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AXCELIS TECHNOLOGIES INC (ACLS)·Q3 2025 Earnings Summary

Executive Summary

  • Axcelis delivered revenue of $213.6M and non-GAAP EPS of $1.21 in Q3 2025, both above guidance and consensus; GAAP EPS was $0.83 as Veeco-related transaction costs, restructuring, and mix pressured GAAP margins .
  • Results beat S&P Global consensus: revenue by ~$13.6M and EPS by ~$0.21; Q4 revenue guidance of ~$215M and non-GAAP EPS of ~$1.12 are essentially in-line with consensus, setting a stable near-term outlook*.
  • Record CS&I revenue ($70M) and slightly better systems revenue ($144M) drove profitability; China mix fell to 46% of total (from 55% in Q2), backlog ended at $484M with bookings of $52M .
  • Q4 guide calls for non-GAAP gross margin ~43% (mix-driven improvement), non-GAAP opex ~$56M, adjusted EBITDA ~$41M, and a ~15% tax rate; mgmt indicated Q1 2026 revenue likely similar to Q4 2025 .
  • Strategic context: announced all-stock merger with Veeco to create a broader semiconductor tool supplier with ~$1.7B pro forma FY24 revenue and expected $35M run-rate cost synergies within 24 months; accretive to non-GAAP EPS within year one post-close .

What Went Well and What Went Wrong

  • What Went Well

    • Record CS&I revenue (spares/consumables and services) of $70M; systems revenue $144M; both above expectations; mgmt: “record CS&I revenue… success of our aftermarket strategy” .
    • Beat on top line and non-GAAP EPS; mgmt: “sales and earnings both exceeding our expectations” .
    • Strong cash generation and balance sheet flexibility; $593M cash and investments on hand; ~$32M repurchased in Q3; $135M remaining authorization .

  • What Went Wrong

    • GAAP margins compressed on mix and one-time items; GAAP GM 41.6% vs 42.9% YoY and GAAP op margin 11.7% vs 18.3% YoY; non-GAAP GM 41.8% (below 43% outlook) due to lower-margin installations and higher consumables mix .
    • Bookings fell to $52M and China revenue mix declined to 46% (from 55% in Q2) amid digestion in mature node and power; backlog decreased to $484M .
    • Tariff headwinds could increase in 2026 as costs move from inventory to P&L; mgmt working to mitigate impact .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$256.6 $194.5 $213.6
GAAP Gross Margin (%)42.9% 44.9% 41.6%
Non-GAAP Gross Margin (%)43.0% 45.2% 41.8%
GAAP Operating Margin (%)18.3% 14.9% 11.7%
Non-GAAP Operating Margin (%)21.7% 17.7% 18.2%
GAAP Diluted EPS ($)$1.49 $0.98 $0.83
Non-GAAP Diluted EPS ($)$1.72 $1.13 $1.21
Adjusted EBITDA ($USD Millions)$59.7 $38.9 $43.2
Adjusted EBITDA Margin (%)23.3% 20.0% 20.2%

Revenue Mix and Segments

Revenue MixQ2 2025Q3 2025
Systems ($USD Millions)$134 $144
CS&I ($USD Millions)$61 $70 (record)
Product ($USD Millions)$183.4 $201.2
Services ($USD Millions)$11.1 $12.4

Key Performance Indicators

KPIQ2 2025Q3 2025
Bookings ($USD Millions)$96 $52
Backlog ($USD Millions)$582 $484
China % of Total Revenue55% 46%
Cash & Investments ($USD Millions)$581 $593
Share Repurchases ($USD Millions)$45 $32
Non-GAAP Tax Rate~11% (Q2) ~14% (Q3)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 2025“Relatively similar to Q3 levels” (qualitative) ~$215 Maintained/in-line vs prior qualitative
Non-GAAP Gross Margin (%)Q4 2025“Similar levels with the third quarter” (earlier view) ~43% Raised vs prior outlook/actual Q3
Non-GAAP Operating Expenses ($USD Millions)Q4 2025—~56 New
Adjusted EBITDA ($USD Millions)Q4 2025—~41 New
Non-GAAP Diluted EPS ($)Q4 2025—~$1.12 New
GAAP Diluted EPS ($)Q4 2025—~$0.76 New
Non-GAAP Tax RateQ4 2025~15% for balance of year ~15% Maintained
Near-term Revenue OutlookQ1 2026—“Relatively similar to Q4 2025” New qualitative commentary

