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Veeco (VECO) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 5, 2026

Source: earnings call transcript

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

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

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—

Orderbook & backlog

Advanced Packaging Orders $200M Q2 FY26

Principally for delivery in 2027, strengthening visibility into 2027.

Anticipated 2027 Revenue in Backlog significant portion Q2 FY26

increased

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

Data Storage Backlog booked well into 2027 Q2 FY26

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

Product announcements

ProductTypeDetails
Lumina+ MOCVD Systemlaunch

Deals & partnerships

Axcelis Pending 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 foundry Active engagement on a panel processing opportunity.

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

imec Participation 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

Manufacturing Expansion Plan underway
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

Near-term profitability impact from growth investments H2 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 merger H2 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

Axcelis Merger China Approval

H2 2026
Current Pending China antitrust approval
Target Approval 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.

Find out whether VECO delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.