to the types of expenses, including (among other items) the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each interim and annual income statement’s expense caption, as applicable. This authoritative guidance can be applied prospectively or retrospectively and will be effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. This update clarifies certain interim reporting requirements, including the applicability of interim reporting guidance and the form and content of interim financial statements. This ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance on its Condensed Consolidated Financial Statements and related disclosures.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which clarifies, corrects errors, and makes minor improvements to various areas of the Accounting Standards Codification. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its Condensed Consolidated Financial Statements and related disclosures.

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2. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures its cash equivalents and money market funds at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value:

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings.

Level 3 — Unobservable inputs that are supported by little or no market activities.

The following table represents the Company’s assets measured at fair value on a recurring basis as of September 25, 2026, and the basis for that measurement:

		Balance as of
(In thousands)		September 25, 2026				Level 1				Level 2				Level 3
Money market funds		$	101,112			$	101,112			$	-			$	-
Total		$	101,112			$	101,112			$	-			$	-

The following table represents the Company’s assets measured at fair value on a recurring basis as of June 26, 2026, and the basis for that measurement:

		Balance as of
(In thousands)		June 26, 2026				Level 1				Level 2				Level 3
Money market funds		$	110,161			$	110,161			$	-			$	-
Total		$	110,161			$	110,161			$	-			$	-

The following table represents the Company’s assets measured at fair value on a recurring basis as of May 29, 2026, and the basis for that measurement:

		Balance as of
(In thousands)		May 29, 2026				Level 1				Level 2				Level 3
Money market funds		$	112,661			$	112,661			$	-			$	-
Total		$	112,661			$	112,661			$	-			$	-

Included in money market funds as of September 25, 2026, June 26, 2026 and May 29, 2026 was $0.2 million restricted cash representing a security deposit for the Company’s United States manufacturing and office space lease. There were no financial liabilities measured at fair value as of September 25, 2026, June 26, 2026 and May 29, 2026. There were no transfers between Level 1 and Level 2 fair value measurements during the three months ended September 25, 2026 or for the one month ended June 26, 2026. The carrying amounts of financial instruments, including cash equivalents, accounts receivable, accounts payable and certain other accrued liabilities, approximate fair value due to their short maturities.

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3. BALANCE SHEET INFORMATION

Inventories

Inventories consisted of the following:

		September 25,				June 26,				May 29,
(In thousands)		2026				2026				2026
Raw materials and sub-assemblies		$	37,534			$	30,040			$	29,247
Work in process			14,617				13,628				11,441
Finished goods			969				742				666
		$	53,120			$	44,410			$	41,354

Property and equipment

Property and equipment, net consisted of the following:

		Useful life		September 25,				June 26,				May 29,
(In thousands)		(in years)		2026				2026				2026
Leasehold improvements		*		$	6,094			$	6,096			$	6,096
Machinery and equipment		3 - 5			4,416				4,375				4,375
Test equipment		4 - 5			3,469				3,524				3,523
Furniture and fixtures		2 - 10			1,540				1,535				1,518
Construction-in-process					804				391				405
					16,323				15,921				15,917
Less: accumulated depreciation					(7,503	)			(7,107	)			(6,977	)
				$	8,820			$	8,814			$	8,940

* Lesser of estimated useful life or lease term.

Depreciation expense was $0.4 million for both the three months ended September 25, 2026 and August 29, 2025. Depreciation expense was $0.1 million for the one month ended June 26, 2026.

Product warranties

The Company provides for the estimated cost of product warranties at the time revenues are recognized on the products shipped. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers, the Company’s warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from the Company’s estimates, revisions to the estimated warranty liability would be required. The standard warranty period is one year for systems and ninety days for parts and service.

The following is a summary of changes in the Company's liability for product warranties during the three months ended September 25, 2026 and August 29, 2025 and during the one month ended June 26, 2026:

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
(In thousands)		2026				2025				2026
Balance at the beginning of the period		$	699			$	428			$	676
Accruals for warranties issued during the period			586				169				12
Adjustments to previously existing warranty accruals			61				204				110
Consumption of reserves			(322	)			(291	)			(99	)
Balance at the end of the period		$	1,024			$	510			$	699

The accrued warranty balance is included in accrued expenses on the accompanying Condensed Consolidated Balance Sheets.

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Deferred revenue

Deferred revenue, short-term consisted of the following:

		September 25,				June 26,				May 29,
(In thousands)		2026				2026				2026
Customer deposits		$	7,529			$	6,028			$	4,554
Deferred revenue			415				670				638
		$	7,944			$	6,698			$	5,192

4. GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill

There were no impairments to goodwill during the three months ended September 25, 2026 and August 29, 2025, and during the one month ended June 26, 2026.

