Veeco Instruments Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 5, 2026

Key Takeaways

  • Positive Sentiment: Q2 results exceeded expectations: Revenue reached $193 million, with non-GAAP operating income of $23 million and diluted EPS of $0.33. Management raised full-year 2026 revenue guidance to $780–$810 million.
  • Positive Sentiment: Order momentum strengthened substantially, including $200 million of Advanced Packaging orders that are primarily expected to ship in 2027. Management said visibility into 2027—and in some cases beyond—has improved significantly.
  • Positive Sentiment: AI-related demand is driving growth across Advanced Packaging, Silicon Photonics, laser annealing, memory, EUV, and data storage. Veeco expects semiconductor revenue to grow more than 10% in 2026, compound semiconductor revenue to approximately double, and data storage revenue to double year over year.
  • Negative Sentiment: Growth investments are pressuring near-term profitability: Veeco plans to more than double Advanced Packaging and Silicon Photonics capacity in 2027, adding about $10 million in 2026 operating expenses and reducing full-year gross margin by roughly 75 basis points. Full-year non-GAAP EPS guidance is now $1.36–$1.61 despite the higher revenue outlook.
  • Neutral Sentiment: The proposed Axcelis merger continues to progress, with shareholder approvals and most regulatory clearances secured; China antitrust approval remains outstanding, and closing is still targeted for the second half of 2026.
AI Generated. May Contain Errors.
Earnings Conference Call
Veeco Instruments Q2 2026
00:00 / 00:00

Transcript Sections

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Operator

Greetings, and welcome to the Veeco second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. It is now my pleasure to introduce your host, Alex Delacroix, Head of Investor Relations. Thank you. You may begin.

Alex Delacroix
Head of Investor Relations at Veeco

Thank you. Good afternoon, everyone. Joining me on the call today are Bill Miller, Veeco's Chief Executive Officer, and John Kiernan, our Chief Financial Officer. The earnings release and slide presentation to accompany today's webcast is available on the Veeco website. To the extent that this call discusses expectations for future revenues, future earnings, the timing and expected benefits of the proposed transaction with Axcelis, market conditions, or

Alex Delacroix
Head of Investor Relations at Veeco

otherwise makes statements about the future, these forward-looking statements are based on management's current expectations and are subject to the risks and uncertainties that could cause actual results to differ materially from the statements made. These risks are discussed in detail in our Form 10-K, annual report, and other SEC filings. Veeco does not undertake any obligation to update any forward-looking statements, including those made on this call, to reflect future events or circumstances after the date of such statements.

Alex Delacroix
Head of Investor Relations at Veeco

Unless otherwise noted, management will address non-GAAP financial results. We encourage you to refer to our reconciliation between GAAP and non-GAAP results, which you can find in our press release and at the end of the earnings presentation. Please note that we will not be addressing questions related to our pending merger with Axcelis. We urge you to read the joint proxy statement relating to the transaction with Axcelis. With that, I would now like to hand the call over to our CEO, Bill Miller.

Bill Miller
CEO at Veeco

Thank you, Alex, thank you everyone for joining us today. We believe the industry is at an important inflection point where AI-driven investments are accelerating demand for enabling semiconductor technologies at an unprecedented pace. Veeco is uniquely positioned at the intersection of the fastest-growing segments of WFE: high-performance computing, Advanced Packaging, and Silicon Photonics, creating a significant opportunity for accelerated multi-year growth.

Bill Miller
CEO at Veeco

Let me review our top four key takeaways from the quarter. First, we had strong quarterly performance exceeding our guidance ranges and Street's expectations. Revenue was $193 million. Non-GAAP operating income was $23 million, and non-GAAP diluted EPS was $0.33. Second, order momentum accelerated across all major end markets. During the second quarter, we secured $200 million in Advanced Packaging orders for wet processing and lithography systems, strengthening our visibility into 2027.

