Nova Q2 Earnings Call Highlights
Nova (NASDAQ:NVMI) reported record second-quarter revenue of $255 million, up 8% sequentially and 16% from a year earlier, as demand increased across its semiconductor process-control portfolio. The company said revenue reached the high end of its guidance range, while non-GAAP diluted earnings per share of $2.51 exceeded the high end of its outlook.
President and CEO Gaby Waisman said the quarter marked a milestone for the company, with revenue surpassing $250 million and non-GAAP EPS exceeding $2.50. He said Nova expects another year of double-digit growth, supported by customer capacity investments, wider adoption of its products and market-share gains.
“Demand was broad-based across our portfolio,” Waisman said, citing advanced logic and advanced packaging applications as leading contributors. He also said the company is developing the next phase of its long-term growth plan and expects to provide additional details at an Investor Day planned for the first quarter of 2027.
Advanced Logic and Packaging Drive Demand
Revenue associated with advanced logic more than doubled sequentially as customers expanded production capacity, according to Waisman. He said demand spanned multiple product lines and divisions, reflecting the process-control requirements of leading-edge logic manufacturing.
Nova’s VeraFlex XPS materials-metrology platform continued to gain traction in gate-all-around manufacturing, with customers increasing the number of tools deployed per fab, Waisman said. The company recently expanded its California clean room, doubling its U.S. manufacturing capacity.
The company also reported record sales for Nova ancosys, its front-end chemical metrology solution, supported by advanced-memory and mature-logic applications. Waisman attributed the performance to rising adoption, deeper engagement with existing customers and market-share gains.
Advanced packaging contributed nearly one-quarter of total product revenue during the second quarter, reaching a record level. Waisman said customer investments in Advanced packaging and high-bandwidth memory capacity for AI-related devices supported the growth. The Nova WMC dimensional-metrology platform gained traction, including a tool-of-record selection from a leading foundry customer for multilayer measurements in Advanced packaging production flows.
Waisman said Nova expects advanced packaging to account for about 25% of product revenue for the full year, compared with the company’s earlier expectation of between 20% and 25%.
Margins, Cash Position and Third-Quarter Outlook
CFO Guy Kizner said second-quarter GAAP gross margin was 57%, while non-GAAP gross margin was 58%. GAAP operating expenses totaled $68 million and non-GAAP operating expenses were $62.9 million, reflecting investments in product development and roadmap expansion.
GAAP operating margin reached 30%, while non-GAAP operating margin was 33%, at the upper end of Nova’s 28% to 33% target model. GAAP diluted EPS was $2.20, compared with non-GAAP diluted EPS of $2.51. The company’s effective tax rate was approximately 16%.
For the third quarter, Nova forecast revenue of $277 million to $287 million, GAAP diluted EPS of $2.46 to $2.61 and non-GAAP diluted EPS of $2.70 to $2.85. At the midpoint of its outlook, the company expects GAAP gross margin of about 57%, non-GAAP gross margin of about 59%, and an effective tax rate of approximately 17%.
- Third-quarter GAAP operating expenses are expected to rise to approximately $74 million.
- Third-quarter non-GAAP operating expenses are expected to increase to approximately $68 million.
- Nova expects full-year gross margin of approximately 59%, Kizner said.
Nova ended the period with more than $1.7 billion in cash and investments. Kizner said the balance sheet provides flexibility for research and development, strategic growth initiatives and selective acquisition opportunities.
Memory Mix and Visibility Into 2027
Product revenue in the second quarter was approximately 73% logic and foundry and 27% memory and other markets. Kizner said the company expects memory to account for about 30% of its business this year, compared with its long-term model of roughly 60% logic and foundry and 40% memory.
The company is seeing strong demand from DRAM customers, while 3D NAND demand remains more muted, according to management. Waisman said NAND investment has been focused more on upgrades than capacity expansion, though Nova expects to benefit when capacity investment returns.
Management said customer planning has provided greater visibility into the second half of 2026 and into 2027. Waisman said customers are working more closely with Nova on longer-term capacity and inventory planning, and in some cases the company has already received orders tied to 2027 deliveries.
While Waisman said it was too early to determine whether wafer-fab-equipment spending will grow by 40% in 2027, he said Nova expects next year to be a growth year and is working with suppliers to support customer demand. Lead times vary by product line but are generally between four and 12 months, he said.
On costs, Kizner said Nova has seen some impact from higher memory-related bill-of-materials costs, but said memory represents a relatively small portion of its bill of materials and does not meaningfully alter the company’s gross-margin outlook. Management said its 57% to 60% gross-margin target range remains intact.
About Nova (NASDAQ:NVMI)
Nova Measuring Instruments Ltd (NASDAQ: NVMI) develops and supplies advanced metrology and process control systems for the semiconductor manufacturing industry. The company's core product line includes spectroscopic ellipsometry and scatterometry tools designed to measure film thickness, critical dimensions, overlay alignment and other key parameters that drive yield and performance in integrated circuit fabrication.
Founded in 1993 and headquartered in Rehovot, Israel, Nova Measuring Instruments has established itself as a critical partner to leading semiconductor foundries and device manufacturers.
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