Purchased Intangible Assets

The Company’s purchased intangible assets, net, were as follows:

		September 25, 2026												June 26, 2026												May 29, 2026
(In thousands)						Accumulated												Accumulated												Accumulated
Finite-lived intangible assets:		Gross				Amortization				Net				Gross				Amortization				Net				Gross				Amortization				Net
Developed technology		$	9,130			$	(1,648	)		$	7,482			$	9,130			$	(1,458	)		$	7,672			$	9,130			$	(1,395	)		$	7,735
Trade names			1,050				(228	)			822				1,050				(201	)			849				1,050				(192	)			858
Customer relationships			810				(160	)			650				810				(141	)			669				810				(135	)			675
Non-compete agreements and others			1,010				(807	)			203				1,010				(747	)			263				1,010				(726	)			284
Total		$	12,000			$	(2,843	)		$	9,157			$	12,000			$	(2,547	)		$	9,453			$	12,000			$	(2,448	)		$	9,552

Amortization expense related to purchased intangible assets with finite lives was $0.3 million for both the three months ended September 25, 2026 and August 29, 2025. Amortization expense was $0.1 million for the one month ended June 26, 2026. There were no impairments to purchased intangible assets during the three months ended September 25, 2026 and August 29, 2025, and during the one month ended June 26, 2026.

As of September 25, 2026, the estimated future amortization expense of purchased intangible assets with finite lives is as follows:

(In thousands)
Remainder of 2027		$	887
2028			960
2029			939
2030			939
2031			939
2032			940
Thereafter			3,553
Total		$	9,157

5. INCOME TAXES

The following table provides details of income taxes:

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
(In thousands)		2026				2025				2026
Income (loss) before income tax benefit		$	6,927			$	(2,836	)		$	(3,673	)
Income tax benefit		$	(254	)		$	(752	)		$	(930	)
Effective tax rate			(3.7	)%			26.5	%			25.3	%

The Company’s effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to executive compensation and stock-based compensation expenses that are recognized for financial reporting purposes but are not deductible for income tax purposes, as well as discrete tax benefits associated with stock-based compensation.

For the three months ended September 25, 2026, the Company calculated its interim income tax provision using an estimated annual effective tax rate applied to year-to-date ordinary income, adjusted for discrete items. The Company recognized an income tax benefit despite pretax income, primarily due to discrete tax benefits associated with disqualified dispositions and excess tax benefits from the vesting of restricted stock units.

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For the three months ended August 29, 2025, the Company calculated its U.S. interim tax provision on a year-to-date discrete basis under Accounting Standards Codification (“ASC”) 740-270-30-18 because the near break-even level of forecasted United States pretax income and significant permanent differences caused the estimated annual effective tax rate to be highly sensitive to relatively small changes in forecasted income.

For the one-month transition period ended June 26, 2026, the Company recognized an income tax benefit due to a pretax loss in the United States.

The Company accounts for uncertain tax positions consistent with authoritative guidance. The guidance prescribes a “more likely than not” recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income taxes.

6. COMMITMENTS AND CONTINGENCIES

Purchase Obligations

The Company has purchase obligations to certain suppliers. In some cases, the products the Company purchases are unique and have provisions against cancellation of the order.

Contingencies

The Company may, from time to time, be involved in legal proceedings arising in the ordinary course of business. While there can be no assurances as to the ultimate outcome of any litigation involving the Company, management does not believe any pending legal proceedings will result in judgment or settlement that will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

On October 16, 2024, the Company filed a complaint with the Suzhou Intermediate People’s Court to protect its intellectual property rights in China against Suzhou Semight Instruments Co., Ltd. (“Semight”) and its related entities and/or distributors, alleging infringement of the Company’s two patents related to wafer burn-in systems and wafer reliability test systems. The Company is seeking injunctive relief and damage compensation, claiming that Semight’s actions have infringed upon its intellectual property rights and caused substantial harm to its business. The Company believes its claims are valid and is vigorously pursuing its legal remedies. At this stage, the outcome of the litigation is uncertain, and the Company is unable to predict the likelihood of success or estimate the potential financial impact, if any, on its Condensed Consolidated Financial Statements. The Company has also incurred and expects to continue to incur legal expenses related to this matter. On November 15 and December 6, 2024, Semight filed petitions for invalidation to the two aforementioned Chinese patents with the Department of National Intellectual Properties in Beijing, respectively. The oral hearings for both of the patents have been held, and decisions have been issued for both patents upholding part of the claims. In addition, the Company received a suspension ruling from the Suzhou Intermediate People’s Court on the infringement proceedings, pending the outcome of the validity rulings. With both patents having been upheld, the suspended infringement proceedings have resumed. The hearing for the divisional patent was held on August 28, 2025, and the hearing for the parent patent was held on October 17, 2025. In December 2025, the Company received a first-instance judgment from the Suzhou Intermediate People’s Court with respect to the infringement cases, which dismissed the Company’s claims based on the court’s opinion that there was insufficient evidence to establish infringement. The Company filed appeals for both cases on January 4, 2026. On January 27, 2026, Semight filed another petition for invalidation of one of the two aforementioned Chinese patents with the Department of National Intellectual Properties in Beijing. On June 2, 2026, a hearing was held before the Supreme People’s Court of China in connection with the Company’s appeal. The hearing focused primarily on infringement comparison issues, including whether the accused products contain certain claim features at issue. The appeal proceedings remain ongoing, and the Company expects that an additional hearing may be scheduled. In June 2026, the Company received a first-instance judgment from the Beijing Intellectual Property Court in connection with one of the patent invalidation proceedings. The judgment was favorable to the Company on certain issues but did not resolve all matters in the Company’s favor. The Company appealed certain aspects of the judgment. On October 20, 2026, a hearing was held before the Supreme People’s Court of China on the second-instance administrative proceeding concerning the validity of the patent, and a ruling is pending. Meanwhile, the administrative proceedings concerning another patent are still pending at the Beijing Intellectual Property Court at the first-instance stage.

