PDFS · PDF Solutions
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $48.48
Note written ·
Price against the kill line
23.7% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $48.48, on record since 11 November 2026. The shares are down 30.0% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $48.48, 16% above the last close (11 November 2026), would show the shares leading the S&P 500 and prove this call wrong.
Research onlyNot in the portfolio.
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 5 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 68.3
- Revenue, change on a year (%)
- +19.6
- Gross margin (%)
- 72.8
- Operating margin (%)
- 12.1
- Free cash flow, four quarters ($M)
- 0.0
- Net cash, cash less debt ($M)
- 41.8
- Price to earnings (×)
- 98.5
- Enterprise value to sales (×)
- 6.0
All filed numbers
What PDF Solutions reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 68.3 | +19.6 | 72.8 | 12.1 |
| first filed | 61.5 | +18.9 | 68.9 | 8.2 |
| first filed | 60.1 | +25.9 | 71.8 | 10.5 |
| first filed | 62.4 | +24.6 | 72.9 | 5.5 |
| first filed | 57.1 | +23.1 | 72.3 | 8.5 |
| first filed | 51.7 | +24.2 | 71.2 | 2.2 |
| Pre-tax income ($M) | 8.4 |
| Net income ($M) four quarters: 15.9 | 6.8 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +8.5 |
| Operating cash flow ($M) | 49.2 |
| Capital spending ($M) | 49.2 |
| Free cash flow ($M) | 0.0 |
| Cash and short-term investments ($M) | 107 |
| Debt ($M) long-term debt | 65.3 |
| Net cash, cash less debt ($M) | 41.8 |
| Deferred revenue ($M) +66.1% on a year | 36.7 |
| Backlog, orders not yet delivered ($M) −15.3% on a year | 247 |
| Receivables ($M) | 96.9 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 383 |
| Market value ($M) | 1,563 |
| Enterprise value, market value plus net debt ($M) | 1,521 |
| Enterprise value to sales (×) | 6.0 |
| Enterprise value to operating income (×) | 65.8 |
| Price to earnings (×) | 98.5 |
| Price to book value (×) | 4.1 |
| Free-cash-flow yield (%) | 0.0 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 7.8% of shares outstanding sold short, 5.7 days of average trading to cover, −6.5% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $151K |
| 12 monthsfrom | $0 | $228K |
The thesis
PDF Solutions answered the growth question in its 5 November 2026 third-quarter report, but backlog fell, so the case for beating the S&P 500 over three months remains weaker than the analyst targets imply. Platform revenue grew 22% year over year and the company reaffirmed its 20% annual revenue growth target; ending backlog dropped to $247.2 million from $270.7 million. The year-end backlog figure, reported with fourth-quarter results, settles it.
The shares closed at $39.16 on 10 November 2026 in adjusted daily closes. That is 44.7% below the 52-week high of $70.79 and 22.2% lower than three months earlier. The 14-day relative strength index (RSI), a momentum gauge on a 0-to-100 scale, reads 43.3.
The story is well known: the Morgan Stanley, Needham and DA Davidson views are public, and the debate has moved from Platform growth to backlog and fourth-quarter growth since the 5 November 2026 report. Wells Fargo kept Equal-Weight on 6 November 2026 and lowered its target to $39, essentially the current price.
Bullish and bearish views on PDF Solutions, Inc.
The bull case on PDF Solutions, Inc. (PDFS), in brief: Platform growth recovered. The bear case: backlog fell. Ending backlog was $247.2 million, against $270.7 million in the second quarter and $292.0 million a year earlier (5 November 2026 release). Management attributed the drop to the timing of large deals and said some year-end renewals may slip into 2027, per Earnings…
Bull case
- Platform growth recovered. Third-quarter Platform revenue was $58.3 million, up 22% from a year earlier and 19% from the second quarter (company release, 5 November 2026). Second-quarter Platform growth had been 14%.
- Record revenue and margins. Total revenue was $68.3 million, up from $57.1 million a year earlier and $61.5 million in the second quarter. Non-GAAP operating margin was 28%, and non-GAAP earnings were $0.40 a share against a $0.33 estimate in a 5 November 2026 headline.
- The 20% growth target stands. The company reaffirmed the 20% annual revenue growth target for 2026 on 5 November 2026, so the second-quarter reaffirmation was not withdrawn.