Bill Miller
CEO at Veeco

Third, we're focused on executing our growth opportunities through a manufacturing expansion plan to meet customers' requirements. We're making deliberate investments ahead of revenue in the second half of 2026 to meet the demands of 2027. Lastly, Veeco is achieving meaningful commercial validation with our next-generation Nanosecond Annealing system, hitting major milestones in our evaluation program and securing a follow-on order.

Bill Miller
CEO at Veeco

We're excited about the compelling long-term growth runway supported by AI infrastructure and high-performance computing. We remain focused on executing our strategy and delivering sustained value for our shareholders. Before moving on, I'll briefly note that the merger with Axcelis continues to progress as planned with shareholder approval from both companies and all regulatory clearances secured other than China antitrust approval. We continue to target a second half 2026 closing.

Bill Miller
CEO at Veeco

Interaction among integration teams remains on schedule and further supports our conviction in the compelling strategic fit and potential long-term value creation of the combination. We move to the next slide, I'll highlight Veeco's role in our largest market, semiconductor manufacturing, and share our served available market opportunity through 2030. The accelerating investment in AI infrastructure and high-performance computing is driving a fundamental shift in leading-edge enabling technologies.

Bill Miller
CEO at Veeco

This trend aligns well with Veeco's differentiated portfolio and positions us to benefit from the industry's evolving growth opportunities. I'll begin with Advanced Packaging, which is rapidly becoming a larger and increasingly important part of our business through our Wet Processing and Lithography portfolio. The demand remains robust as AI-driven investments accelerate the adoption of Heterogeneous Integration and increasingly complex two-and-a-half and 3D architectures.

Bill Miller
CEO at Veeco

Building on the strong momentum we experienced in the first quarter, activity among leading customers continues to strengthen and provides us with a unique level of visibility into customer expansion plans. A result, we have significant backlog for 2027, and our customers' forecasted roadmaps reinforce our confidence in the long-term growth trajectory of the business. One example, we are actively engaged with a tier 1 foundry on a panel processing opportunity, and we're encouraged by the progress.

Bill Miller
CEO at Veeco

Looking longer term, we expect Advanced Packaging to become an increasingly meaningful contributor to Veeco's growth as we gain share in a growing market that we project will approach $1 billion by 2030. To support this growth, we're expanding our manufacturing footprint in-house and with our outsource partners in Southeast Asia. In the front-end wafer manufacturing process, we serve both advanced logic and foundry, as well as memory customers.

Bill Miller
CEO at Veeco

In logic and foundry, we have long-standing and trusted customer relationships and remain the production tool of record at all three tier 1 customers for our Laser Spike Annealing system, driving repeat business. We're also pleased with our progress for our next-generation Nanosecond Annealing system and recently announced that a tier 1 customer successfully completed their evaluation and placed a follow-on order for a second system to ship in the second half of 2026.

Bill Miller
CEO at Veeco

We also announced that the third tier 1 logic customer received an NSA evaluation tool. Veeco has now successfully engaged all three tier 1 logic customers with our NSA technology, and we continue working closely with them to support future roadmaps. I'll discuss the memory semiconductor market, which represents a significant long-term growth opportunity as AI-driven compute architecture accelerates demand for DRAM and NAND technologies.

Bill Miller
CEO at Veeco

These technology transitions are creating new thermal processing and material requirements that align well with Veeco's differentiated annealing capabilities. The memory industry is at the early stages of adopting laser-based technologies for annealing applications. We continue to make solid progress with leading memory customers, including serving as the production tool of record at a Tier 1 high-bandwidth memory manufacturer that is accelerating their investments in 2026.

Bill Miller
CEO at Veeco

We're also advancing an LSA evaluation at a second Tier 1 DRAM customer and are excited about the potential for additional follow-on orders in the 2027/28 timeframe. Customer engagement continues to expand with a third DRAM customer with potential to enter an evaluation agreement over the coming quarters. We're encouraged by strong engagement with several NAND customers who are exploring applications for our LSA and NSA platforms, which are continuing to advance well.