In the normal course of business to facilitate sales of its products, the Company indemnifies other parties, including customers, with respect to certain matters, including, for example, against losses arising from a breach of representations or covenants, or from intellectual property infringement or other claims. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors, and the Company’s bylaws contain similar indemnification obligations to the Company’s agents.

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It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, payments made by the Company under these agreements have not had a material impact on the Company’s operating results, financial position or cash flows.

7. REVENUE

Revenue recognition

The Company recognizes revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by following a five-step process: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price, and (5) recognize revenue when or as the Company satisfies a performance obligation, as further described below.

Performance obligations include sales of systems, contactors, spare parts, as well as installation and training services included in customer contracts. A contract’s transaction price is allocated to each distinct performance obligation. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company generally does not grant return privileges, except for defective products during the warranty period.

For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. Standalone selling prices are based on multiple factors including, but not limited to historical discounting trends for products and services and pricing practices in different geographies. Revenue for systems and spares is recognized at a point in time, which is generally upon shipment or delivery and evidenced by transfer of title and risk of loss to the customer. Revenue from services is recognized over time as the customer receives the benefit over the contractual period of generally one year or less.

The Company has elected the practical expedient to not assess whether a contract has a significant financing component as the Company’s standard payment terms are less than one year.

The Company sells its products primarily through a direct sales force. In certain international markets, the Company sells its products through independent distributors.

Disaggregation of revenue

The following presents information about the Company’s net revenues in different geographic areas, which are based upon ship-to locations, and by product category:

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
(In thousands)		2026				2025				2026
Asia		$	22,174			$	2,476			$	484
United States			8,802				4,812				143
Europe and Middle East			2,031				3,681				11
		$	33,007			$	10,969			$	638

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
(In thousands)		2026				2025				2026
Systems		$	17,316			$	6,764			$	-
Contactors			13,489				2,613				240
Services			2,202				1,592				398
		$	33,007			$	10,969			$	638

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With the exception of the amount of service contracts and extended warranties, the Company’s product net revenues are recognized at a point in time when control transfers to the customer. The following presents net revenues based on timing of recognition:

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
(In thousands)		2026				2025				2026
Timing of revenue recognition:
Products and services transferred at a point in time		$	31,994			$	10,225			$	333
Services transferred over time			1,013				744				305
		$	33,007			$	10,969			$	638

Contract balances

Accounts receivable are recognized in the period the Company delivers goods or provides services and when the Company’s right to payment is unconditional. Contract assets include unbilled receivables which represent revenues that are earned in advance of scheduled billings to customers. These amounts are primarily related to product sales where transfer of control has occurred but the Company has not yet invoiced. As of September 25, 2026, June 26, 2026, and May 29, 2026, unbilled receivables were $0.8 million, $1.7 million, and $1.9 million, respectively, and were included in prepaid expenses and other current assets on the accompanying Condensed Consolidated Balance Sheets.

Contract liabilities include payments received in advance of performance under a contract and are satisfied as the associated revenue is recognized. Contract liabilities as of September 25, 2026, June 26, 2026, and May 29, 2026 were $8.0 million, $6.8 million, and $5.2 million, respectively, and were included in deferred revenue, short-term and deferred revenue, long-term on the accompanying Condensed Consolidated Balance Sheets. During the three months ended September 25, 2026, the Company recognized $2.9 million in revenue which was included in contract liabilities as of May 29, 2026. Revenue recognized during the one month ended June 26, 2026 that was included in contract liabilities as of May 29, 2026 was not material. 

Remaining performance obligations

As of September 25, 2026, the remaining performance obligations, exclusive of customer deposits, which consisted of deferred service contracts and extended warranty contracts not yet delivered, are not material. The foregoing excludes the value of other remaining performance obligations as they have original durations of one year or less and excludes information about variable consideration allocated entirely to a wholly unsatisfied performance obligation.

Costs to obtain or fulfill a contract

The Company generally expenses sales commissions when incurred as a component of selling, general and administrative expenses as the amortization period is typically less than one year. Additionally, the majority of the Company’s cost of fulfillment as a manufacturer of products is classified as inventory and fixed assets, which are accounted for under the respective guidance for those asset types. Other costs of contract fulfillment are immaterial due to the nature of the Company’s products and their respective manufacturing process.

