Veeco Instruments' Soft Earnings Mask Positive Factors

Veeco Instruments' recent earnings report was soft, but investors are looking at positive factors beyond the numbers. The company issued 5.9% more new shares over the last year, diluting shareholders' interests. While net income grew 51% over three years, earnings per share only gained 30%, and EPS declined 29% in the last year. Unusual items also impacted profit, with a US$6.9m effect in the last year. Despite these challenges, Veeco Instruments' technology has potential to replace computers and could see future profitability improve.

Veeco Instruments Inc. (NASDAQ:VECO) reported its second-quarter (Q2) earnings for the fiscal year 2025, with revenue of $166.1 million, down 6% year-over-year (YoY), but exceeding the company's guidance range of $135–$165 million [1]. The company's semiconductor segment contributed $123.9 million, flat sequentially but up 13% YoY, driven by growth in high-performance computing (HPC) and AI technologies. The compound semiconductor segment contributed $14.2 million, down from $18.2 million in Q2 2024 [2].

Veeco's earnings per share (EPS) were $0.36, adjusted for one-time gains and costs, exceeding the FactSet estimate of $0.23. The company expects its per-share earnings for the current quarter to range from $0.04 to $0.22, and revenue to range from $150 million to $170 million [1].

Despite the revenue decline, Veeco's financial resilience is evident in its non-GAAP gross margin of 42.6% and operating margin of 13.9%. The company has $355 million in cash and short-term investments, providing a buffer against industry downturns. The company's strategic positioning in AI/HPC semiconductor tools and sub-2nm node technologies positions it to benefit from the AI-driven semiconductor growth. Key products include Wet processing and lithography systems, Ion Beam Deposition (IBD) systems, and Laser Spike Annealing (LSA) systems [3].

Veeco faces risks such as China-related volatility, competition in laser annealing and IBD, and margin compression. However, its focus on high-margin, mission-critical tools and geographic diversification mitigates these risks. The company's strong balance sheet and tier-1 customer relationships also provide long-term visibility.

For investors, Veeco's alignment with GAA, 3D packaging, and High-NA EUV lithography positions it to outperform in a recovery cycle. The company's forward P/E ratio of 15x is significantly lower than the broader semiconductor sector, making it an attractive investment opportunity for long-term investors.

References:
[1] https://www.marketscreener.com/news/veeco-q2-earnings-snapshot-ce7c5ededd8cf020
[2] https://www.marketscreener.com/news/veeco-instruments-q2-revenue-beats-analyst-expectations-ce7c5ededb8cff26
[3] https://www.ainvest.com/news/veeco-instruments-q2-2025-outperformance-strategic-position-ai-driven-semiconductor-innovation-2508/