Bill Miller
CEO at Veeco

Our annealing platform continues to perform exceptionally well, and in the second quarter, we delivered record revenue across our LSA and NSA product lines. Looking ahead, we projected an annealing SAM of approximately $1.3 billion by 2030 as advanced logic and memory devices become increasingly complex and require more precise thermal processing solutions.

Bill Miller
CEO at Veeco

Our memory market opportunity continues to advance through our ion beam deposition technology with multiple IBD300 systems under evaluation for advanced DRAM applications, such as bit line metallization. These evaluations continue to progress with high customer engagement. Collectively, these engagements strengthen our position in the memory market and provide additional avenues for future growth. Veeco continues to be a leader in ion beam deposition for EUV mask blanks and is well positioned as the industry advances towards High NA lithography.

Bill Miller
CEO at Veeco

We have expanded the use of our ion beam technology for EUV pellicles, which protect defect-free masks and improve productivity as EUV utilization scales. We continue to win production business at a Tier 1 foundry and engage new customers for EUV pellicles. We see an ion beam deposition SAM opportunity of approximately $500 million by 2030, driven by adoption of our IBD300 platform for low-resistance metals and our leadership position in deposition for EUV applications.

Bill Miller
CEO at Veeco

On the next slide, I'll discuss our compound semiconductor market and the projected served available market opportunity through 2030. Our outlook remains supported by the secular growth of AI infrastructure in silicon photonics, optical connectivity, and power efficiency. We believe these trends are driving a significant inflection in compound semiconductors, where adoption is accelerating across both optical networking and power applications, which continues to create an increasingly attractive opportunity for Veeco.

Bill Miller
CEO at Veeco

In silicon photonics, we project a $700 million SAM by 2030 for our role in the manufacturing of indium phosphide lasers. The rapidly evolving landscape of AI data centers is driving demand across our Spector IBD system, WaferStorm and WaferEtch for wet processing solutions, and Lumina MOCVD platform. We continue to see engagement with these customers as they move toward large-scale deployments.

Bill Miller
CEO at Veeco

I'll provide greater detail in our role in silicon photonics on the next slide. In the other photonics category, we project $550 million in SAM by 2030. This includes opportunities for red MicroLEDs, low-Earth orbit satellites, and AR/VR applications. In GaN power, we project $250 million in SAM by 2030, supported by long-term trends tied to AI data center power efficiency, electrification, and high-power density applications.

Bill Miller
CEO at Veeco

We remain encouraged by our progress with a leading power IDM customer, where our Propel 300 platform continues to advance towards production. Following the previously announced pilot line order, we believe we're well positioned to participate in future capacity expansions. Veeco is also a critical member in the imec 300-millimeter GaN power consortium program to advance power electronics manufacturing alongside other industry leaders.

Bill Miller
CEO at Veeco

On the next slide, I'll dive deeper into the role we play in Silicon Photonics. Within the compound semiconductor market, we continue to benefit from the growing demand tied to AI, particularly through our exposure to Silicon Photonics and the Indium phosphide lasers used for optical connectivity applications. Industry investment remains focused on a hyperscaler's need for higher bandwidth and optical connectivity across increasingly large AI data clusters.

Bill Miller
CEO at Veeco

As bandwidth requirements continue to accelerate, the industry is increasingly focused on overcoming the copper wall, where traditional electrical interconnects become less efficient at supporting higher speed data transmission. At the same time, hyperscalers continue to advance optical networking architectures, including evolution of EML pluggables, Silicon Photonics pluggables, as well as the longer-term solutions of near package and co-packaged optics. Collectively, these trends are driving broader adoption of optical connectivity throughout the AI infrastructure ecosystem.

