Skip to content
    VECO
    Earnings call· Jun 2026(Q2 FY26)

    VEECO INSTRUMENTS Q2 FY26 earnings call VECO

    Aug 5, 2026 Source

    Executive summary

    Veeco Q2 FY26 — Strong Performance Driven by AI Demand and Advanced Packaging Orders

    Veeco delivered a strong second quarter, exceeding revenue expectations, driven by accelerating AI-driven demand across semiconductor, advanced packaging, and silicon photonics markets. The company is making strategic investments in manufacturing capacity and R&D to capitalize on this multi-year growth runway, which will impact near-term profitability. The merger with Axcelis continues to progress as planned, with a target closing in the second half of 2026.

    Highlights

    5

    • Q2 FY26 revenue of $193 million exceeded guidance ranges and Street expectations.

    • Secured $200 million in advanced packaging orders, strengthening visibility into 2027.

    • Semiconductor revenue increased 20% QoQ to $131 million, driven by laser annealing and wet processing systems.

    • Cash and short-term investments increased by $46 million to $429 million.

    • Nanosecond annealing system achieved major commercial validation milestones, including a follow-on order from a Tier 1 customer.

    Concerns

    3

    • Full-year 2026 non-GAAP EPS outlook was lowered to $1.36-$1.61, despite raised revenue guidance.

    • Manufacturing expansion initiatives are expected to result in approximately $10 million of incremental operating expenses in H2 FY26.

    • These growth initiatives are projected to have a gross margin impact of roughly 75 basis points for full-year 2026.

    Guidance & targets

    22
    CategoryTargetConfidence
    Q3 FY26 Revenue
    $200M-$220M
    high materiality
    High
    Q3 FY26 Gross Margin
    41%-42%
    medium materiality
    High
    Q3 FY26 Operating Expenses
    $57M-$58M
    medium materiality
    High
    Q3 FY26 Net Income
    $23M-$33M
    medium materiality
    High
    Q3 FY26 Diluted EPS
    $0.35-$0.49
    high materiality
    High
    Full Year FY26 Revenue
    $780M-$810M
    high materiality
    High
    Full Year FY26 Gross Margin
    40%-42%
    medium materiality
    High
    Full Year FY26 Operating Expenses
    $215M-$225M
    medium materiality
    High
    Full Year FY26 Non-GAAP Diluted EPS
    $1.36-$1.61
    high materiality
    High
    Semiconductor Revenue Growth
    more than 10%
    medium materiality
    High
    Compound Semiconductor Revenue Growth
    approximately double
    medium materiality
    High
    Data Storage Revenue Growth
    double year-over-year
    medium materiality
    High
    Revenue Growth Acceleration
    meaningfully accelerate
    high materiality
    High
    Advanced Packaging Capacity
    more than double
    medium materiality
    High
    Silicon Photonics Capacity
    more than double
    medium materiality
    High
    Advanced Packaging SAM
    approach $1B
    medium materiality
    High
    Annealing SAM
    approximately $1.3B
    medium materiality
    High
    Ion Beam Deposition SAM
    approximately $500M
    medium materiality
    High
    Silicon Photonics SAM
    $700M
    medium materiality
    High
    Other Photonics SAM
    $550M
    medium materiality
    High
    GaN Power SAM
    $250M
    medium materiality
    High
    Silicon Photonics Opportunity
    at least $2B
    high materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Semiconductor
    Comprised 68% of total revenue. Driven by laser annealing systems for leading-edge foundry logic and memory customers, and wet processing systems for advanced packaging. Expected to grow by more than 10% for full year 2026.
    		$131M—20%—
    Compound Semiconductor
    Comprised 11% of total revenue. Expected to approximately double for full year 2026, driven by Lumina MOCVD and SPECTOR IBD systems for silicon photonics. Revenue growth expected to accelerate in 2027.
    		$21M—9%—
    Data Storage
    Comprised 11% of total revenue. Expected to double year-over-year in 2026. Demand remains robust, supported by customer investments in next-generation storage technologies and capacity expansion.
    		$22M—117%—
    Scientific and Other
    Comprised 10% of total revenue.
    		$20M—flat—
    United States
    Accounted for 31% of total revenue, primarily from advanced semiconductor customers.
    		——increase from prior quarter—
    Asia Pacific (excluding China)
    Accounted for 36% of total revenue.
    		——decrease from previous quarter—
    China
    Accounted for 25% of total revenue.
    		——increase from prior quarter—

    Operational metrics

    13
    Non-GAAP Operating Income
    $23M
    Q2 FY26

    Exceeded guidance ranges and Street expectations.