8. STOCK-BASED COMPENSATION

Stock-based compensation expense consists of expenses for stock options, restricted stock units (“RSUs”), performance RSUs (“PRSUs”), restricted shares, performance restricted shares and employee stock purchase plan (“ESPP”) purchase rights. Stock-based compensation expense for stock options and ESPP purchase rights is measured at each grant date, based on the fair value of the award using the Black-Scholes option valuation model, and is recognized as expense over the employee’s requisite service period. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different from those of publicly traded options. For RSUs, PRSUs, restricted shares and performance restricted shares, stock-based compensation expense is based on the fair value of the Company’s common stock at the grant date and is recognized as expense over the employee’s requisite service period. All of the Company’s stock-based compensation is accounted for as equity instruments. See Note 12 in the Company’s Annual Report on Form 10-K for fiscal 2026 filed on July 27, 2026 for further information regarding the equity incentive plans and the ESPP.

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The following table summarizes the stock-based compensation expense for the three months ended September 25, 2026 and August 29, 2025, and for the one month ended June 26, 2026:

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
(In thousands)		2026				2025				2026
Cost of sales		$	171			$	159			$	36
Research and development			451				365				112
Selling, general and administrative			1,258				1,147				300
		$	1,880			$	1,671			$	448

Stock-based compensation expense capitalized in inventory was $0.4 million as of each of September 25, 2026, June 26, 2026, and May 29, 2026.

The Company’s nonvested RSU, PRSU and restricted share activities for the three months ended September 25, 2026 and for the one month ended June 26, 2026 were as follows:

						Weighted
						Average Grant
						Date Fair
		Shares				Value
		(in thousands)				Per Share
Unvested, May 29, 2026			707			$	16.12
Granted			1				99.47
Vested			(8	)			13.95
Forfeited			(3	)			16.15
Unvested, June 26, 2026			697			$	16.24
Granted (1)			124				94.37
Vested			(134	)			17.38
Forfeited			(2	)			15.50
Unvested, September 25, 2026			685			$	28.35

(1) Includes 61,000 performance-based awards, of which approximately 14,000 performance-based awards have target achievement goals whereby the grantee can earn up to 200% of the original award (up to 29,000 shares) if the maximum target goals are met. The remaining awards are earned at 100% if the target goals are achieved.

There were no options granted during the three months ended September 25, 2026 and August 29, 2025, or during the one month ended June 26, 2026. There were no ESPP purchase rights granted during the three months ended September 25, 2026 and August 29, 2025, or during the one month ended June 26, 2026.

9. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is determined using the weighted average number of common shares outstanding during the period. Diluted net income per share is determined using the weighted average number of common shares and potential common shares (representing the hypothetical number of incremental shares issuable under the assumed exercise of outstanding stock options, and vesting of outstanding RSUs and ESPP shares) during the period using the treasury stock method. The calculation of dilutive shares outstanding excludes securities that would have an antidilutive effect on net income per share.

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The following table presents the computation of basic and diluted net income (loss) per share:

		Three Months Ended								One Month Ended
		September 25,				August 29,				June 26,
(In thousands, except per share data)		2026				2025				2026
Numerator:
Net income (loss)		$	7,181			$	(2,084	)		$	(2,743	)
Denominator:
Basic weighted average shares outstanding			32,619				29,923				32,485
Dilutive effect of common equivalent shares outstanding			901				-				-
Diluted weighted average shares outstanding			33,520				29,923				32,485
Net income (loss) per share - Basic		$	0.22			$	(0.07	)		$	(0.08	)
Net income (loss) per share - Diluted		$	0.21			$	(0.07	)		$	(0.08	)
Antidilutive employee share-based awards, excluded			1				1,924				1,202

10. SEGMENT AND CONCENTRATION INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or group, in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision maker, the chief executive officer, reviews discrete financial information presented on a consolidated basis for purposes of regularly making operating decisions and assessing financial performance. Accordingly, the Company considers itself to be in one operating segment.

Property and equipment, net by geographic area are as follows:

		September 25,				June 26,				May 29,
(In thousands)		2026				2026				2026
United States		$	8,688			$	8,791			$	8,913
International			132				23				27
Total property and equipment, net		$	8,820			$	8,814			$	8,940

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact may be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential”, “target” or “continue,” the negative of terms like these or other similar expressions. Any statement concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions taken by us or our subsidiaries, which may be provided by us are also forward-looking statements. These forward-looking statements are only predictions. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those anticipated or projected. All forward-looking statements included in this document are based on information available to us on the date of filing and we further caution investors that our business and financial performance are subject to substantial risks and uncertainties. We assume no obligation to update any such forward-looking statements. In evaluating these statements, you should specifically consider various factors, including the risk factors and uncertainties discussed in Item 1A, “Risk Factors” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended May 29, 2026, filed with the Securities and Exchange Commission on July 27, 2026. All references to “we”, “us”, “our”, “Aehr Test”, “Aehr Test Systems” or the “Company” refer to Aehr Test Systems.