- New commercial agreements. The company reported an eight-figure E-Probe and CV test-chip contract with an existing leading-edge customer, and a second customer running multiple machines (Finviz summary of the 5 November 2026 release). Samsung presented E-Probe results at the CONNECT conference.
- Analysts remain above the price. DA Davidson kept Buy on 6 November 2026 and lowered its target to $60 from $68. Morgan Stanley and Needham initiated at Overweight ($62, 8 September 2026) and Buy ($60, 25 September 2026).
Bear case
- Backlog fell. Ending backlog was $247.2 million, against $270.7 million in the second quarter and $292.0 million a year earlier (5 November 2026 release). Management attributed the drop to the timing of large deals and said some year-end renewals may slip into 2027, per Earnings Whispers.
- The target implies slower fourth-quarter growth. Finviz calculates that the 20% annual target implies fourth-quarter revenue of about $73 million, roughly 17% growth against about 22% in the first half. A 5 November 2026 headline shows full-year sales guidance of $262.829 million against a $263.934 million estimate.
- Targets keep coming down. DA Davidson cut from $68 to $60 after the October cut, Wells Fargo lowered to $39 from an unreported prior level, and Morgan Stanley adjusted its target on 6 November 2026 (amount not in the headline).
- Volume-based revenue slipped. It was $10.0 million, down from $12.4 million in the second quarter, though above $9.1 million a year earlier.
- GAAP earnings sit far below adjusted. Third-quarter GAAP diluted earnings were $0.16 a share against $0.40 non-GAAP, and GAAP gross margin was 73% against 77% non-GAAP.
Price setup
Adjusted daily closes were $54.40 on 9 October 2026, $41.27 on 15 October 2026, $45.49 on 28 October 2026 and $39.16 on 10 November 2026. Finviz reported the shares at $39.79 before the report, about 10.9% below the 200-day moving average. Its page shows conflicting reaction figures for 5 November 2026 and 6 November 2026, so the day-by-day path is not confirmed here.
The shares have not recovered the October rebound. The $41.27 close of 15 October 2026 is now above the price and the $44.00 May offering price is further above.
Crowding looks low. No insider sales are in the filings reviewed, and the only recent ownership filing is a Schedule 13G of 9 October 2026 showing a passive holder with sole voting power over 1.85 million shares. The share count rose in 2026 through the May equity offering and an August shelf registration tied to an employee stock ownership plan offering.
Catalysts ahead
- ~February 2027 (est.): Fourth-quarter and full-year 2026 report. Shows whether backlog rebuilt above $271 million as management guided and whether the 20% annual growth target was met.
Elapsed catalysts
- ~12 November 2026 (est.): Form 10-Q for the third quarter of 2026. Discloses customers above 10% of revenue and backlog detail, showing whether the backlog drop reflects deal timing or a lost customer. (passed)
What would change the view
A daily close above $48.48, 16% above the last close (11 November 2026), would show the shares leading the S&P 500 and prove this call wrong.
What it trades with
PDF Solutions sells yield-analytics software and test equipment to semiconductor makers, so its volume-based revenue follows customer wafer starts. Its shares have traded on company-specific events, with the October drop of $54.40 to $41.27 coming without a company release. Semiconductor equipment and foundry spending cycles are the main outside influence on volume revenue.
The evidence, claim by claim (6)
- Q3 2026 total revenue was $68.3 million versus $61.5 million in Q2 2026 and $57.1 million in Q3 2025; Platform revenue was $58.3 million, up 22% year over year. PDF Solutions Q3 2026 results release (8-K Exhibit 99.1) · as of
- Ending backlog was $247.2 million, versus $270.7 million at Q2 2026 and $292.0 million at Q3 2025. PDF Solutions Q3 2026 results release · as of
- The company reaffirmed its 20% annual revenue growth target for 2026; Q3 GAAP diluted EPS was $0.16 and non-GAAP $0.40. PDF Solutions Q3 2026 results release · as of
- Volume-based revenue was $10.0 million in Q3 2026, down from $12.4 million in Q2 and up from $9.1 million a year earlier. PDF Solutions Q3 2026 results release · as of
- DA Davidson maintained Buy and lowered its price target to $60; Wells Fargo maintained Equal-Weight and lowered its target to $39. Analyst-action headlines · as of
- Finviz reported shares at $39.79 before the report, about 10.9% below the 200-day moving average. Finviz earnings analysis · as of
Sources
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