0001104659-25-107052
SEC filingRevenue fell 10% YoY in Q3 as Data Storage plunged 70%, gross margin slipped to 41% on tariff costs, net income down 52%.
In Q3 2025, Veeco reported net sales of $165.9 million, a 10% decline from $184.8 million in the prior year quarter. Gross profit fell 15% to $67.7 million, with gross margin contracting to 41% from 43%, driven by lower sales volume, higher logistics costs, and adverse product mix. Operating income plunged 57% to $10.6 million, resulting in an operating margin of 6.4% versus 13.2% a year ago. Net income decreased 52% to $10.6 million, or $0.21 per diluted share (EPS not explicitly stated in MD&A but derived from net income and shares outstanding elsewhere). The decline was primarily attributable to revenue weakness and margin compression, partially offset by a 10% reduction in R&D expenses to $29.0 million as part of cost management. SG&A expenses rose 8% to $27.3 million due to merger-related costs associated with the pending Axcelis transaction.
Sales by end-market showed significant divergence. Semiconductor revenue, representing 71% of total sales, decreased 5% YoY to $118.3 million, driven by system shipments of laser spike annealing, ion beam deposition EUV mask blanks, and advanced packaging wet processing. The Semiconductor segment continued to benefit from AI and HBM demand, though tariffs created headwinds. Data Storage revenue collapsed 70% to $10.0 million as customers refrained from new system capacity additions; however, order activity picked up in Q3 driven by HAMR technology adoption. Compound Semiconductor revenue fell 30% to $10.9 million, with GaN power and photonics orders partially offsetting weakness. Scientific & Other revenue surged 116% to $26.7 million, buoyed by optical deposition systems. From a geographic perspective, sales declined in the United States (-55%) and China (-16%), while Rest of APAC grew 35% led by Taiwan and Japan.
Looking ahead, management anticipates growth in semiconductor markets driven by leading-edge logic, Gate-All-Around nodes, HBM, and 3D packaging for AI. However, recently enacted tariffs have introduced uncertainty, increasing costs for Veeco and its customers, and are expected to pressure gross margins further in the remainder of 2025. The company continues to invest in next-generation technologies, including nanosecond laser annealing (NSA500) and ion beam deposition (IBD300), to expand its serviceable addressable market. The pending merger with Axcelis Technologies is progressing, with customary approvals pending. No specific quantitative guidance was provided for future periods.
As of September 30, 2025, Veeco held $193.2 million in cash and cash equivalents and $176.1 million in short-term investments, totaling $369.3 million. Total debt stood at $225.7 million, comprising $230.0 million principal of 2029 Notes net of unamortized costs. Shareholders' equity increased to $876.0 million from $770.8 million at year-end 2024, driven by net income and share issuance. Inventory rose to $263.3 million from $246.7 million, reflecting build-up in materials and evaluation inventory. Contract liabilities (deferred revenue) were $57.1 million, down from $65.0 million at year-end.
Veeco has $128.2 million in purchase commitments as of September 30, 2025, substantially all due within one year, related to securing rights to assets and services. Operating lease liabilities total $36.7 million, with maturities extending to 2035 and beyond. The company also has $7.6 million in outstanding bank guarantees and $30.0 million available under a receivable purchase agreement (no receivables sold in 2025).
No share repurchases or dividends were reported. The company reduced debt by $50.5 million net, primarily through settlement of the 2025 Notes (matured, settled with shares) and 2027 Notes (settled with shares and $5.4 million cash). Only the 2029 Notes ($230 million principal) remain outstanding. Capital expenditures totaled $12.9 million for the nine months (2.6% of sales). The revolving credit facility ($250 million capacity) had no borrowings.
Veeco operates as a single reportable segment but discloses revenue by end-market. For the nine months ended September 30, 2025: Semiconductor $366.0M (73.3%), Compound Semiconductor $39.5M (7.9%), Data Storage $29.0M (5.8%), Scientific & Other $64.7M (13.0%). Geographically, Rest of APAC was the largest region at $240.3M (48.1%), followed by China $144.0M (28.8%), U.S. $72.4M (14.5%), and EMEA $42.5M (8.5%). Segment operating income is not disclosed.