This article first appeared on GuruFocus .
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Revenue:$193 million, exceeding guidance and Street expectations.
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Non-GAAP Operating Income:$23 million.
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Non-GAAP Diluted EPS:$0.33.
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Gross Margin:39.5%.
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Operating Expenses:$53.3 million.
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Net Income:Approximately $22 million.
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Cash and Short-Term Investments:$429 million, an increase of $46 million.
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Cash Flow from Operations:$51 million.
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CapEx:$4 million.
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Semiconductor Revenue:$131 million, up 20% from the prior quarter, comprising 68% of revenue.
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Compound Semiconductor Revenue:$21 million, up 9% from the prior quarter, comprising 11% of revenue.
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Data Storage Revenue:$22 million, up 117% from the prior quarter, comprising 11% of revenue.
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Scientific and Other Revenue:$20 million, flat, comprising 10% of revenue.
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Advanced Packaging Orders:$200 million secured during the quarter.
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Third-Quarter 2026 Revenue Guidance:Expected between $200 million and $220 million.
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Third-Quarter 2026 Gross Margin Guidance:Expected between 41% and 42%.
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Third-Quarter 2026 Diluted EPS Guidance:Expected between $0.35 and $0.49.
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Full-Year 2026 Revenue Guidance:Updated to between $780 million and $810 million.
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Full-Year 2026 Gross Margin Guidance:Expected between 40% and 42%.
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Full-Year 2026 Diluted EPS Guidance:Expected between $1.36 and $1.61.
Release Date: August 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Veeco Instruments Inc ( NASDAQ:VECO ) delivered strong Q2 2026 results, with revenue of $193 million, non-GAAP operating income of $23 million, and non-GAAP diluted EPS of $0.33, all exceeding guidance and Street expectations.
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Order momentum accelerated across all major end markets, including securing $200 million in advanced packaging orders for wet processing and lithography systems, strengthening visibility into 2027.
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The next-generation nanosecond annealing (NSA) system achieved major milestones, with a Tier 1 customer completing evaluation and placing a follow-on order, and all three Tier 1 logic customers now engaged with the technology.
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The company is well-positioned in high-growth markets tied to AI infrastructure, including advanced packaging, silicon photonics, and memory, with a projected served available market (SAM) of approximately $1.3 billion for annealing and $700 million for silicon photonics by 2030.
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Full-year 2026 revenue guidance was raised to $780-$810 million, reflecting strong demand and improved customer visibility, with expectations for meaningful acceleration in 2027.
Negative Points
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The company is investing ahead of revenue, with approximately $10 million in incremental operating expenses and a 75 basis point gross margin impact in 2026, which will pressure near-term profitability.
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Full-year 2026 non-GAAP EPS guidance was lowered to $1.36-$1.61, reflecting the impact of higher operating expenses and gross margin dilution from growth initiatives.
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The pending merger with Axcelis remains subject to China antitrust approval, creating uncertainty around the closing timeline and potential integration risks.
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Gross margin in Q2 2026 was 39.5%, below the company's long-term target, and is expected to remain in the 40%-42% range for the full year, indicating ongoing margin pressure.
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The company faces execution risks in ramping manufacturing capacity, including expanding internal production and outsourcing partnerships in Southeast Asia, which could lead to operational challenges or delays.
Q & A Highlights
Q: The 2026 annual revenue guidance was lifted by about $25 million, but the non-GAAP EPS outlook was lowered. Can we assume the gross margin impact is from the $200 million advanced packaging order, and what kind of investments are driving the OpEx increase? A: John Kiernan (CFO) clarified that the $200 million advanced packaging order is principally for delivery in 2027, so it does not impact this year's gross margins. The lowered EPS outlook is due to deliberate investments ahead of revenue to support growth in advanced packaging and silicon photonics. This includes expanding internal manufacturing capacity on the East Coast, bringing on contract manufacturers in Southeast Asia, and hiring/training personnel. The company expects approximately $10 million in incremental operating expenses and a 75 basis point impact on full-year gross margin associated with these growth initiatives.
