Cohu (COHU) Stock Forecast & Price Target

Cohu is benefiting from a clear AI HPC-led inflection, as 3Q26 revenue of $173.0M and EPS of $0.43 both beat consensus while gross margin held strong at 45.7% and operating margin improved to 14.7%. Management’s raised HPC pipeline to about $1.0B, combined with a $178.0M 4Q26 midpoint guide, 82% downstream test utilization, and a rare +30% to +40% CY27 growth outlook, supports confidence that demand is broadening beyond a single quarter. With Eclipse capacity expected to rise roughly 3x in 2027 and cash of about $508M versus $305M of long-term debt, the company appears positioned to convert strong customer engagement into sustained revenue and margin expansion.

Cohu is facing a fundamentally weaker demand backdrop as the ongoing auto/industrial, mobile, and compute correction is pressuring a business that had previously benefited from EV/ADAS, 5G mmWave, and broader electrification trends. Despite leadership in semiconductor test handlers and sockets and emerging opportunities in HBM inspection/metrology and SiC wafer level burn-in test, the company has struggled with low test cell utilization and a prolonged inventory digestion period across key end markets. Although gross margin pressure seen through 2021 may not repeat and a ~46% GM floor appears established, the near-term mix and utilization dynamics still imply limited operating leverage and a negative setup for the stock.