    Non-GAAP Diluted EPS
    $0.33
    Q2 FY26

    Exceeded guidance ranges and Street expectations, based on 67 million shares.

    Operating Expenses
    $53.3M
    Q2 FY26

    Total operating expenses for the quarter.

    Income Tax Expense
    $3M
    Q2 FY26

    Resulting in an effective tax rate of approximately 12%.

    Effective Tax Rate
    12%
    Q2 FY26

    Approximate effective tax rate for the quarter.

    Net Income
    $22M
    Q2 FY26

    Approximate net income for the quarter.

    Cash and investments balance
    $429Mincreased by $46M
    Q2 FY26

    Cash and short-term investments at the end of the quarter.

    Accounts Receivable
    $148Mdecreased by $3M
    Q2 FY26

    Working capital component.

    Accounts Payable
    $57Mdecreased by $3M
    Q2 FY26

    Working capital component.

    Customer Deposits
    $114Mincreased by $45M
    Q2 FY26

    Working capital component.

    Incremental Operating Expenses
    $10M
    H2 FY26

    Associated with growth initiatives for manufacturing expansion.

    Gross Margin Impact from Growth Initiatives
    75
    FY26

    Negative impact on full-year gross margin due to manufacturing expansion investments.

    Diluted Share Count
    67M
    Q2 FY26

    Used for diluted EPS calculation.

    Industry KPIs

    8
    MetricValueDetails
    Backlog order booksignificant backlog
    Ai data center revenue—
    Fab capacity utilization—
    Bookings net order intake$200MUSD
    Design wins socket pipeline3 Tier 1 logic customerscustomers
    Inventory channel inventory$292MUSD
    Node platform ramp scheduleLumina+ MOCVD System
    End market segment revenue mixSemiconductor: $131M (68%); Compound Semiconductor: $21M (11%); Data Storage: $22M (11%); Scientific and Other: $20M (10%)USD

    Orderbook & backlog

    3
    Advanced Packaging Orders$200MQ2 FY26

    Principally for delivery in 2027, strengthening visibility into 2027.

    Anticipated 2027 Revenue in Backlogsignificant portionQ2 FY26

    increased

    Represents a significant portion of anticipated 2027 revenue, indicating strong customer visibility.

    Data Storage Backlogbooked well into 2027Q2 FY26

    Strong backlog for data storage, providing confidence in growth for 2027.

    Product announcements

    1
    ProductTypeDetails
    Lumina+ MOCVD Systemlaunch

    Deals & partnerships

    3
    AxcelisPending merger to combine the two companies.

    Shareholder approval from both companies and all regulatory clearances secured, other than China antitrust approval. Integration teams remain on schedule.

    Tier 1 foundryActive engagement on a panel processing opportunity.

    Encouraged by progress with a Tier 1 foundry for advanced packaging panel processing.

    imecParticipation in 300-millimeter GaN Power Consortium program.

    Veeco is a critical member in the imec 300-millimeter GaN Power Consortium program to advance power electronics manufacturing alongside other industry leaders.

    Capital programs

    1
    Manufacturing Expansion Planunderway
    Start: H2 FY26

    Benefit: more than double capacity in advanced packaging and silicon photonics

    Deliberate investments ahead of revenue to meet demands of 2027. Includes expanding internal production and strategic outsourcing partnerships, adding and training personnel, and expanding the supply chain. Expected to incur $10M incremental OpEx and 75bps GM impact in FY26.

    Risks & headwinds

    2
    Near-term profitability impact from growth investmentsH2 FY26 and full year FY26

    $10M incremental operating expenses in H2 FY26; 75 basis points gross margin impact for full year 2026.

    Mitigation: These are deliberate investments to meet anticipated strong demand and capitalize on significant long-term growth opportunities in advanced packaging and silicon photonics, aiming to more than double capacity by 2027.

