Veeco Instruments Misses Q1 Revenue and EPS Estimates, Maintains Full-Year Guidance

Veeco's Q1 FY2026 revenue of $158.3 million represents a 4.0% decline from the prior quarter and a 5.4% decline year-over-year. The company's revenue has been on a downward trend since Q1 FY2024, with the latest quarter marking the lowest revenue since Q1 FY2023. The revenue miss of -1.1% against street estimates is a concern, especially given the company's guidance range, which the actuals fell within.

The gross margin for the quarter was 34.8%, a significant decline from the 37.1% reported in Q4 FY2025.

The semiconductor business, which comprises 69% of revenue, reported $109 million, a 1% decline from the prior quarter. Compound semiconductor revenue totaled $19 million, a 6% decline from the prior quarter, and data storage revenue was flat at $10 million. Scientific and other revenue declined 16% to $20 million, reflecting a broader slowdown in these segments.

Despite the revenue miss, the company's management remains optimistic about the future. CEO William Miller highlighted several growth opportunities, including:

• Annealing: Projected SAM of $1.3 billion by 2030.
• Ion Beam Deposition: SAM projection of $500 million by 2030.
• Back-End Semiconductor Process: SAM projection of $1 billion by 2030.
• Silicon Photonics: SAM projection of $700 million by 2030.
• Other Photonics Applications: SAM projection of $550 million by 2030.
• GaN Power: SAM projection of $250 million by 2030.

These projections indicate a significant market opportunity for Veeco over the next several years, with a total growth opportunity of approximately $2 billion.

Veeco ended the quarter with cash and short-term investments of $383 million, a decline of $7 million from the previous quarter. 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 by $19 million to $69 million.

These changes in the balance sheet suggest that Veeco is managing its working capital effectively, despite the revenue miss. The increase in customer deposits is a positive sign, indicating strong customer demand and potential future revenue.

For the second quarter, Veeco expects revenue to be between $170 million and $190 million, with a gross margin between 38% and 40%. Operating expenses are expected to be between $52 million and $55 million, with net income between $12 million and $21 million and diluted EPS between $0.20 and $0.32 on 64 million shares.

For the full year 2026, the company reiterates its revenue guidance between $740 million and $800 million, with growth accelerating in the second half of the year. Diluted non-GAAP EPS is expected to be between $1.50 and $1.85. This guidance reflects the company's belief in its long-term growth opportunities and its ability to navigate the current market challenges.

The tone of the earnings call was generally positive, with a sentiment score of 0.42, a slight improvement from the 0.39 reported in Q4 FY2025. However, the guidance tone declined by 0.06, and the prepared sentiment increased by 0.10, while the QA sentiment decreased by 0.12. The AI optimism score also declined by 0.23, and uncertainty increased by 24.6 points, indicating a more cautious outlook.

The call's prepared remarks were more optimistic, with CEO William Miller and CFO John Kiernan emphasizing the company's market opportunities and long-term growth prospects. However, the QA session revealed a more cautious tone, with management addressing concerns about the revenue miss and the decline in gross margin.

For a detailed tone history, see the tone history.

The revenue miss and the decline in gross margin have implications for Veeco's key customers and suppliers. Intel [INTC], TSMC [TSM], Samsung, ASE Group [ASX], and SK Hynix [000660.KS] are significant customers for Veeco, particularly in the areas of laser spike annealing, ion beam, wet processing, and advanced packaging lithography.

• Intel: Veeco's production tool of record for laser spike annealing and ion beam processes.
• TSMC: Veeco has a 50-60% share in advanced packaging lithography.
• Samsung: Advanced packaging lithography.
• ASE Group: Advanced packaging lithography and wet processing.
• SK Hynix: Production tool of record for HBM laser spike annealing.

The revenue miss may indicate a slowdown in these customers' capital expenditures, which could impact their own financial performance. However, the maintained full-year guidance suggests that Veeco expects a rebound in demand, particularly in the second half of the year.

Comparing Veeco's performance to its peers in the Wafer Fab Equipment subsector, the company's gross margin of 34.8% is below the industry average. For example, Tokyo Electron [7751.T] reported a gross margin of 46.2%, and Advantest [6857.T] reported 46.8%. This suggests that Veeco may need to focus on cost optimization to improve its margins.

Despite the lower gross margin, Veeco's revenue decline of 5.4% year-over-year is in line with the industry trend, with several peers also reporting revenue declines. This suggests that the semiconductor equipment market is facing broader challenges, and Veeco's performance is not an isolated issue.

Veeco Instruments' Q1 FY2026 results reflect a challenging quarter, with a revenue miss and a decline in gross margin. However, the company's maintained full-year guidance and positive long-term market opportunities suggest that management remains confident in the company's ability to navigate the current market environment. The tone of the earnings call was generally positive, but the QA session revealed a more cautious outlook. The supply chain implications and peer comparison highlight the need for Veeco to focus on cost optimization and capitalize on its market opportunities to improve its financial performance.