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VI

VEECO INSTRUMENTS INC (VECO)·Q2 2025 Earnings Summary

Executive Summary

  • VECO delivered a clean beat: revenue $166.1M vs S&P Global consensus $151.3M* and non-GAAP EPS $0.36 vs $0.225*; both came in above the high end of company guidance, driven by Advanced Packaging wet processing/lithography and IBD systems for EUV mask blanks .
  • Gross margin benefited from favorable mix; non-GAAP GM of 42.6% (GAAP 41.4%) exceeded guidance, partially offset by ~100 bps tariff headwind; China shipment delays resolved as tariffs were reduced during the quarter .
  • Q3 2025 guidance: revenue $150–$170M; non-GAAP EPS $0.20–$0.35; non-GAAP GM 40–42%; OpEx $48–$49M; management embeds ~100 bps tariff impact in GM .
  • Strategic narrative strengthened: Advanced Packaging expected to double in 2025; NSA/LSA evaluations progressing; data storage systems still soft but service up and commercial discussions improving .

*Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Above-guidance execution: “Revenue, Non-GAAP Operating Income, and Non-GAAP EPS all above high-end of guidance” and “exceeding the high end of our guidance” .
  • Advanced Packaging & EUV momentum: CEO cited shipments of wet processing and lithography systems for Advanced Packaging and IBD systems for EUV mask blanks as key drivers; LSA shipments supported GAA and HBM .
  • Mix-driven margin outperformance: Non-GAAP GM 42.6% exceeded guidance; CFO noted higher volume and improved product mix; OpEx in line .

What Went Wrong

  • Year-over-year softness: Revenue $166.1M vs $175.9M in Q2’24; non-GAAP EPS $0.36 vs $0.42; non-GAAP operating income $23.1M vs $28.3M (lower YoY despite execution) .
  • Tariff headwinds: ~100 bps GM impact expected again in Q3; management also seeing potential supplier price increases tied to tariffs .
  • Data storage remains pressured: System revenue down YoY, with service revenue offsetting as utilization rises; system demand still uncertain into 2026 despite improving engagement .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ2 2024Q1 2025Q2 2025
Revenue ($M)$175.9 $167.3 $166.1
Gross Margin (GAAP)42.9% 40.9% 41.4%
Gross Margin (Non-GAAP)43.7% 41.7% 42.6%
GAAP Diluted EPS ($)$0.25 $0.20 $0.20
Non-GAAP Diluted EPS ($)$0.42 $0.37 $0.36
Non-GAAP Operating Income ($M)$28.3 $24.3 $23.1

Actuals vs S&P Global Consensus (Q2 2025)

MetricActualConsensus*Surprise
Revenue ($M)$166.1 $151.3*Beat
Non-GAAP EPS ($)$0.36 $0.225*Beat

*Values retrieved from S&P Global.

Segment Revenue Breakdown ($M)

SegmentQ2 2024Q1 2025Q2 2025
Semiconductor110 124 124
Compound Semiconductor18 14 14
Data Storage34 7 12
Scientific & Other14 22 16
Total176 167 166

Regional Mix (Q2 2025)

  • APAC ex-China 59%; China 17%; United States 13%; EMEA 11% .

Operating & Balance Sheet KPIs

KPIQ1 2025Q2 2025
Cash & Short-Term Investments ($M)353 355
Cash from Operations ($M)20 9
Capital Expenditures ($M)7 3
Accounts Receivable ($M)114 107
Inventories ($M)254 259
Accounts Payable ($M)58 50
DSO (days)62 58
DIO (days)228 237
DPO (days)53 46
Long-Term Debt ($M)250 225
Diluted Shares (GAAP, mm)60.2 60.2