Q: With the industry in an upcycle, can you provide an update on when the optical networking orders, data storage revenue, and advanced packaging systems will begin shipping and how the revenue ramp profile will look? A: William Miller (CEO) stated that the revenue ramp will begin slightly in the fourth quarter of 2026, but will primarily hit in Q1 2027 and gain momentum in Q2 2027. The majority of the revenue from silicon photonics and advanced packaging is expected to come online in 2027.
Q: How far on average are customers providing visibility, and has this visibility increased over the last three months? A: William Miller (CEO) noted that visibility has been increasing and is much stronger than historically into 2027 at this point midway through 2026. Customers are sharing forecasts beyond 2027, including long-range forecasts they wouldn't normally share, reflecting the strong demand environment.
Q: Can you provide more detail on the $200 million in advanced packaging orders secured during the quarter? A: William Miller (CEO) highlighted that the company secured $200 million in advanced packaging orders for wet processing and lithography systems during Q2, strengthening visibility into 2027. The demand is driven by AI-driven investments accelerating the adoption of heterogeneous integration and increasingly complex 2.5D and 3D architectures. The company is actively engaged with a Tier 1 foundry on a panel processing opportunity and expects advanced packaging to approach a $1 billion market by 2030.
Q: What is the status of the next-generation nanosecond annealing (NSA) system and its commercial validation? A: William Miller (CEO) reported that a Tier 1 customer successfully completed their evaluation and placed a follow-on order for a second NSA system to ship in the second half of 2026. Additionally, the third Tier 1 Logic customer received an NSA evaluation tool, meaning Veeco has now successfully engaged all three Tier 1 Logic customers with NSA technology. The company also delivered record revenue across its LSA and NSA product lines in Q2.
Q: What is the progress in the memory market, particularly with DRAM and NAND customers? A: William Miller (CEO) stated that Veeco is the production tool of record at a Tier 1 high-bandwidth memory manufacturer that is accelerating investments in 2026. The company is advancing an LSA evaluation at a second Tier 1 DRAM customer with potential for follow-on orders in 2027-2028, and a third DRAM customer may enter an evaluation agreement in coming quarters. There is also strong engagement with several NAND customers exploring LSA and NSA applications. The projected annealing SAM is approximately $1.3 billion by 2030.
Q: Can you elaborate on the silicon photonics opportunity and the recent Lumina Plus MOCVD order? A: William Miller (CEO) announced that a global leader in optical and photonics technologies selected the Lumina Plus MOCVD system to fabricate Indium Phosphide lasers for the datacom industry. The system offers the largest batch size in the MOCVD industry, best-in-class throughput, and lowest cost per wafer. The company projects a $700 million SAM by 2030 for its role in manufacturing Indium Phosphide lasers, with the overall opportunity representing at least $2 billion over the coming years.
Q: What is the outlook for the data storage segment, and what is driving the growth? A: John Kiernan (CFO) reported that data storage revenue was $22 million in Q2, a 117% increase from the prior quarter, and expects revenue to double year-over-year in 2026. The company is booked well into 2027, supported by customer investments in next-generation storage technologies and capacity expansion initiatives, particularly around HAMR-based production roadmaps.
Q: What is the status of the merger with Axcelis and the expected closing timeline? A: William Miller (CEO) noted that the merger continues to progress as planned, with shareholder approval from both companies and all regulatory clearance secured other than China antitrust approval. The company continues to target a second-half 2026 closing, and integration teams remain on schedule, reinforcing confidence in the strategic fit and potential long-term value creation.
Q: Can you provide more details on the full-year 2026 guidance and the expected impact of growth investments? A: John Kiernan (CFO) provided updated full-year 2026 non-GAAP guidance: revenue between $780 million and $810 million, gross margin between 40% and 42%, operating expenses between $215 million and $225 million, and diluted EPS between $1.36 and $1.61. The company expects approximately $10 million of incremental operating expenses and a 75 basis point gross margin impact associated with growth initiatives, including more than doubling capacity in advanced packaging and silicon photonics during 2027.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
