NVMI Q2 2025: 60% Margins, On Track for $500M Gate-All-Around by 2026
- Robust Gate All Around Momentum: Management is on track to achieve $500,000,000 in cumulative gate all around revenue by 2026, driven by strong engagement with four leading customers and consistent demand across regions.
- Strong Margin Profile: The company delivered 60% non-GAAP gross margins in Q2 2025 with only marginal tariff impacts, reflecting a high-mix of higher margin products.
- Diversified and Growing Product Portfolio: The integration of Sintronics, solid market share gains in standalone OCD, and positive traction in advanced packaging and dimensional metrology highlight a diversified revenue mix that positions the company for continued growth.
- Lack of clarity on progress toward the $500,000,000 gate all around revenue target: During the Q&A, when asked for quantitative color on progress toward this milestone, the CEO noted he did not have final numbers yet, which leaves uncertainty about execution and momentum in this key area.
- Uncertainty in geographic dynamics, especially in China: While management mentioned differing dynamics between China and ex-China markets—with China expected to be nominally higher but a lower percentage of overall revenue—the ambiguity could signal potential risks in sustaining growth across regions.
- Integration risks related to the Sintronics acquisition: Questions addressing the momentum and contributions from the recently integrated Sintronics business were met with optimistic yet non-quantitative responses, leaving investors without a clear picture of the organic growth and potential integration challenges.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q3 2025 | no prior guidance | $215 million – $227 million | no prior guidance |
GAAP Earnings Per Diluted Share | Q3 2025 | no prior guidance | $1.77 to $1.97 | no prior guidance |
Non-GAAP Earnings Per Diluted Share | Q3 2025 | no prior guidance | $2.20 to $2.22 | no prior guidance |
Gross Margin (GAAP) | Q3 2025 | no prior guidance | 57% | no prior guidance |
Gross Margin (Non-GAAP) | Q3 2025 | no prior guidance | 59% | no prior guidance |
Operating Expenses (GAAP) | Q3 2025 | no prior guidance | $63 million | no prior guidance |
Operating Expenses (Non-GAAP) | Q3 2025 | no prior guidance | $57.5 million | no prior guidance |
Financial Income (Non-GAAP) | Q3 2025 | no prior guidance | remain similar to Q2 2025 | no prior guidance |
Effective Tax Rate | Q3 2025 | no prior guidance | 16% | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Gate-All-Around | In previous periods the focus was on setting a target of $500 million in cumulative revenue with early indications of success in pilot phases – with Q4 2024 reporting roughly $40 million and Q1/Q3 2024 emphasizing pilots and evaluations with major manufacturers | The current period reaffirms the $500 million target and highlights strong execution, noting work with all four leading customers and robust demand in H1 2025 with expectations for further growth in later periods | There is increased clarity and momentum in execution, shifting from early pilot investments to higher demand and stability as the technology matures |
Gross Margin Performance and Tariff Impact | Earlier periods (Q1, Q3 and Q4 2024) detailed gross margins in the mid to high 50s (around 56–59%) with concerns about tariffs impacting margins by 30–50 basis points, though results generally met target ranges | Q2 2025 reports blended gross margins of 58% (GAAP) and 60% (non-GAAP) that exceed expectations, with tariffs having only a marginal impact of roughly 20 basis points | Margin performance remains strong with improved product mix; the negative impact of tariffs is less severe than initially anticipated, showing a more positive sentiment |
Advanced Packaging Growth and Diversified Product Portfolio | Past calls (across Q1, Q3 and Q4 2024) emphasized double-digit growth in advanced packaging revenue, record sales with platforms like Prism, and a diversified portfolio combining chemical, dimensional, and materials metrology supported by early customer adoptions and acquisitions | The current call underscores record performance in advanced packaging driven by strong HBM and 3D NAND results, along with a robust and diversified product portfolio (including new capabilities on platforms and integration of acquisitions) | The business continues to experience robust growth with strong customer adoption and product innovation, deepening its diversified product mix and leveraging acquisitions to bolster advanced packaging capabilities |
China Market Exposure and Regulatory/Geopolitical Risks | In previous periods, China contributed significantly (e.g. 39% in Q4 2024) and discussions included expectations of flat to slightly declining growth along with some regulatory and tariff concerns, though demand remained robust in Q3 2024 | In Q2 2025, while the nominal revenue from China is expected to be moderately higher, its percentage share is forecast to decline as advanced nodes take precedence; there is no mention of additional regulatory or geopolitical risks | The narrative is shifting from a heavy reliance on China to a reduced percentage share as focus moves to advanced nodes, with less emphasis on geopolitical risks compared with earlier periods |