Overview

We are a leading provider of test solutions for testing, burning-in, and stabilizing semiconductor devices in wafer level, singulated die, and package level, and have installed thousands of systems worldwide. The rapid advancement of generative artificial intelligence (“AI”) and High Performance Computing (“HPC”) data centers, together with the accelerating electrification of transportation and global infrastructure represent two of the most significant macro-trends impacting the semiconductor industry today. These transformative forces are driving enormous growth in semiconductor demand while fundamentally increasing the performance, reliability, safety, and security requirements of the devices used across AI and HPC data centers, computing and data infrastructure, telecommunications networks, hard disk drive and solid-state storage solutions, electric vehicles, charging systems, and renewable energy generation. As these applications operate at ever-higher power levels and in increasingly mission-critical environments, the need for comprehensive test and burn-in has become more essential than ever. Semiconductor manufacturers are turning to advanced wafer-level and package-level burn-in systems to screen for early-life failures, validate long-term reliability, and ensure consistent performance under extreme electrical and thermal stress. This growing emphasis on reliability testing reflects a fundamental shift in the industry—from simply achieving functionality to guaranteeing dependable operation throughout a product’s lifetime, a requirement that continues to expand alongside the scale and complexity of next-generation semiconductor devices.

We have developed and introduced several innovative products including the FOX-P family of test and burn-in systems and FOX WaferPak Aligner, FOX WaferPak Contactor, FOX DiePak Carrier and FOX DiePak Loader. The FOX-XP and FOX-NP systems are full wafer contact and singulated die/module test and burn-in systems that can test, burn-in, and stabilize a wide range of devices such as leading-edge silicon carbide-based and gallium nitride power semiconductors, memory semiconductors, processors, microcontrollers, systems-on-a-chip, and photonics and integrated optical devices used in artificial intelligence. The FOX-CP system is a low-cost single-wafer compact test solution for logic, memory and photonic devices and the newest addition to the FOX-P product family. The FOX WaferPak Contactor contains a unique full wafer contactor capable of testing wafers up to 300mm that enables integrated circuit manufacturers to perform test, burn-in, and stabilization of full wafers on the FOX-P systems. The FOX DiePak Carrier allows testing, burning in, and stabilization of singulated bare die and modules up to 1,024 devices in parallel per DiePak Carriers on the FOX-NP and FOX-XP systems, with up to nine DiePak Carriersat a time.

The introduction of the High Power FOX-XP in connection with the Sonoma Ultra high-power package level reliability/burn-in test solutions provides us the unique ability to deliver wafer level test and burn-in and package level burn-in for AI accelerators, GPUs, and HPC processors. The combination positions us well within the rapidly growing AI market as a turn-key provider of reliability and testing that spans from engineering to high volume production. In combination with Sonoma, Tahoe and Echo package level burn-in systems, we provide a full range of burn-in solutions for semiconductor devices.

Our net revenue consists primarily of sales of FOX-P systems, WaferPak Aligners and DiePak Loaders, WaferPak contactors, DiePak carriers, Sonoma systems, Tahoe systems, Echo systems, test fixtures, upgrades and spare parts, service contract revenues, and non-recurring engineering charges. Our selling arrangements may include contractual customer acceptance provisions, which are mostly deemed perfunctory or inconsequential, and installation of the product occurs after shipment, transfer of title and risk of loss.

Our operating results and cash flows can vary significantly from period to period due to the timing, volume, and mix of customer orders, particularly because a substantial portion of our revenue is derived from a relatively small number of high-value system sales. As a result, the number, type, and selling price of systems sold in a given period can materially affect revenue, gross margin, earnings, and operating cash flow.

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Demand for our products is influenced by conditions in the semiconductor industry and in the end markets served by our customers, including demand related to generative AI, silicon photonics and power semiconductors such as silicon carbide and gallium nitride. During fiscal 2026, our operating performance was negatively affected by continued softness in demand in electric vehicle power semiconductors. Changes in customer investment cycles, order timing, and the pace of adoption of new technologies may continue to affect our results in future periods.

In addition, our results of operations have been affected by changes in revenue mix across systems, contactors, and services, as well as by the integration and contribution of the acquired business. Because these factors can affect revenue levels, gross margins, operating expenses, and working capital differently from period to period, past performance may not necessarily be indicative of future results. 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.

Recent changes in U.S. trade and tariff policies, including potential modifications to existing tariffs and the outcome of ongoing regulatory, administrative, or legal developments, may affect the cost of our imported goods, our supply chain, and, accordingly, our gross margins and operating results. The scope, timing, and ultimate impact of these developments remain uncertain, and we continue to evaluate their potential effects on our business, financial condition, and results of operations.

Change in Fiscal Year

On April 2, 2026, our board of directors approved a change in the Company’s fiscal year-end from the 52- or 53-week period ending on the Friday in May nearest May 31 to the 52- or 53-week period ending on the Friday in June nearest June 30. The change became effective beginning in fiscal year 2027, which began on June 27, 2026 and will end on June 25, 2027. As a result of the change in fiscal year, there was a one-month transition period beginning on May 30, 2026, and ending on June 26, 2026 (the “Transition Period”). See “Results of Operations” for further information regarding the Transition Period.

Financial information for the three months ended September 26, 2025 has not been included in this Form 10-Q because: (i) the three months ended August 29, 2025 provide a meaningful comparison to the three months ended September 25, 2026; (ii) there are no significant seasonal or other factors that would materially impact comparability of information if the results for the three months ended September 26, 2025 were presented in lieu of results for the three months ended August 29, 2025; and (iii) it was not practicable or cost justified to prepare such information.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, assumptions and judgments, including those related to customer programs and incentives, inventories, and income taxes. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Those results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a discussion of the critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended May 29, 2026.