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
AI/Tech initiatives; product roadmapStrong profitability focus; emphasis on innovation and cost control Launches of Purion Power Series+ and GSD Ovation ES to address next-gen power devices and engineered substrates ; highlights XEmax multi-step/channeling capability and evaluation placements Continued innovation; expanded applications
Merger/Strategic scope—All-stock merger with Veeco; ~$1.7B pro forma FY24 revenue; $35M run-rate cost synergies; non-GAAP EPS accretion within 12 months post-close Transformational expansion
Supply chain & tariffsMonitoring tariff environment; modest impact assumed 2026 P&L impact could rise as tariff costs move from inventory; mitigation actions underway Tariff risk increasing
Product performance (CS&I; systems)CS&I ~30% of revenue; strong margins; installed base leverage Record CS&I ($70M) and better-than-expected systems ($144M) Aftermarket resilience supports margins
Regional trends (China)China 55% of total revenue; digestion planned H2 China 46% of total; expected down again in Q4 Sequential normalization lower
Memory cycleMuted through 2025; small opportunistic buys Expect Q4 uptick and 2026 growth led by DRAM/HBM; NAND still muted Improving trajectory into 2026
R&D/Advanced LogicEvaluation wins; targeting backside power and n+1/n+2 nodes Continued engagements and revenue from previously booked system; XEmax evaluation for PMIC application Steady progress

Management Commentary

  • CEO Russell Low: “We delivered another solid quarter, with sales and earnings both exceeding our expectations… record CS&I revenue… successfully navigate the anticipated cyclical digestion period across our markets in 2025.”
  • On Veeco merger: “By bringing our two companies together, we believe we are building a leading semiconductor equipment company… to capitalize on powerful secular tailwinds including AI and electrification.”
  • CFO Jamie Coogan: “GAAP GM 41.6%… non-GAAP GM 41.8% below our outlook of 43% primarily due to mix… increased consumables and service contract revenue… encouraging as this reflects increased utilization.”
  • CFO on balance sheet: “We exited the third quarter with a strong balance sheet consisting of $593 million of cash, cash equivalents, and marketable securities on hand… $135 million remaining under the share repurchase program.”

Q&A Highlights

  • China demand trajectory: Mgmt expects digestion to persist into year-end; 2026 depends on end demand and self-sufficiency goals; customers in China remain engaged on roadmaps and seek best technology .
  • Memory outlook: DRAM/HBM driving near-term improvement; greenfield capacity likely needed; NAND still quiet; intensity ~45–55 implanters per 100k wafer starts in memory .
  • Tariffs: 2026 could see greater P&L impact as tariff-related costs flow through; optimization of global footprint ongoing to mitigate .
  • CS&I sustainability: Elevated consumables/service reflect higher utilization; upgrades strong (especially in memory); not one-time; supports margins through cycles .
  • Gross margin dynamics: Lower-margin installation revenue pulled into Q3; not expected to repeat in Q4; mix and CS&I volumes are primary GM drivers .

Estimates Context

PeriodRevenue Actual ($M)Revenue Cons. ($M)Surprise ($M)EPS Actual ($)EPS Cons. ($)Surprise ($)
Q2 2025194.5 185.1*+9.41.13 (non-GAAP) 0.71*+0.42
Q3 2025213.6 200.1*+13.61.21 (non-GAAP) 1.003*+0.21
Q4 2025 (Guide vs Cons.)~215.0 (guide) 215.0*≈0.0~1.12 (guide, non-GAAP) 1.119*≈0.00

Values with an asterisk retrieved from S&P Global.

Key Takeaways for Investors

  • Beat-and-raise quarter on a non-GAAP basis with revenue and EPS above consensus; mix-driven GAAP margin compression was clearly explained and appears transitory .
  • Aftermarket strength (record CS&I) and installed base leverage provide downside protection and margin support through the cycle .
  • China digestion continues, but mix normalization is underway; exposure will likely step down again in Q4, reducing geopolitical headline sensitivity .
  • Memory is a positive 2026 catalyst (DRAM/HBM); NAND remains muted—watch for greenfield announcements translating to higher implant intensity .
  • Q4 guide is in-line, suggesting stability; non-GAAP gross margin guided to improve to ~43% on mix, with opex normalization post one-time Q3 savings .
  • Veeco merger broadens product portfolio and TAM with identified cost synergies and expected non-GAAP EPS accretion within 12 months of close—supports multiple expansion case through 2026 if integration executes to plan .
  • Near-term trading: in-line guide may cap upside after a beat, but CS&I resilience and memory commentary should support dips; medium term, merger synergy realization plus memory inflection are key re-rating drivers.