There are share price recoveries, and then there are recoveries that are backed by the numbers.
AEM Holdings (SGX: AWX), the Singapore-listed semiconductor test solutions provider, has surged over 90% year to date in 2026.
And for once, the excitement appears warranted.
Behind the share price run is a genuine operational turnaround: record free cash flow, a cleaner balance sheet, and the reinstatement of a dividend after a three-year drought.
Here are five things investors need to know.
1. AI demand is driving real revenue growth
AEM’s revival is not a story of financial engineering; it is a story of demand.
Revenue rose 5.0% year on year (YoY) to S$399.3 million in 2025, underpinned by a ramp in high-volume manufacturing for a strategic AI and high-performance computing (AI/HPC) customer.
More tellingly, the second half was stronger than the first.
Revenue in the second half of 2025 (2H2025) came in at S$209.1 million, comfortably ahead of management’s guidance range of S$170 million to S$190 million — a welcome change from the guidance downgrades of prior years.
Looking ahead, management has guided revenue of S$460 million to S$510 million for 2026, underpinned by continued ramp from its anchor AI/HPC customer, increased orders from a long-standing HPC customer facing capacity constraints, and a second AI/HPC customer expected to grow significantly, potentially becoming AEM’s largest customer by revenue.
2. Free cash flow staged a dramatic turnaround
Free cash flow is the lifeblood of dividends, and AEM’s 2025 showing was exceptional.
The group generated S$111.5 million in free cash flow for the year — a dramatic swing from the negative S$41.7 million recorded in 2024.
The turnaround was largely driven by a S$65.7 million reduction in inventories as AEM worked through its stockpile, combined with an increase in trade payables.
While some of this is working capital timing rather than pure earnings quality, the scale of the improvement is difficult to ignore.
The free cash flow surge also funded meaningful debt repayment: borrowings fell from S$72.8 million to just S$3.1 million over the course of the year.
3. The balance sheet swings to net cash
AEM ended 2025 in its strongest financial position in years.
The group swung from a net debt position of S$29.0 million at end-2024 to a net cash position of S$74.3 million as at 31 December 2025.
This matters for dividend investors because a net cash balance sheet reduces financial risk and gives management the flexibility to sustain or grow payouts even if near-term earnings disappoint.
It also signals that the inventory and cash flow problems that plagued the group in 2023 and 2024 have been substantially resolved.
4. Dividend reinstated for the first time since 2022
AEM declared a final dividend of S$0.013 per share for 2025 — its first payout since 2022, when it paid S$0.103 per share.
The amount is modest by historical standards, and at S$3.34 per share, the trailing dividend yield stands at just 0.4%.
The significance here is not the quantum but the signal.
A dividend reinstatement, backed by genuine free cash flow rather than financial sleight of hand, suggests that management believes the recovery is durable enough to begin returning cash to shareholders again.
Whether that confidence is borne out will depend on how 2026 unfolds.
5. Margins remain the unresolved question
For all the positives, one number demands honesty: AEM’s net profit margin for 2025 was just 4.3% — far below the 18.8% and 16.3% achieved in 2020 and 2021, respectively.
Gross profit margin held flat at 25.7%, but elevated R&D expenses and selling, general and administrative costs continue to erode what should be a higher level of operating leverage as revenues recover.
Net profit rose 48.2% YoY to S$17.0 million — respectable in percentage terms, but still a fraction of the earnings power this business once demonstrated.
The 2026 revenue guidance of S$460 million to S$510 million is encouraging, but revenue growth without margin expansion would leave the investment thesis incomplete.
This is the number to watch: if margins do not improve meaningfully as revenues scale, it would suggest that the structural economics of AEM’s business have changed permanently.
Get Smart: Watch the margins, not just the revenue.
AEM’s 2025 results confirm that the worst is likely behind it.
Free cash flow has recovered, the balance sheet is clean, and the dividend is back.
But the share price has already run hard in anticipation of good news.
The real test — and the real opportunity — lies in whether operating leverage finally shows up in the margin line as revenue climbs towards S$500 million.
Watch the margins, not just the revenue.
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Disclosure: Calvina L. does not own any of the stocks mentioned. Chin Hui Leong contributed to the article and owns shares of AEM.