There have been no material changes to our critical accounting policies and estimates during the three months ended September 25, 2026, or the one-month transition period ended June 26, 2026, compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended May 29, 2026. 

Income Taxes

We recognize deferred tax assets (“DTAs”) for deductible temporary differences, net operating loss carryforwards, and tax credit carryforwards to the extent we conclude it is more likely than not that such DTAs will be realized. Our DTAs relate solely to U.S. federal and state income taxes. At each reporting date, we evaluate the realizability of our DTAs and record a valuation allowance when, based on all available evidence, we conclude that it is not more likely than not that some portion or all of our DTAs will be realized.

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This assessment is a critical accounting estimate because it requires significant judgment in weighing both positive and negative evidence, with the most objective evidence generally carrying the greatest weight. In making this determination, we consider, among other factors: (i) recent operating results and cumulative pretax income (loss) in the United States; (ii) the duration and severity of any recent losses; (iii) projections of future taxable income based on our operating plans (including expected revenues, margins, and cost structure); (iv) the availability and feasibility of tax planning strategies; and (v) the expected utilization periods and limitations applicable to carryforwards.

During fiscal 2024, we released a valuation allowance of $21.9 million after concluding that it was more likely than not that our U.S. DTAs would be realized. We incurred pretax losses in fiscal 2025 and 2026 and reported pretax income in the first quarter of fiscal 2027. Management continues to reassess at each reporting date whether sufficient positive evidence exists to support realization of our U.S. DTAs. This reassessment places increased emphasis on the evaluation of recent operating performance and our forecast of future taxable income, including the extent to which recent losses are expected to be temporary versus indicative of a sustained trend.

If actual results differ from our current estimates, if assumptions underlying our forecast of future taxable income change, or if negative evidence (including sustained losses) outweighs positive evidence, we may be required to record or adjust a valuation allowance. Any such change could have a material impact on our income tax provision and our results of operations in the period of the change.

Results of Operations

Discussion of Results of Operations for the Three Months Ended September 25, 2026 Compared to the Three Months Ended August 29, 2025

Revenues

		Three Months Ended
		September 25,				August 29,				Percent
(Dollars in thousands)		2026				2025				Change
Revenues		$	33,007			$	10,969				201	%

For the three months ended September 25, 2026 revenue increased by $22.0 million, compared to the three months ended August 29, 2025, primarily driven by significantly higher shipments of systems and contactors due to strong demand in the AI market. Revenue from package level burn-in systems increased by $10.9 million, while revenue from wafer-level burn-in contactors and package level burn-in boards and modules increased by a combined $10.9 million.

Revenue by Geography		Three Months Ended
		September 25,				August 29,				Percent
(Dollars in thousands)		2026				2025				Change
Asia		$	22,174			$	2,476				796	%
United States			8,802				4,812				83	%
Europe and Middle East			2,031				3,681				(45	)%
Total revenues		$	33,007			$	10,969				201	%
Asia as a percentage of total revenues			67.2	%			22.6	%
United States as a percentage of total revenues			26.7	%			43.9	%
Europe and Middle East as a percentage of total revenues			6.1	%			33.5	%

On a geographic basis, revenues represent products that were shipped to or services that were performed at our customer locations. For the three months ended September 25, 2026, compared to the three months ended August 29, 2025, revenue increased in Asia and the United States due to strong demand in the AI market, which was partially offset by decreases in FOX-P systems sold in Europe and Middle East.

Gross Margin

		Three Months Ended
		September 25,				August 29,				Percent
(Dollars in thousands)		2026				2025				Change
Gross profit		$	15,663			$	3,719				321	%
Gross margin			47.5	%			33.9	%

Gross profit increased by $11.9 million for the three months ended September 25, 2026, compared to the three months ended August 29, 2025, primarily due to significantly higher revenue levels. Gross margin increased by 13.6 percentage points primarily due to higher sales volume and a more favorable product mix. The higher sales volume resulted in improved absorption of labor and manufacturing overhead, reducing fixed manufacturing costs as a percentage of revenue. In addition, the prior-year quarter included a higher proportion of lower-margin products sold as part of our complete solutions.

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Research and Development

		Three Months Ended
		September 25,				August 29,				Percent
(Dollars in thousands)		2026				2025				Change
Research and development		$	4,143			$	2,849				45	%
As a percentage of total revenues			12.6	%			26.0	%

Research and development expenses consist primarily of compensation and benefits for product development personnel, outside development service costs, travel expenses, facilities cost allocations, and stock-based compensation charges. Research and development expenses increased by $1.3 million for the three months ended September 25, 2026, compared to the three months ended August 29, 2025. The increase was primarily driven by $0.8 million in higher employment-related costs, and $0.3 million in higher allocated costs, both of which resulted from increased headcount.