    China antitrust approval for Axcelis mergerH2 2026 (target closing)

    China antitrust approval is the only remaining regulatory clearance needed.

    Mitigation: The merger continues to progress as planned, with shareholder approvals and other regulatory clearances secured. Management remains confident in the strategic fit.

    What to watch in Q3 FY26

    5

    Axcelis Merger China Approval

    H2 2026
    CurrentPending China antitrust approval
    TargetApproval secured

    Why it matters

    This is the final regulatory hurdle for the merger, which is expected to create significant long-term value.

    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.

    Q&A highlights

    3

    Why was the full-year EPS outlook lowered despite raised revenue guidance, and what are the details of the OpEx increase?

    The lowered EPS and gross margin impact are due to strategic investments ahead of revenue, primarily for 2027 advanced packaging and silicon photonics deliveries. These investments include increasing internal manufacturing capacity, expanding partnerships with contract manufacturers in Southeast Asia, and hiring/training additional employees. The $10 million OpEx increase and 75 basis point gross margin impact for FY26 are directly related to these capacity expansion efforts.

    “So we're adding cost and we're adding costs to be able to increase our manufacturing capacity that we highlighted in our prepared remarks is more than doubling the capacity. And 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.”

    asked by Denis Pyatchanin · answered by John Kiernan

    2 min read6 chapters

    Detailed Narrative

    01

    AI-Driven Market Inflection and Veeco's Positioning

    Veeco believes the semiconductor industry is at a critical inflection point, with AI investments accelerating demand for enabling technologies. The company is strategically positioned in high-growth segments like high-performance computing, advanced packaging, and silicon photonics. This alignment with industry trends is expected to drive accelerated multiyear growth, leveraging Veeco's differentiated portfolio.

    02

    Advanced Packaging Momentum and Manufacturing Expansion

    Advanced packaging is rapidly growing, driven by AI investments and the adoption of heterogeneous integration and complex 2.5/3D architectures. Veeco secured $200 million in advanced packaging orders in Q2, primarily for 2027 delivery, providing strong visibility. To support this demand, Veeco is expanding its manufacturing footprint internally and with outsourced partners in Southeast Asia, aiming to more than double capacity in advanced packaging and silicon photonics by 2027.

    03

    Nanosecond Annealing System Validation and Memory Market Progress

    Veeco's next-generation nanosecond annealing (NSA) system achieved significant commercial validation, with a Tier 1 customer completing evaluation and placing a follow-on order for H2 2026 shipment. All three Tier 1 logic customers are now engaged with NSA technology. In the memory market, Veeco is the production tool of record at a Tier 1 high-bandwidth memory manufacturer and is advancing LSA evaluations with two other DRAM customers, with potential for follow-on orders in 2027-2028.

    04

    Compound Semiconductor and Silicon Photonics Opportunities

    The compound semiconductor market, particularly silicon photonics, is experiencing significant growth due to AI infrastructure and optical connectivity needs. Veeco projects a $700 million SAM by 2030 for its role in indium phosphide laser manufacturing, with a total opportunity of at least $2 billion over the coming years. The company's Lumina+ MOCVD System, WaferEtch, WaferStorm, and SPECTOR IBD tools are critical across multiple steps of the laser manufacturing process, with a global leader selecting Lumina+ for datacom applications.

    05

    Strategic Investments and Financial Outlook Adjustments

    To capitalize on strong order momentum and increased customer visibility, Veeco is investing ahead of revenue. These investments include expanding manufacturing capacity, adding personnel, and strengthening the supply chain. While critical for long-term growth, these initiatives will result in approximately $10 million of incremental operating expenses in the second half of 2026 and a 75 basis point gross margin impact for the full year, leading to a lowered non-GAAP EPS outlook despite raised revenue guidance.

    06

    Axcelis Merger Update

    The pending merger with Axcelis continues to progress as planned. Shareholder approvals from both companies and all regulatory clearances, except for China antitrust approval, have been secured. The companies continue to target a second half 2026 closing, with integration teams working on schedule, reinforcing conviction in the strategic fit and potential long-term value creation of the combined entity.

    AI-generated summary of the company’s earnings call. Not investment advice.