Veeco Instruments (NASDAQ:VECO) reported first-quarter fiscal 2026 results within its guidance ranges and highlighted what executives described as rising multi-year demand tied to artificial intelligence infrastructure, particularly in silicon photonics and advanced packaging.
Revenue for the quarter was $158 million, with non-GAAP operating income of $9 million and non-GAAP diluted earnings per share of $0.14, CEO William J. Miller said. CFO John P. Kiernan added that non-GAAP gross margin was 36% and non-GAAP operating expenses were $49 million.
Management points to AI-driven inflection and expanding backlog visibility
He also said Veeco is expanding manufacturing footprint and capacity to support customer demand and timely deliveries, with activity spanning logic, memory, advanced packaging, compound semiconductors, and data storage.
On Veeco’s pending merger with Axcelis, Miller said the transaction has been approved by shareholders of both companies and has received all regulatory approvals except antitrust approval in China. He said the company remains engaged with Chinese authorities and continues to expect the transaction to close in the second half of 2026, while noting the company would not address merger-related questions during Q&A.
$250 million-plus order haul tied to indium phosphide lasers
A central focus of the call was Veeco’s compound semiconductor opportunity in indium phosphide lasers, which Miller tied to the shift from copper interconnects to optics in AI data centers. Miller said the company believes the transition represents “a growth opportunity of approximately $2 billion over the next several years,” and that Veeco participates across multiple process steps.
Miller said Veeco received “over $250 million in orders from multiple customers for our MOCVD, wet processing, and ion beam deposition tools to support the manufacturing of indium phosphide lasers,” with deliveries starting in 2026 and “significantly accelerating in 2027.” He added that “a large portion of these orders is for our Spector IBD system” used for laser facet coatings, including demand from suppliers of “next generation 800 gig and 1.6 terabyte optical transceivers for hyperscale customers.”
In Q&A, Kiernan said Veeco expects to “start shipping against those $250 million plus of aggregate orders in the third quarter,” with “the most significant ramp” likely beginning in the first quarter of 2027.
Asked about competitive dynamics, Miller said the company serves three parts of indium phosphide laser manufacturing—epitaxy via MOCVD, wet processing steps, and laser facet coatings via ion beam deposition. He described Veeco as having “a very strong incumbent position” in laser facet coating, while in epitaxy the company is “probably more the second provider there today as a second source.” He also noted that Veeco and a competitor both provide MOCVD tools for indium phosphide epitaxy, identifying AIXTRON as a head-to-head competitor in that step.
Capacity expansion: 10x plans for Spector and added wet processing capacity
As Veeco prepares for higher volumes, Kiernan said the company has “plans to increase our Spector IBD capacity about 10X from its kind of base level we’re at today,” with that level “starting to hit” in early 2027. He added the company is evaluating future needs “to potentially double that again.”
For wet processing, Kiernan said Veeco is looking to add expansion capacity to its existing facility and is also considering an outsourced contract manufacturing partner in Southeast Asia.
On lead times, Kiernan said Spector lead times have been “more in that sort of 9-month” range, and the company will seek to reduce lead and cycle times to meet customer shipment requirements as output steps up beginning in the first quarter of 2027.
Segment performance, margins, and regional mix
Kiernan said Veeco’s semiconductor segment generated $109 million, down 1% sequentially and representing 69% of revenue, driven largely by laser annealing systems for foundry, logic, and memory customers and wet processing systems for advanced packaging. Compound semiconductor revenue was $19 million, down 6% sequentially and 12% of revenue. Data storage revenue was $10 million, flat sequentially and 6% of revenue, while scientific and other revenue fell 16% to $20 million, representing 13% of revenue.
By geography, Asia-Pacific excluding China represented 57% of revenue, the U.S. was 20%, China was 13%, and EMEIA/rest of world was 10%.
During Q&A, Miller attributed the quarter’s gross margin performance in part to a delayed system shipment tied to export licensing. He said Veeco was informed by the U.S. Bureau of Industry and Security that a China customer would require a license to ship to certain fabs, which created “about an $8 million impact on the top line for Q1,” and also pushed results “outside” the company’s gross margin guidance range.
Outlook: Q2 guide raised from Q1 levels; full-year reiterated
For the second quarter, Kiernan guided to revenue of $170 million to $190 million, gross margin of 38% to 40%, operating expenses of $52 million to $55 million, net income of $12 million to $21 million, and non-GAAP diluted EPS of $0.20 to $0.32 on 64 million shares.
Veeco reiterated full-year 2026 guidance for revenue of $740 million to $800 million and non-GAAP diluted EPS of $1.50 to $1.85, with Kiernan saying growth is expected to accelerate in the second half.
In commentary on end markets, Kiernan said Veeco expects strong growth from tier-one semiconductor customers driven by AI and high-performance computing, offsetting declines in its mature-node China business. He also cited advanced packaging wet processing demand. For compound semiconductors, he pointed to “strong growth in silicon photonics, particularly for indium phosphide laser manufacturing,” as well as opportunities in low Earth orbit satellites, MicroLEDs, AR/VR, and GaN power, adding that significant first-quarter orders are expected to drive revenue growth into 2027.
On GaN power, Miller said the move to 300mm GaN-on-silicon is “squarely targeted at the AI data centers.” He said Veeco has an evaluation tool at a major IDM performing well, has received a pilot line multi-chamber order, and expects to ship that tool “at the end of the year kind of timeframe.”
On ion beam deposition for memory applications, Miller said customers are impressed with film performance and told Veeco it is “not a matter of if, it’s a matter of when,” but he said evaluations have been extended through the end of 2026 as the company works on particle performance, automation, and reliability improvements to meet high-volume manufacturing requirements.
In data storage, Miller said Veeco is looking to double that business in 2026 versus 2025, with growth weighted to the second half due to lead times and a build-to-order model. He said both major customers continue placing orders for front-end equipment and for “slider fabs,” which he characterized as indicating increased head production, and added that early 2026 order activity suggests a strong first half of 2027.
Closing the call, Miller reiterated confidence that Veeco’s technologies are becoming more critical as customers pursue performance and efficiency improvements, particularly as silicon photonics reaches what he called an industry inflection point driven by AI and high-performance computing.
About Veeco Instruments (NASDAQ:VECO)
Veeco Instruments Inc (NASDAQ: VECO) is a leading supplier of process equipment for the semiconductor, data storage, wireless communications, power electronics and advanced packaging industries. The company designs, manufactures and services precision tools used to grow, deposit and etch thin films on substrates, enabling the fabrication of chips, light-emitting diodes (LEDs), micro-electromechanical systems (MEMS) and high-density storage devices. Veeco’s platforms are deployed across fabrication facilities worldwide, where they support key processes in materials science and device manufacturing.
Veeco’s product portfolio spans molecular beam epitaxy (MBE), metal organic chemical vapor deposition (MOCVD), atomic layer deposition (ALD), ion beam etch and deposition, and high-precision wet and dry etch systems.
