VECO — Veeco Instruments Inc.

Summary of Veeco's Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 Revenue: $165 million, flat from the previous quarter and at the midpoint of guidance.
• Full Year Revenue: $664 million, a 7% decline year-over-year.
• Q4 EPS: $0.24; Full Year EPS: $1.33.
• Semiconductor Business: Accounted for 67% of Q4 revenue and 72% of total annual revenue, reaching $477 million, up 2% year-over-year.
• Gross Margin: 38% in Q4; 41% for the full year.
• Order Backlog: Ended the year at $555 million, a 35% increase from the prior year.

2. Strategic Updates and Business Highlights

• Veeco experienced strong growth in its semiconductor business, particularly in laser annealing, wet processing, and ion beam EUV technology.
• The company announced a merger with Axcelis Technologies, which was approved by shareholders, aiming to create a leading semiconductor equipment company.
• Significant traction was noted in advanced packaging, doubling revenue year-over-year to $150 million, driven by AI-related demand.
• New product orders for the Propel 300mm GaN-on-silicon system and Lumina arsenide phosphide system were highlighted as key growth drivers.

3. Forward Guidance and Outlook

• Q1 2026 Revenue Forecast: Between $150 million and $170 million; Full Year 2026 Revenue Forecast: Between $740 million and $800 million, representing a potential 16% growth.
• Expected growth in the semiconductor business to reach approximately $550 million, with significant contributions from the compound semiconductor and data storage segments.
• Gross margins are projected to improve, reaching 41%-43% for the full year 2026, with expectations of 45% by the second half of 2026.

4. Challenges and Points of Concern

• Revenue Decline: Overall revenue decreased by 7% year-over-year, with specific segments like compound semiconductors and data storage showing declines.
• Gross Margin Pressure: Margins dipped due to a shift in product mix towards lower-margin advanced packaging and impacts from evaluation systems.
• Tariff Headwinds: Approximately 100 basis points of gross margin headwind due to tariffs, with expectations of continued impact in 2026.

5. Notable Q&A Insights

• Analysts inquired about growth expectations across different segments, with the semiconductor business expected to grow around 15% in 2026.
• The data storage segment is projected to double to approximately $80 million in 2026, driven by increased customer CapEx and HAMR adoption.
• Concerns were raised about gross margin trends, with management indicating that while Q1 margins would be similar to Q4, improvements are expected in the latter half of 2026 due to new product contributions and higher volumes.
• Management confirmed that the scientific and other segment is expected to decline significantly due to the absence of large quantum computing orders.

Overall, Veeco demonstrated resilience in its semiconductor business, with strong strategic initiatives and a positive outlook for 2026, despite facing challenges related to revenue declines and margin pressures.