Selling, General and Administrative

		Three Months Ended
		September 25,				August 29,				Percent
(Dollars in thousands)		2026				2025				Change
Selling, general and administrative		$	5,473			$	4,717				16	%
As a percentage of total revenues			16.6	%			43.0	%

Selling, general and administrative expenses consist primarily of compensation and benefits for sales, marketing and general and administrative personnel, legal and accounting service costs, marketing communications costs, travel expenses, facilities cost allocations, and stock-based compensation charges. Selling, general and administrative expenses increased by $0.8 million for the three months ended September 25, 2026, compared to the three months ended August 29, 2025. The increase was primarily driven by higher employment-related costs, including increased accruals for bonuses and commissions.

Restructuring Charges

		Three Months Ended
		September 25,				August 29,				Percent
(Dollars in thousands)		2026				2025				Change
Restructuring charges		$	-			$	219				(100	)%
As a percentage of total revenues			0.0	%			2.0	%

There were no restructuring charges for the three months ended September 25, 2026. Restructuring charges incurred for the three months ended August 29, 2025 primarily related to a workforce reduction implemented to better align our resources with our business needs.

Interest and Other Income, Net

		Three Months Ended
		September 25,				August 29,				Percent
(Dollars in thousands)		2026				2025				Change
Interest income, net		$	899			$	179				402	%
Other Income (expense), net			(19	)			1,051			N.M.
Interest and other income, net		$	880			$	1,230				(28	)%

N.M.-Not meaningful

Interest and other income, net, consists primarily of interest income, foreign currency transaction exchange gains and losses and other non-operating income and expense. Interest income, net, increased by $0.7 million for the three months ended September 25, 2026, compared to the three months ended August 29, 2025, primarily driven by higher interest income earned on a significantly higher average cash balances from our investments in money market funds. Other income, net, decreased by $1.1 million for the three months ended September 25, 2026, compared to the three months ended August 29, 2025, primarily attributable to the Employee Retention Credit (“ERC”) refund of $1.3 million received, net of a $0.3 million third-party service fee incurred in connection with the filing of the ERC claims during the three months ended August 29, 2025.

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Income Tax Benefit

		Three Months Ended
		September 25,				August 29,				Percent
(Dollars in thousands)		2026				2025				Change
Income tax benefit		$	(254	)		$	(752	)			(66	)%

For the three months ended September 25, 2026, the Company recognized a $0.3 million income tax benefit despite pretax income primarily due to tax deductions associated with disqualified dispositions and excess tax benefits from the vesting of restricted stock units. For the three months ended August 29, 2025, the Company recognized a $0.8 million income tax benefit primarily driven by year-to-date losses in the United States.

Discussion of Results of Operations for the One Month Ended June 26, 2026

Because the transition period covers only one month, the results of operations for the period are not necessarily indicative of results for a full fiscal quarter or fiscal year.

Revenues

		One Month Ended
		June 26,
(Dollars in thousands)		2026
Revenues		$	638

Revenue by Geography		One Month Ended
		June 26,
(Dollars in thousands)		2026
United States		$	143
Europe and Middle East			11
Asia			484
Total revenues		$	638
United States as a percentage of total revenues			22.4	%
Europe and Middle East as a percentage of total revenues			1.7	%
Asia as a percentage of total revenues			75.9	%

For the one-month transition period ended June 26, 2026, revenue consisted primarily of $0.4 million in services revenue and $0.2 million in revenue from package level burn-in boards and modules.

Gross Margin

		One Month Ended
		June 26,
(Dollars in thousands)		2026
Gross loss		$	(1,012	)
Gross margin			(159	)%

Gross margin was negative for the one-month transition period ended June 26, 2026, primarily because shipments are historically low in the month after year-end and the low level of revenue was insufficient to absorb fixed manufacturing costs.

Research and Development

		One Month Ended
		June 26,
(Dollars in thousands)		2026
Research and development		$	1,164
As a percentage of total revenues			182.4	%

Research and development expenses were $1.2 million for the one-month transition period ended June 26, 2026. Research and development expenses consisted primarily of compensation and benefits for product development personnel, outside development service costs, travel expenses, facilities cost allocations, and stock-based compensation charges.

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Selling, General and Administrative

		One Month Ended
		June 26,
(Dollars in thousands)		2026
Selling, general and administrative		$	1,819
As a percentage of total revenues			285.1	%

Selling, general and administrative expenses were $1.8 million for the one-month transition period ended June 26, 2026. Selling, general and administrative expenses consisted primarily of compensation and benefits for sales, marketing and general and administrative personnel, legal and accounting service costs, marketing communications costs, travel expenses, facilities cost allocations, and stock-based compensation charges.

Interest and Other Income, Net

		One Month Ended
		June 26,
(Dollars in thousands)		2026
Interest income, net		$	301
Other Income, net			21
Interest and other income, net		$	322

Interest and other income, net, consisted primarily of interest income, foreign currency transaction exchange gains and losses and other non-operating income and expense.

Income Tax Benefit

		One Month Ended
		June 26,
(Dollars in thousands)		2026
Income tax benefit		$	(930	)

For the one-month transition period ended June 26, 2026, the Company recognized a $0.9 million income tax benefit primarily due to a pretax loss in the United States.

Liquidity and Capital Resources

Cash, cash equivalents, and restricted cash were $105.1 million as of September 25, 2026, compared to $24.7 million as of August 29, 2025. Cash, cash equivalents, and restricted cash were $112.5 million as of June 26, 2026. We believe that our existing cash resources and anticipated funds from operations will satisfy our cash requirements to fund our operating activities, capital expenditures and other obligations for the next twelve months.

