FormFactor's record 54.7% gross margin included $8.6 million of tariff refunds that end after Q4
FormFactor's quarterly report shows 3.1 points of its record margin came from IEEPA tariff refunds that stop after the fourth quarter, while the new Texas plant's underutilization costs are headed into cost of revenues. Adjusted for the refund, the quarter sits at the guided level, not above it.
Vincent Jiang · 3 min read
FormFactor+11.30% — FormFactor, up 11.30 percent today, the probe-card maker, filed its quarterly report on November 3 with a record quarter and a line that adjusts it 1. One-time tariff refunds added about $8.6 million to gross profit in the quarter ended September 26, roughly 3.1 points of the record 54.7% gross margin 1. The stock fell 12% after the October 28 earnings print, jumped 9.7% on November 3, and still sits about 40% below its June high of $159.93 4.
Why Washington is paying a chip tester back
The refunds exist because the US government used the International Emergency Economic Powers Act, a 1977 statute written for economic sanctions, to impose tariffs in 2025 1. On February 20, 2026, the Supreme Court ruled those tariffs were not authorized by the statute; the Court of International Trade then ordered Customs and Border Protection to set up a refund process, running since April 20 1. FormFactor has received about $9.9 million through September 26 and expects $1.8 million more in the fourth quarter, after which the filing says the benefit stops 1.
Strip the same money from both quarters
Q3 gross profit was $153.4 million on $280.5 million of revenue, up 38.4% year over year 12. Without the refund it is about $144.8 million, a 51.6% margin 2. The fourth-quarter guide is 52.3% GAAP on $285 million 2; take the $1.8 million out of both and the gap between the record quarter and the guide closes from 2.4 points to about a tenth of a point. The step-up over last year's 39.8% is real, roughly 12 points ex-refund, but the headline jump is not the operating level 2.
Take out the $8.6M refund and the record margin sits at the Q4 guide
Take out the $8.6M refund and the record margin sits at the Q4 guide
- GAAP gross margin
- Estimate
Data
| GAAP gross margin | |
|---|---|
| Q3 FY2025 | 39.8% |
| Q3 FY2026 reported | 54.7% |
| Q3 FY2026 ex-refund (computed) (estimate) | 51.6% |
| Q4 FY2026 guide (midpoint) (estimate) | 52.3% |
What management says the quarter actually bought
CFO Aric McKinnis framed it the same way: excluding about $10.5 million of tariff refunds and other one-time costs, non-GAAP gross margin was 52.5% to 53%, about 150 basis points above the baseline the company described last quarter, and management now calls 53% the baseline 3. That is the durable improvement: about 1.5 points, not the 14.9-point GAAP headline 3.
Texas cuts the other way
The Farmers Branch plant began production late in Q3 and shipped its first customer unit in Q4 1. The filing says its underutilization costs will be expensed to cost of revenues and are "expected to be substantial" 1. Factory start-up costs were $6.375 million against $964,000 a year ago, with about $5 million moving into cost of revenues this quarter 13.
The February test
Teradyne+5.38% — Teradyne, up 5.38 percent today agreed on October 6 to buy 2,234,887 shares for about $300.0 million, closing expected this quarter 1. February's report is the first print with no refunds and Texas costs inside cost of revenues; that number, not November's, sets the operating margin this stock trades on.
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