After AI Hyperscaler Deal, Is Aehr Test Systems Stock on Sale?Written by Leo Miller. Published 10/9/2025.
Key Points- Aehr Test Systems absolutely surged in August and September after the company announced new orders from its main AI hyperscale customer.
- However, Aehr's latest earnings did not impress markets despite beating estimates, sending shares down steeply.
- Is there now an attractive entry point in AEHR, or does the company need to show investors more considering its current valuation?
After posting its largest single-day gain of 2025, small-cap chip stock Aehr Test Systems (NASDAQ: AEHR) just took a huge hit. On Oct. 7, shares closed down more than 17% as the market reacted to the company’s latest earnings report. The drop follows a critical announcement Aehr made in late August, which sent shares up nearly 36% in one day. The firm said it had received follow-on orders for its Sonoma systems from a major artificial intelligence (AI) hyperscaler, a development that positioned Aehr as a small company with potential to ride the AI wave.
Below, we detail the key points from the company’s latest earnings that investors should know. Ultimately, did an investing opportunity just open up in this headline-grabbing stock?
Aehr Beats Estimates, But Lack of Guidance Disappoints
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Aehr released its fiscal Q1 2026 financial results on Oct. 6. Revenue was $11 million, a 16% decline from $13.1 million a year earlier, but slightly ahead of Wall Street’s $10.8 million estimate (which implied a drop of more than 17%). The company also posted adjusted earnings per share (EPS) of $0.01, in line with analysts’ estimates. Despite these modest beats, the stock experienced a sharp sell-off — a reaction that becomes clearer when you review several underlying factors.
Most notably, Aehr did not provide guidance for the next quarter or the full fiscal year, citing tariff-related uncertainty as a key reason. That’s not surprising given that 63% of Aehr’s revenues came from Asian customers in fiscal 2025. The United States and China have delayed the implementation of new tariffs until Nov. 10 to allow for negotiations, and 40% “transshipment” levies are affecting some Southeast Asian countries. With this level of uncertainty, management’s reluctance to provide forecasts disappointed the market and likely contributed to the sell-off.
Aehr’s Hyperscaler Orders Don’t Move the Needle YetThe hyperscaler order didn’t produce a big jump in bookings or backlog. Bookings were $11.4 million and backlog $15.5 million, only slightly above the $11.1 million and $15.2 million reported in fiscal Q4 2025. Because shares had surged on the order announcement, investors likely expected a much more substantial improvement in those metrics.
The company is still relatively early in monetizing its AI opportunity. With the July 2024 acquisition of Incal, Aehr gained the Sonoma product that is driving hyperscaler interest, but the acquisition is just over a year old. AI already represented about 40% of total sales last year — up from essentially zero the year before — but those AI revenues remain small in absolute terms. At the same time, sales to other markets, such as silicon carbide customers, have been declining, which has weighed on overall results. Management believes the AI opportunity could be three to five times larger than its silicon carbide business, but tangible scale is still ahead.
AEHR: Valuation Comes Closer to Earth, But Isn’t Compelling YetHeading into the earnings release, Aehr commanded a lofty valuation. Without revenue visibility or a clear surge in bookings, it was hard to justify the nearly 17x price-to-sales (P/S) ratio the stock reached — a top-ten level among about 80 U.S. chip companies with trailing 12-month revenues of $50 million or more. That stretched valuation reflected investor enthusiasm after the stock jumped further following the 36% single-day gain in August.
As of the Oct. 7 close, the stock trades at roughly a 14x P/S ratio. That’s a meaningful decline from peak levels, but it remains high relative to many peers. Aehr has made promising announcements, yet those moves haven’t translated into material financial results so far, leaving the company in a proving phase of its AI strategy. Its core value proposition — helping customers reduce costs by testing chips for failures before deployment — is still compelling, and the firm could see meaningful upside if it gains broader traction in the AI market. For now, Aehr is a stock to watch closely rather than a clear-cut buy. |
