Veeco Instruments (NASDAQ:VECO) reported third-quarter 2026 revenue of $209 million and said it expects growth to accelerate in 2027 as demand for semiconductor manufacturing and optical connectivity equipment rises alongside investment in artificial intelligence infrastructure.
Chief Executive Officer Bill Miller said the company sees a path to exceed $1 billion in revenue in 2027. During the earnings call, he said Veeco’s current estimate points to companywide growth closer to 40% next year, factoring in potential supply constraints and bottlenecks.
The company also expects its pending merger with Axcelis to close by the end of the first quarter of 2027. Miller said shareholders have approved the transaction and that Veeco is working to obtain regulatory clearance in China. Management did not take questions about the merger.
Third-quarter results and outlook
Veeco’s third-quarter revenue was within its guidance range. Non-GAAP operating income was $25 million, while non-GAAP net income was $24 million, or $0.36 per diluted share.
Non-GAAP gross margin was 39%, below the company’s expectations. Chief Financial Officer John Kiernan attributed the shortfall to higher supply chain costs, product mix and the timing of revenue recognition on a laser spike annealing system under U.S. government export review.
For the fourth quarter, Veeco expects revenue of $230 million to $260 million and non-GAAP diluted earnings of $0.50 to $0.70 per share. It forecast a non-GAAP gross margin of 43% to 44%, reflecting improved volume and a more favorable product mix.
The company updated its full-year 2026 outlook to revenue of $790 million to $820 million and non-GAAP diluted earnings of $1.32 to $1.52 per share.
Veeco ended the third quarter with $483 million in cash and short-term investments, up $53 million from the prior quarter. Customer deposits rose $58 million to $169 million, while operating cash flow totaled $58 million.
Packaging and photonics drive expansion plans
Semiconductor revenue rose 4% from the prior quarter to $135 million, representing 65% of total revenue. Kiernan said sales were driven largely by laser annealing systems for leading-edge foundry, logic and memory customers, as well as wet processing systems for advanced packaging.
Compound semiconductor revenue nearly doubled sequentially to $40 million. Veeco expects that business to approximately double for full-year 2026 compared with 2025, primarily because of systems used in silicon photonics. Kiernan said the company expects growth to accelerate in 2027, supported by a significant backlog.
Miller said Veeco has received advanced packaging orders from foundry, memory and outsourced semiconductor assembly and test customers, improving its visibility into 2027 and 2028. He said the company’s advanced packaging business is heading toward doubling in 2027 from its elevated 2026 level, based on backlog for wet processing and lithography equipment.
To support demand, Veeco plans to more than double manufacturing capacity in 2027 through internal expansion and contract manufacturing partnerships in Southeast Asia and the United States. Miller said the first shipments from the Southeast Asian contract manufacturer are expected in the first quarter.
The company is also pursuing orders for its Lumina and Lumina+ systems used in indium phosphide laser production. Miller said the relatively new product line faces some growth constraints in 2027 as Veeco ramps production, but he expects the company to begin gaining more market share in late 2027, 2028 and beyond.
Supply constraints and product development
Kiernan said supply chain challenges have increased, with longer lead times and shortages of certain components. Veeco is placing orders earlier, qualifying alternative suppliers and using advance payments to secure supply, he said. The company has also placed orders against its requirements for all of 2027.
Veeco is advancing several products for chipmakers. Miller said one Tier 1 logic customer has completed an evaluation of its next-generation nanosecond annealing system and placed a revenue order. A second customer is progressing toward completing its evaluation, while a third has received an evaluation system.
In memory, two IBD 300 systems are under evaluation at leading DRAM customers. Miller said Veeco has made progress demonstrating the systems’ robustness and expects to expand the program in 2027. He said the company is in early discussions about additional tools to support customers’ high-bandwidth memory pilot lines.
Data storage revenue was $20 million in the third quarter, and Veeco expects the business to approximately double year over year in 2026. Miller estimated that it could grow about 20% in 2027. Kiernan said current customer demand signals do not indicate a return to prior peak levels, although that could change.
About Veeco Instruments (NASDAQ:VECO)
Veeco Instruments Inc (NASDAQ: VECO) develops and manufactures specialized equipment used in the production of semiconductors and other advanced electronic devices. Its systems help customers deposit, etch, pattern, anneal and otherwise process thin films and materials at the wafer level.
The company’s product portfolio includes metal-organic chemical vapor deposition systems, molecular beam epitaxy equipment, ion beam etch and deposition systems, laser annealing systems, and related process-control and automation technologies.