Notable capital structure action: VECO retired all $25M of 2027 notes via 1.6M shares and $5M cash; revolver upsized to $250M, maturity extended to 2030 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2025$135–$165M (5/7/25) N/A (actual reported)Actual $166.1M above high end
Non-GAAP Diluted EPSQ2 2025$0.12–$0.32 (5/7/25) N/A (actual reported)Actual $0.36 above high end
RevenueQ3 2025—$150–$170M New
Non-GAAP GMQ3 2025—40%–42% (GAAP 39%–41%) New
OpEx (Non-GAAP)Q3 2025—$48–$49M New
Non-GAAP Diluted EPSQ3 2025—$0.20–$0.35 New
Assumed Tariff ImpactQ3 2025—~100 bps GM impact New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
AI/Advanced PackagingWet processing growth in 3D packaging; record LSA revenue; shipped first NSA eval to leading-edge logic customer Growth driven by Advanced Packaging; LSA tool of record at two leading-edge customers; new wet processing wins Advanced Packaging systems a key driver; AP business expected to double in 2025 Strengthening
EUV / IBDStrong position in IBD for EUV mask blanks Continued emphasis on IBD EUV IBD EUV shipments drove performance; SAM growth opportunity >$120M Positive
Tariffs / MacroGeneral trade/tariff risks cited Guidance contemplated tariffs indirectly Tariffs caused initial shipment delays; resolution mid-Q; ~100 bps GM headwind persists; supplier cost pressure possible Headwind managed
China ExposureChina 2024 revenue 36% Q1: China 42% of revenue Q2: China 17%; H1 ~30%; H2 expected ~20% Lower mix H2
LSA/NSA & EvaluationsShipped first NSA; evaluation investments ongoing LSA orders for GAA/HBM; tool of record at leading customers NSA evaluations expanding to more logic customers; second LSA eval to Tier-1 DRAM in 2H; each app win can drive $30–$60M follow-on Building pipeline
Data StorageMixed; service vs systems Not a focus in Q1 slides Systems down YoY; service up; improving commercial discussions, potential for future orders (no POs yet) Early signs of recovery

Management Commentary

  • CEO: “Veeco delivered strong financial performance, exceeding the high end of our guidance… highlighted by record revenue for our Advanced Packaging Systems… increased revenue for our Ion Beam Deposition Systems for EUV mask blanks… continued demand for our Laser Spike Annealing Systems… for GAA and high bandwidth memory” .
  • CEO on evaluations: “Each application win has the potential to generate $30–$60 million in follow on business… evaluations in the field are progressing well” .
  • CFO: “Gross margin totaled approximately 43% above the high end of guidance… favorably impacted by higher volume and improved product mix… tariffs impact ~100 bps” .
  • CFO on China: “Delay in tariff shipments was a one time thing in Q2… for the second half… about 20% of revenue coming from China” .

Q&A Highlights

  • China shipments and tariffs: Shipment delays anticipated were resolved after tariff rate reductions; H2 China mix expected ~20% vs ~30% in H1 .
  • GaN on Si (300mm) evaluation: Progressing well with Tier-1 power device customer; potential pilot line revenue in 2026, with HVM ramp beyond .
  • Tariff cost pass-through: ~100 bps GM impact; potential supplier price increases being managed through sourcing and efficiency actions .
  • Data storage: Service revenue up with rising utilization; constructive commercial discussions suggest potential for future systems orders, though no POs yet .
  • Demand drivers: Strong pull from AI/HPC and HBM; Advanced Packaging doubling in 2025; growth in GAA on logic side .

Estimates Context

  • Q2 2025 actuals vs S&P Global consensus: Revenue $166.1M vs $151.3M*; non-GAAP EPS $0.36 vs $0.225* — both beats .
  • Street likely raises near-term estimates for Advanced Packaging contribution and IBD EUV, while embedding tariff-related GM drag (~100 bps) and lower 2H China mix .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Clean beat and above-guide execution anchored by Advanced Packaging and EUV IBD; margin quality benefited from mix despite tariff headwinds .
  • Structural growth vectors (AI/HPC, HBM, GAA) continue to expand VECO’s SAM; evaluations represent medium-term revenue catalysts with potential $30–$60M per application win .
  • China exposure moderating into 2H (~20% mix) helps de-risk geopolitical concentration; Q2 tariff disruptions were transitory, though ongoing 100 bps GM headwind is assumed in guidance .
  • Q3 guide ($150–$170M revenue; $0.20–$0.35 non-GAAP EPS) brackets seasonal and tariff dynamics; OpEx discipline ($48–$49M) supports EBIT despite investment in eval programs .
  • Balance sheet flexibility improved (2027 notes retired; larger revolver), enabling continued R&D and evaluation spend while sustaining liquidity .
  • Near-term trading: Beating and raising narrative (beat in Q2, solid Q3 range) with strengthening AP/EUV story; monitor tariff headlines and China WFE variability as potential volatility drivers .
  • Medium-term: Track NSA/LSA and IBD 300 evaluation conversions, Advanced Packaging growth trajectory, and any inflections in data storage systems demand .