Bill Miller
CEO at Veeco

These architectures increasingly rely on Indium phosphide laser technologies. Our portfolio spans multiple steps of the laser manufacturing process, including epitaxy, wet processing, and laser facet coating. Given our engagement with our customers, we continue to believe this opportunity represents at least $2 billion over the coming years. Let me briefly touch on each of our products in the laser manufacturing space.

Bill Miller
CEO at Veeco

First, the MOCVD epitaxy steps play a crucial role, and we're continuing to penetrate the market with our Lumina MOCVD Indium phosphide platform as leading photonics customers expand capacity. As announced in today's press release, a global leader in optical and photonics technologies has selected our Lumina+ MOCVD system to fabricate Indium phosphide lasers in the datacom industry. This system offers the largest batch size in the MOCVD industry, best-in-class throughput, and lowest cost per wafer.

Bill Miller
CEO at Veeco

Lumina+ also has the ability to deposit high-quality epitaxial layers on Indium phosphide wafers of any size, bringing much needed scale to the optical transceiver industry. Additionally, we're a market leader with our WaferEtch and WaferStorm wet processing technologies for advanced etching and surface preparation. Lastly, we're a market leader with our SPECTRO ion beam deposition tool for the critical laser facet coating step.

Bill Miller
CEO at Veeco

From ongoing customer engagements, we believe our IBD technology remains differentiated from traditional approaches as the industry transitions to higher-powered lasers, which demand stricter film specifications. In order to capture this opportunity in Silicon Photonics, we're executing our product roadmaps to meet our customers' needs and are spending ahead of revenue. With that, I'll turn the call over to John to review the financial results.

John Kiernan
John Kiernan
CFO at Veeco

Thank you, Bill. Revenue came in at $193 million, above the midpoint of our guidance in the previous quarter. For the second quarter, our semiconductor revenue was $131 million, an increase of 20% from the prior quarter and comprising 68% of revenue. It was largely driven by laser annealing systems to leading-edge foundry logic and memory customers, and wet processing systems for Advanced Packaging.

John Kiernan
John Kiernan
CFO at Veeco

For full year 2026, we expect semiconductor revenue to grow by more than 10% compared to the prior full year. This performance is driven primarily by additional sales to leading memory, foundry logic, and EUV customers serving AI and high-performance computing applications. In 2027, building on this momentum, we expect revenue growth to meaningfully accelerate, particularly in Advanced Packaging. Compound semiconductor revenue for the second quarter totaled $21 million, a 9% increase from the prior quarter, totaling 11% of revenue.

John Kiernan
John Kiernan
CFO at Veeco

For full year 2026, we expect compound semiconductor revenue to approximately double versus full year 2025. Growth is primarily driven by our Lumina MOCVD and Spector IBD systems for Silicon Photonics. Looking ahead in 2027, we expect revenue growth to accelerate, driven by backlog for these tools. Turning to data storage, revenue for the second quarter was $22 million, a 117% increase from the prior quarter, representing 11% of revenue. We expect revenue to double year-over-year in 2026.

John Kiernan
John Kiernan
CFO at Veeco

Demand remains robust, supported by customer investments in next-generation storage technologies and capacity expansion initiatives. We are booked well into 2027 and continue to engage closely with customers on future technology inflections, particularly HAMR-based production roadmaps. The combination of strong backlog, favorable industry dynamics, and deep customer collaboration provides us with confidence in growth in this market as we move into 2027.

John Kiernan
John Kiernan
CFO at Veeco

Lastly, scientific and other quarterly revenue remained flat at $20 million, comprising 10% of revenue. Turning to quarterly revenue by region, revenue from the U.S. accounted for 31% of revenue, an increase from the prior quarter, primarily from advanced semiconductor customers. The Asia Pacific region, excluding China, was 36%, a decrease from the previous quarter. Our China portion was 25% of revenue, an increase from the prior quarter.

