Why Aehr Test Systems Stock Sank 12.6% Today

Key Points

• Aehr posted disappointing earnings yesterday, revealing declining revenue and EPS.

• The company provided no update to its limited guidance, further disappointing investors.

• 10 stocks we like better than Aehr Test Systems ›

Shares of Aehr Test Systems (NASDAQ: AEHR) fell on Wednesday, finishing the day down 12.6%. The drop came as the S&P 500 and Nasdaq Composite gained 0.5% and 0.9%, respectively.

Aehr, a global supplier of "burn-in" systems, a key test for semiconductors that catches faulty chips before they make it out of the factory, reported its latest quarterly earnings yesterday.

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A disappointing quarter

Aehr's results for the fourth quarter of fiscal 2025, ended May 30, disappointed investors. The company reported a year-over-year decline in both revenue ($14.1 million, down from $16.6 million) and earnings per share (a net loss of $0.10 per share, down from net income of $0.81 per share).

The company's full-year results were similar, reporting revenue of $59 million, compared to the previous year's $66.2 million, and a net loss of $0.13 per share compared to EPS of $1.12 the year before.

Image source: Getty Images.

Despite the performance, management struck a positive tone, focusing on the company's "transformation," saying the year was "marked by significant progress on our strategic initiatives to expand our total addressable market, diversify our customer base, and enhance our product portfolio."

Still, management admitted there were significant challenges and told investors, "We are maintaining our cautious approach and are not reinstating specific guidance beyond what we have already stated."

Growth potential

The transformation Aehr management was alluding to is the company's expansion beyond its focus on testing Silicon Carbide semiconductors, an alternative to traditional Silicon chips, and a comparatively small market. Critically, the company says it has successfully tested a burn-in system for artificial intelligence (AI) chips, a massive and growing market that could provide the company a path to significant growth.

Still, there is a lot of uncertainty ahead for Aehr. For investors with a high risk tolerance, Aehr could pay off if it can successfully gain a foothold in AI.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.