Veeco Instruments (NASDAQ:VECO) reported first-quarter financial results on Tuesday. The transcript from the company’s first-quarter earnings call has been provided below.
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Access the full call at https://events.q4inc.com/attendee/743465672
Summary
Veeco Instruments aims to reach $1 billion in revenue by 2030, driven by strong momentum in the compound semiconductor market and significant orders totaling over $250 million for indium phosphide laser manufacturing tools.
The company reported revenue of $158 million for the quarter, slightly below guidance, with a gross margin of 36% and net income of $9 million.
Future outlook projects revenue between $170 and $190 million for the next quarter, with full-year 2026 revenue guidance reaffirmed between $740 and $800 million.
Veeco Instruments is expanding capacity for its Spectre Ion Beam Deposition system and wet processing technologies, anticipating significant growth opportunities in AI data centers and silicon photonics.
Management highlighted strong customer demand and expanding market opportunities, particularly in silicon photonics and AI-related applications, despite some revenue declines in mature node China business.
Full Transcript
Bill
To reach $1 billion by 2030. We continue to demonstrate our ability to support our customers High volume manufacturing ramps driven primarily by AI Moving to the next slide I want to spend time discussing our stronger than expected momentum in the compound semiconductor market. We’re seeing a clear industry inflection point underscored by Nvidia’s recent investments in and optical networking leaders in silicon photonics. The industry is transitioning from copper interconnect to co-packaged optics as AI data centers require higher speeds, greater bandwidth density and improved power efficiency. Indium phosphide laser manufacturing is a critical component of this shift and a foundational technology for next generation AI optical infrastructure as the industry transitions towards future capacity requirements. We believe this represents a growth opportunity of approximately $2 billion over the next several years. Veeco plays a critical role across multiple steps of the indium phosphide laser manufacturing process and we’re seeing rapidly accelerating order demand across several of our product lines. Beginning with Epitaxy, MOCVD is a critical step and we’re seeing increasing orders for our Lumina MOCVD indium phosphide platform as leading photonics customers expand capacity to support AI driven data center growth. We also support downstream process steps with our wafer etch and wafer storm wet processing technologies for advanced etching and surface preparation. What I would like to highlight for investors is is the laser facet coating and epitaxy opportunities are similar sized and significant for the manufacturing of indium phosphide lasers. Our Spectre Ion Beam Deposition system designed for the critical laser facet coating step is essential to the process. Veeco is a market leader in ion beam deposition and is differentiated from traditional approaches such as E-beam evaporation, ion-assisted deposition, or PVD. Compared to other approaches, the Spectre Ion Beam deposition tool delivers low loss optical films with tight control of thickness, uniformity and reflectivity precision that is required for anti reflective and highly reflective facet coatings on indium phosphide lasers. We have engagements with industry leaders that will drive the growth of our Spectre IBD business in 2027 and beyond. As announced in today’s press release, we received over $250 million in orders from multiple customers for our MOCVD wet processing and ion beam deposition tools to support the manufacturing of indium phosphide lasers with Delivery starting in 2026 and significantly accelerating in 2027. A large portion of these orders is for our Spectre IBD system from leading suppliers of next generation 800 gig and 1.6 terabyte optical transceivers for hyperscale customers. This significant order activity underscores the long term value of our ion beam deposition technology leadership and our expanding role in this rapidly growing market. We have long standing partnerships with our customers spanning more than two decades and we are well positioned across our multiple differentiated products to meet their growing needs. In silicon photonics, our focus remains on supporting customer production ramps, executing early deployments and expanding our footprint to meet customer demand. With that, I’ll flip to the next slide to share our projected served available market within the compound semi space in silicon photonics specific to the manufacturing of indium phosphide lasers. We project our Sam to be $700 million in 2030. As we discussed on the previous slide, demand is accelerating across several of our products driven by AI data centers. Our Lumina MOCVD batch platform, wafer storm and Etch and our Spectre ion beam deposition for the laser facet coatings are gaining significant traction. Other photonics driving SAM growth include red micro LEDs, solar cells for low earth orbit satellites and AR VR applications. Additionally, a global optoelectronic solution provider accepted and qualified our Lumina plus MOCVD system for high volume arsenide phosphide production including for use in micro LEDs. We expect these other photonics applications to total $550 million by 2030. In GaN Power we project our SAM to be $250 million by 2030 as we continue to see strong long term drivers tied to AI data center power efficiency, electrification and high power density applications. Importantly, at a leading power IDM customer, we have an evaluation for our Propel 300 system in place and we received a pilot line order for a multi chamber system which we previously announced at the end of 2025. This represents an important validation point as customers move from development to early production. Looking ahead as this customer ramps and finalizes long term capacity plans, there is potential for additional system orders in the second half of 2026 for delivery in 2027. In the next several years we expect our compound semiconductor served available market opportunity to meaningfully grow as AI power efficiency and advanced connectivity continue to reshape the industry. I would now like to hand the call over to John to walk through the financials.
John
Thank you Bill. Revenue came in at $158 million, slightly below the midpoint of our guidance. In previous quarter our semiconductor business reported $109 million, a decline of 1% and comprising 69% of revenue. Revenue in the semiconductor market was largely driven by Laser Annealing Systems co leading Foundry logic and memory customers and wet processing systems for advanced packaging. Compound Semiconductor revenue totaled $19 million, a 6% decline from the prior quarter, totaling 12% of revenue. Data storage revenue was $10 million flat to the prior quarter representing 6% of revenue. Scientific and other revenue declined 16% to $20 million, comprising 13% of revenue. Turning to the quarterly revenue by region, revenue from Asia Pacific region excluding China was 57%, no change from the prior quarter. Sales were driven by leading semiconductor customers in Taiwan for our laser Annealing systems and wet processing systems for advanced packaging. The US accounted for 20% of revenue and increased from the previous quarter, primarily from semiconductor customers. Our China portion was 13% of revenue, a decrease from the previous quarter. EMEA and the rest of the world accounted for 10% of revenue. Turning to the first quarter non GAAP results, first quarter gross margin came in at 36% and operating expenses total $49 million. Income tax expense was approximately $1 million, resulting in an effective tax rate of approximately 11%. Net income was approximately $9 million and diluted EPS was $0.14 on 62 million shares. Moving to the balance sheet and cash flow highlights we ended the quarter with cash and short term investments of $383 million, a decline of $7 million. From a working capital perspective, our accounts receivable increased by $40 million to $151 million, inventory increased by $7 million to $282 million and accounts payable increased by $5 million to $60 million. Customer deposits included within contract liabilities on the balance sheet increased $19 million to $69 million. Cash flow from operations totaled $8 million and CapEx totaled $5 million during the quarter. Next I’ll turn to our second quarter non GAAP outlook. Second quarter revenue is expected to be between 170 and $190 million, gross margin is expected to be between 38 and 40%. We expect OpEx between 52 and $55 million, net income between 12 and $21 million and diluted EPS between 20 and $0.32 on 64 million shares. Based on our current visibility, we’re reiterating our full year 2026 revenue guidance between 740 and $800 million with growth accelerating in the second half of the year year as well as reiterating our diluted …
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