Acquisition and Integration Strategies | Previous periods described the initial phases of integrating the Sentronics acquisition – with Q1 2025 noting partial contribution after the close and Q4 2024 providing detailed acquisition numbers and integration plans, while Q3 2024 did not mention it | Q2 2025 highlights that Sentronics is now fully integrated, with most of its sales transitioned to direct channels, and is being viewed as a market expansion catalyst in advanced packaging and related areas | The progression shows a maturing integration process, moving from early-stage partial contribution to a fully integrated and accretive business addition, bolstering Nova’s market position |
Customer Adoption and Transition to High‑Volume Manufacturing | Earlier calls (Q1, Q3 and Q4 2024) focused on record sales and strong customer adoption in pilot and early phases for gate‑all‑around, advanced packaging, and platforms like Metrion, with expectations for gradual transition to high‑volume production and increased tool orders | In Q2 2025, the lab‑to‑fab strategy is emphasized with detailed evaluations of new tools (such as inline SIMS and Raman) and strong indications of transitioning from evaluations to high‑volume manufacturing | There is a clear evolution from initial customer adoption to active strategies that drive the transition to high‑volume manufacturing, indicating a consolidating and scaling process in technology deployment |
Wafer Fab Equipment (WFE) Growth Outlook | Past periods highlighted expectations to outperform WFE growth with outperformance ratios around 1.5x, expecting mid-single digit or strong growth in the market, and historical performance had set a bullish tone | Q2 2025 reports a dramatic over 45% year‑over‑year revenue increase, confirming that Nova is outpacing the general WFE forecasts | The consistent theme of outperformance continues with even stronger results in Q2 2025, reinforcing a bullish outlook relative to overall market trends |
Memory Market Growth Driven by AI Demand | In prior periods, the discussion centered on robust demand for DRAM and HBM driven by AI, with double‑digit and moderate growth noted in DRAM capacity for AI-related devices, supported by record wins and market share expansion trends | Q2 2025 emphasizes AI as a secular growth driver, highlighting innovations like active charge compensation on metrology platforms, record results for high‑bandwidth memory, and strong positioning in both DRAM and 3D NAND applications | The narrative remains bullish on AI-driven growth, with added emphasis on innovative features and stronger market results, reinforcing Nova’s leadership in meeting the evolving demands of the memory market |
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Gate Revenue
Q: How is overall all-around revenue trending?
A: Management emphasized strong positioning with all four Gate All Around customers and is targeting $500M cumulative revenue by 2026 with stable growth in the second half of the year. -
Margin Drivers
Q: Are chemicals boosting margin levels?
A: They explained that a robust product mix enabled a high gross margin of 60%, with tariff impacts being marginal, leading to solid profitability. -
Revenue Progress
Q: How close are you to the $500M target?
A: While precise figures weren’t shared, management confirmed they remain on track for the $500M cumulative target by year’s end, with more detailed numbers to follow later. -
Materials Strategy
Q: When will lab‑to‑fab boost growth?
A: Management outlined that upgrades—like active charge compensation on the VERIFLEX platform and progress with new tools—will start driving additional growth over the next two years. -
China & HBM
Q: What’s the outlook for China and HBM?
A: They noted that while HBM is growing and now forms a significant part of advanced packaging, China’s revenue is projected to be moderately higher in nominal terms but will represent a lower percentage due to increased advanced node investments. -
Dimensional Metrology
Q: How is the competitive landscape shifting?
A: Management stated that for integrated metrology, they maintain a leadership position, and their standalone OCD products are gaining market share thanks to a unique value proposition. -
Tool Revenue
Q: What about Ellipson and Matrion contributions?
A: They expect these new tools, already being adopted by advanced node manufacturers, to deliver steady, year‑over‑year revenue growth. -
Centronics Momentum
Q: How strong is Centronics’ impact?
A: Management expressed optimism about Sytronics’ integration into the business, noting encouraging adoption and a positive momentum that enhances overall growth prospects. -
Global Demand
Q: Are China and ex‑China demand dynamics different?
A: They observed similar upside in both regions, with China showing slightly stronger recent trends, although overall demand remains robust across markets.
Research analysts covering NOVA.