Veeco Instruments Q2 Earnings Call Highlights

Key Points

• Veeco exceeded second-quarter guidance with $193 million in revenue and non-GAAP EPS of $0.33, prompting the company to raise its full-year 2026 revenue outlook to $780 million–$810 million.
• Advanced-packaging demand is strengthening: Veeco booked $200 million in orders that improve visibility into 2027 and plans to more than double related manufacturing capacity, though the expansion will add about $10 million in second-half 2026 expenses and reduce full-year gross margin by roughly 75 basis points.
• Growth is broadening across AI-related markets, with semiconductor revenue up 20% sequentially, compound-semiconductor revenue expected to double in 2026, and data-storage revenue up 117% sequentially. Veeco also continues targeting the Axcelis merger’s closing in the second half of 2026, pending China antitrust approval.

Veeco Instruments NASDAQ: VECO reported second-quarter results above its guidance range, citing accelerating demand across semiconductor, advanced-packaging and silicon-photonics markets tied to AI infrastructure and high-performance computing.

Revenue for the quarter was $193 million, while non-GAAP operating income totaled $23 million and non-GAAP diluted earnings per share were $0.33, Chief Executive Officer Bill Miller said. Chief Financial Officer John Kiernan said revenue exceeded the midpoint of the company’s prior guidance.

Management also raised its full-year 2026 revenue outlook to a range of $780 million to $810 million. However, the company said planned investments to expand manufacturing capacity would affect near-term operating expenses and gross margin.

Advanced Packaging Orders Build 2027 Backlog

Veeco secured $200 million in advanced-packaging orders during the second quarter for wet-processing and lithography systems, Miller said. The orders strengthen the company’s visibility into 2027, though Kiernan said they are principally scheduled for delivery next year and will not affect 2026 gross margins.

The company is investing in manufacturing capacity ahead of anticipated growth in advanced packaging and silicon photonics. Kiernan said Veeco plans to more than double capacity in those areas during 2027 through internal production expansion, outsourcing partnerships in Southeast Asia, personnel additions and supply-chain expansion.

These efforts are expected to add approximately $10 million in operating expenses during the second half of 2026 and reduce full-year gross margin by roughly 75 basis points, according to Kiernan.

Miller said shipments related to the growth programs are expected to begin ramping modestly late in the fourth quarter of 2026, with a larger ramp beginning in the first quarter and gaining momentum in the second quarter of 2027.

Veeco projects its advanced-packaging served available market could approach $1 billion by 2030. The company said it is also working with a Tier 1 foundry on a panel-processing opportunity.

Semiconductor Revenue Rose 20% Sequentially

Second-quarter semiconductor revenue totaled $131 million, up 20% from the prior quarter and representing 68% of company revenue. Kiernan attributed the growth largely to laser annealing systems sold to leading-edge foundry, logic and memory customers, as well as wet-processing systems for advanced packaging.

Veeco expects semiconductor revenue to increase by more than 10% in full-year 2026 compared with 2025. Management expects growth to accelerate in 2027, particularly in advanced packaging.

The company said it recorded record quarterly revenue across its Laser Spike Annealing and Nanosecond Annealing product lines. Veeco remains the production tool of record for its Laser Spike Annealing systems at all three Tier 1 logic customers, Miller said.

For its next-generation Nanosecond Annealing platform, a Tier 1 customer completed an evaluation and placed a follow-on order for a second system scheduled to ship in the second half of 2026. A third Tier 1 logic customer also received an evaluation tool, meaning Veeco has now engaged all three Tier 1 logic customers with the technology.

In memory, Veeco said it is the production tool of record at a Tier 1 high-bandwidth-memory manufacturer that is accelerating investment in 2026. The company is also advancing a Laser Spike Annealing evaluation at a second Tier 1 DRAM customer, with potential follow-on orders in 2027 and 2028.

Silicon Photonics and Data Storage Growth

Compound-semiconductor revenue was $21 million, up 9% sequentially and accounting for 11% of total revenue. Veeco expects full-year 2026 compound-semiconductor revenue to approximately double from 2025, driven by its Lumina MOCVD and Spector ion-beam deposition systems for silicon photonics.

The company announced that a global optical and photonics technology company selected its Lumina+ MOCVD system for fabrication of indium phosphide lasers used in datacom applications. Miller said Veeco sees a silicon-photonics opportunity of at least $2 billion over the coming years, based on customer engagements.

Data-storage revenue rose 117% from the prior quarter to $22 million, representing 11% of revenue. Veeco expects revenue in the market to double year over year in 2026 and said it is booked well into 2027. The company cited customer investments in next-generation storage technology and capacity expansion, including engagement around heat-assisted magnetic recording production roadmaps.

• U.S. revenue represented 31% of second-quarter revenue.
• Asia-Pacific revenue excluding China represented 36%.
• China accounted for 25% of revenue.
• EMEA and the rest of the world represented 8%.

Third-Quarter and Full-Year Outlook

For the third quarter, Veeco forecast revenue of $200 million to $220 million, non-GAAP gross margin of 41% to 42%, and non-GAAP diluted earnings per share of $0.35 to $0.49 on approximately 67 million shares.

For full-year 2026, the company forecast non-GAAP gross margin of 40% to 42%, operating expenses of $215 million to $225 million, and non-GAAP diluted earnings per share of $1.36 to $1.61.

Veeco ended the quarter with $429 million in cash and short-term investments, up $46 million from the prior quarter. Operating cash flow was $51 million, while capital expenditures totaled $4 million.

Regarding Veeco’s pending merger with Axcelis, Miller said both companies’ shareholders have approved the transaction and all regulatory clearances have been obtained except for China antitrust approval. Veeco continues to target a closing in the second half of 2026.

About Veeco Instruments (NASDAQ:VECO)

Veeco Instruments Inc NASDAQ: VECO is a leading supplier of process equipment for the semiconductor, data storage, wireless communications, power electronics and advanced packaging industries. The company designs, manufactures and services precision tools used to grow, deposit and etch thin films on substrates, enabling the fabrication of chips, light-emitting diodes (LEDs), micro-electromechanical systems (MEMS) and high-density storage devices. Veeco's platforms are deployed across fabrication facilities worldwide, where they support key processes in materials science and device manufacturing.

Veeco's product portfolio spans molecular beam epitaxy (MBE), metal organic chemical vapor deposition (MOCVD), atomic layer deposition (ALD), ion beam etch and deposition, and high-precision wet and dry etch systems.

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