John Kiernan
John Kiernan
CFO at Veeco

EMEA and the rest of the world accounted for 8% of revenue. Turning to the second quarter non-GAAP operating results, we had strong performance with our bottom line exceeding our previously provided guidance ranges and street expectations. Second quarter gross margin came in at 39.5% and operating expenses totaled $53.3 million. Income tax expense was approximately $3 million, resulting in an effective tax rate of approximately 12%.

John Kiernan
John Kiernan
CFO at Veeco

Net income was approximately $22 million, and diluted EPS was $0.33 on 67 million shares. Moving to the balance sheet and cash flow highlights. We ended the quarter with cash and short-term investments of $429 million, an increase of $46 million. From a working capital perspective, our accounts receivable decreased by $3 to 148 million. Inventory increased by $10 to 292 million, and accounts payable decreased by $3 to 57 million.

John Kiernan
John Kiernan
CFO at Veeco

Customer deposits increased by $45 million to 114 million. Cash flow from operations totaled $51 million, and CapEx totaled $4 million during the quarter. Next, I'll turn to our third quarter and full year 2026 non-GAAP outlook. Third quarter revenue is expected to be between $200 million and $220 million. Gross margin is expected to be between 41% and 42%.

John Kiernan
John Kiernan
CFO at Veeco

We expect OpEx between $57 and $58 million, net income between $23 and $33 million, and diluted EPS between $0.35 and $0.49 on 67 million shares. As discussed earlier, demand across our key markets remains exceptionally strong, with many customers providing forecasts that extend well into the future. This increasing visibility is translating into robust order momentum, and today, a significant portion of our anticipated 2027 revenue is already represented in backlog.

John Kiernan
John Kiernan
CFO at Veeco

To capitalize on these opportunities, we remain intensely focused on executing our manufacturing ramp and investing ahead of expected revenue. During 2027, we plan to more than double capacity in Advanced Packaging and Silicon Photonics. These investments include expanding manufacturing capacity through a combination of internal production and strategic outsourcing partnerships, adding and training personnel, and expanding our supply chain to support customer demand.

John Kiernan
John Kiernan
CFO at Veeco

While we view these investments as critical to capturing significant long-term growth opportunity, they will have a near-term impact. On a full-year 2026 basis, we expect approximately $10 million of incremental operating expenses and a gross margin impact of roughly 75 basis points associated with these growth initiatives. Given the strength of our order momentum, improved customer visibility, and actions we are taking to support future growth, we are updating our full year 2026 non-GAAP outlook.

John Kiernan
John Kiernan
CFO at Veeco

We now expect full year revenue to be between $780 and $810 million. Gross margin is expected to be between 40% and 42%. Operating expenses are expected to range from $215 to $225 million. We expect non-GAAP diluted earnings per share of $1.36 to $1.61, based on approximately 67 million shares. Overall, we are entering this next phase of growth from a position of strength.

John Kiernan
John Kiernan
CFO at Veeco

The combination of increasing customer visibility, strong order momentum, and expanding opportunities tied to AI infrastructure gives us confidence in our long-term outlook. We believe Veeco is uniquely positioned to capitalize on these opportunities, deliver sustainable, profitable growth, and create a substantial value for shareholders. I would now like to turn the call over to the operator for Q&A.

Operator

Thank you. We will now be conducting a question and answer session. As a reminder, given the pending merger with Axcelis Technologies, Veeco management will not be addressing questions related to the transaction. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Operator

You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Denis Pyatchanin with Needham & Company, LLC. Please proceed with your question.

Denis Pyatchanin
Denis Pyatchanin
Analyst at Needham & Company

Great. Thank you for the opportunity. It looks like your 2026 annual revenue guidance was lifted by about $25 million, but the non-GAAP EPS outlook was lowered, and from what looks like gross margin mix and higher OpEx. Can we assume that the gross margin impact is from the $200 million order for the Advanced Packaging? In terms of the OpEx increase, can you tell us more about what kind of investments you'll be making there?