		Three Months Ended
		September 25,				August 29,
(In thousands)		2026				2025				Change
Operating activities		$	(3,054	)		$	(282	)		$	(2,772	)
Investing activities			(49	)			(1,391	)			1,342
Financing activities			(4,298	)			(158	)			(4,140	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(6	)			9				(15	)
Net decrease in cash, cash equivalents and restricted cash		$	(7,407	)		$	(1,822	)		$	(5,585	)

		One Month Ended
		June 26,
(In thousands)		2026
Operating activities		$	(3,812	)
Investing activities			(4	)
Financing activities			(234	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			-
Net decrease in cash, cash equivalents and restricted cash		$	(4,050	)

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Net Cash Flows Used in Operating Activities

Net cash used in operating activities increased by $2.8 million for the three months ended September 25, 2026, compared to the three months ended August 29, 2025. This increase in cash usage was primarily driven by an increase in accounts receivable associated with significantly higher revenue and increased cash used for prepaid expenses. The Company also increased inventory purchases in anticipation of higher customer demand; however, the cash impact was largely offset by a corresponding increase in accounts payable due to the timing of vendor payments. These uses of cash were partially offset by improved net income and an increase in cash provided by deferred revenue due to the timing of customer deposits and revenue recognition.

Net cash used in operating activities during the one month ended June 26, 2026, was driven primarily by a net loss and cash used for inventory purchases in anticipation of higher customer demand, partially offset by cash provided by deferred revenue and collection of accounts receivable.

Net Cash Flows Used in Investing Activities

Net cash used in investing activities decreased by $1.3 million for the three months ended September 25, 2026 compared to the three months ended August 29, 2025. The decrease was primarily due to higher cash expenditures on property and equipment in the prior-year period, mainly related to office renovations.

Net cash used in investing activities during the one month ended June 26, 2026 was immaterial.

Net Cash Flows Used in Financing Activities

Net cash used in financing activities increased by $4.1 million for the three months ended September 25, 2026 compared to the three months ended August 29, 2025. The increase was primarily due to higher cash payments for shares withheld for taxes upon the vesting of restricted stock units, driven by a higher stock price.

Net cash used in financing activities during the one month ended June 26, 2026 was immaterial.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt. There have been no material changes in the composition, magnitude or other key characteristics of our contractual obligations or other commitments as disclosed in the Company's Annual Report on Form 10-K for the year ended May 29, 2026.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer, or CEO, and chief financial officer, or CFO, evaluated the effectiveness of our "disclosure controls and procedures" as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) as of September 25, 2026, in connection with the filing of this Quarterly Report on Form 10-Q. Based on that evaluation as of September 25, 2026, our CEO and CFO concluded that our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC and accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting during the three months ended September 25, 2026, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are subject to various claims and legal proceedings that arise in the ordinary course of business. We accrue for losses related to litigation when a potential loss is probable and the loss can be reasonably estimated in accordance with FASB requirements. For additional information regarding legal proceedings, refer to Note 6 – Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements.

Item 1A. Risk Factors

Item 1A, “Risk Factors,” on pages 13 through 21 of the Company’s Annual Report on Form 10-K for the year ended May 29, 2026, provides information on the significant risks associated with our business. There have been no subsequent material changes to these risks.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 

None. 

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable. 

Item 5. Other Information

During the three months ended September 25, 2026, none of our directors or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408(a).

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Item 6. Exhibits

Exhibit Number				Description
3.1(1)				Restated Articles of Incorporation of Registrant
3.2(2)				Amended and Restated Bylaws of the Registrant
4.1(3)				Form of Common Stock certificate
31.1				Certification of the principal executive officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.†
31.2				Certification of the principal financial and accounting officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.†
32.1				Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2				Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS				XBRL Instance Document.†
101.SCH				XBRL Taxonomy Extension Schema Document.†
101.CAL				XBRL Taxonomy Extension Calculation Linkbase Document.†
101.DEF				XBRL Taxonomy Extension Definition Linkbase Document.†
101.LAB				XBRL Taxonomy Extension Label Linkbase Document.†
101.PRE				XBRL Taxonomy Extension Presentation Linkbase Document.†

1	Incorporated by reference to the same-numbered exhibit previously filed with the Company’s Registration Statement on Form S-1 filed June 11, 1997 (File No. 333-28987).
2	Incorporated by reference to Exhibit 3.1 previously filed with the Company’s Annual Report on Form 10-K filed July 28, 2025 (File No. 000-22893)
3	Incorporated by reference to the same-numbered exhibit previously filed with Amendment No.1 to the Company’s Registration Statement on Form S-1 filed July 17, 1997 (File No. 333-28987).
†	Filed herewith.
**	Furnished, and not filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AEHR TEST SYSTEMS
Date: November 6, 2026	By:	/s/ GAYN ERICKSON
		Gayn Erickson
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: November 6, 2026	By:	/s/ CHRIS P. SIU
		Chris P. Siu
		Executive Vice President of Finance, and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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