John Kiernan
John Kiernan
CFO at Veeco

Yeah, sure, Denis. The $200 million order in Advanced Packaging is principally for delivery in 2027, that's not having an impact on the gross margins for this year and the gross margin going forward for the rest of this year. What we did highlight in our prepared remarks here is that we are investing ahead of that increased business that we're expecting in Advanced Packaging, as well as increased business in the Silicon Photonics that we highlighted those orders earlier in the year.

John Kiernan
John Kiernan
CFO at Veeco

We're adding costs to be able to increase our manufacturing capacity that we highlighted in our prepared remarks as more than doubling the capacity. That's both by increasing our internal manufacturing capability here on the East Coast, where we manufacture some of those products, as well as expanding partnerships with contract manufacturers in Southeast Asia.

John Kiernan
John Kiernan
CFO at Veeco

The one-time setup costs to get the capacity in place and to bring the contract manufacturers on board, the hiring of additional and training of additional employees to meet those customer demands to build the tools, install the tools, and the like there. That's on the one end. On the other end, we're also increasing our OpEx. We said it's about a $10 million increase over our planned OpEx in the second half of the year to support those activities and about a 75 basis points impact on the full year gross margin.

John Kiernan
John Kiernan
CFO at Veeco

That's really what the impact was to bringing down the gross margin percentage for the balance of the year compared to what was previously forecasted, and increase our operating expenses compared to what was previously forecasted.

Denis Pyatchanin
Denis Pyatchanin
Analyst at Needham & Company

That's really helpful. Thank you. Then for my second question, with the industry in an upcycle, you have both these optical networking orders shipping, the data storage related revenue coming in, and now the Advanced Packaging systems as well. Could you maybe give us a recap or an update on when these will begin shipping, how the revenue ramp profile will look, and if there were any changes from prior expectations for some of these programs?

Bill Miller
CEO at Veeco

Yeah, Dennis. I would say most of this is really starting to ramp, beginning a little bit in the end of the fourth quarter of 2026, but starting in Q1, and then probably getting more up to speed in Q2 of 2027. It's really ramping. The majority of it is in 2027 for all those, for silicon photonics ramp, as well as advanced packaging coming online in that timeframe.

Denis Pyatchanin
Denis Pyatchanin
Analyst at Needham & Company

Great. One more, if I may. I think you'd mentioned that customers are providing outlooks well into the future. How far would you say on average they're giving you visibility to right now? Has this visibility increased over the last three months?

Bill Miller
CEO at Veeco

I would say our visibility has been increasing. We have much stronger visibility, I would say, than historically we've had into 2027 at this point, midway through 2026. Customers are actually sharing forecasts out beyond 2027, some long-range forecasts that they wouldn't normally be sharing.

Denis Pyatchanin
Denis Pyatchanin
Analyst at Needham & Company

That's it for me. Thank you very much.

Bill Miller
CEO at Veeco

Thanks, Denis.

John Kiernan
John Kiernan
CFO at Veeco

Thank you, Denis.

Operator

At this time, we have no further questions, and I would like to turn the call over to Bill Miller for closing remarks.

Bill Miller
CEO at Veeco

Thank you. Veeco delivered another strong quarter, exceeding expectations and continuing to build momentum across the business. We remain well-positioned to capitalize on AI investments, which are driving strong customer engagement and increased visibility into 2027.

Bill Miller
CEO at Veeco

At the same time, we continue to make steady progress toward completing our merger with Axcelis, reinforcing our confidence in the significant potential value creation. We remain focused on our execution, and we're excited about the opportunities ahead. Thank you for our shareholders and our Veeco United team for continued support and commitment. Have a great evening.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Executives
Analysts
    • Alex Delacroix
      Head of Investor Relations at Veeco
    • Bill Miller
      CEO at Veeco
    • Denis Pyatchanin
      Analyst at Needham & Company
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