0001104659-26-055672
SEC filingRevenue declined 5% YoY to $158.3M; operating loss of $2.7M. Semiconductor weakness offset by strong Compound Semi and Data Storage growth.
For the three months ended March 31, 2026, Veeco reported net sales of $158.3 million, down 5% from $167.3 million in the prior year period. The decline was primarily driven by a 12% decrease in Semiconductor market sales, partially offset by strong growth in Compound Semiconductor (+31%) and Data Storage (+52%) segments. Gross profit fell 18% to $55.8 million, with gross margin contracting to 35% from 41% a year ago. Management attributed the margin compression to unfavorable product mix and higher logistics costs. Operating expenses rose 8% to $58.5 million, including $2.0 million in merger-related costs, resulting in an operating loss of $2.7 million compared to operating income of $14.1 million in Q1 2025. Net income swung to a loss of $0.3 million from a profit of $11.9 million, reflecting lower revenue and margins.
Semiconductor revenue, which accounted for 69% of total sales, decreased 12% year-over-year to $109.0 million. The drop was largely due to a 72% decline in sales to China (from $70.9 million to $20.0 million), partially offset by strong growth in the United States (+34%) and Rest of APAC (+51%). Compound Semiconductor revenue surged 31% to $18.8 million, driven by AI data center infrastructure build-out, particularly for InP lasers used in high-speed optical transceivers. Veeco noted over $250 million in orders from multiple customers for MOCVD, wet processing, and ion beam deposition tools supporting this market. Data Storage revenue increased 52% to $10.2 million, benefiting from cloud and AI data center demand and HAMR technology adoption. Scientific & Other revenue declined 9% to $20.3 million on slower government and research spending.
Management highlighted several growth catalysts. In the semiconductor market, the Laser Spike Annealing platform is a production tool of record at all three Tier 1 logic customers, and the next-generation Nanosecond Annealing system is progressing through evaluations. In memory, two Ion Beam Deposition systems are under evaluation for DRAM bitline metallization, with potential pilot orders in H2 2026. The pending merger with Axcelis Technologies remains subject to Chinese regulatory approval. Veeco expects the Compound Semiconductor and Data Storage markets to continue growing as AI, power efficiency, and connectivity trends persist. The company believes it has sufficient liquidity to fund operations for at least the next twelve months, with $383.3 million in cash, cash equivalents, and short-term investments as of March 31, 2026.
Cash and cash equivalents stood at $179.5M as of March 31, 2026, up from $163.5M at year-end 2025. Short-term investments totaled $203.8M, resulting in combined liquid assets of $383.3M. Total debt of $226.3M (convertible notes) remained unchanged, with no borrowings under the $250M revolving credit facility. Shareholders' equity was $883.7M, slightly down from $885.5M due to net loss and other comprehensive loss. Inventory increased to $282.2M from $275.3M, driven by materials and work-in-process.
Purchase commitments totaled $205.8M, substantially all due within one year, securing rights to assets and services. Remaining performance obligations on contracts with duration over one year were $142.8M, of which 51% is expected within one year. Operating lease liabilities totaled $35.2M with a weighted average remaining term of 10 years. The company also had $30.0M available under a receivable purchase agreement and $37.2M in unused bank guarantees/letters of credit.
No share buybacks or dividends were reported. Capital expenditures were $5.1M (3.2% of sales), primarily for equipment. The company incurred $2.0M in merger-related costs during the quarter. No debt was issued or repaid; the $230M 2.875% convertible notes due 2029 remain outstanding.
The company operates as one reportable segment. Revenue by end-market: Semiconductor $109.0M (down 12% YoY), Compound Semiconductor $18.8M (up 31%), Data Storage $10.2M (up 52%), Scientific & Other $20.3M (down 9%). Geographically, Rest of APAC led with $90.4M (57% of total), followed by United States $32.2M, China $20.0M, and EMEA $15.8M. China sales dropped significantly from $70.9M in Q1 2025.
Net income swung from $11.9M profit in Q1 2025 to a $0.3M loss in Q1 2026, while operating cash flow dropped 60% to $7.9M. The divergence is largely due to working capital absorption: accounts receivable and contract assets consumed $26.7M, inventories used $6.9M, and payables/accruals provided $12.5M. Contract liabilities were a $18.6M source vs. a $7.8M use last year, partially offsetting. Depreciation and amortization ($5.0M) and share-based compensation ($8.5M) were consistent. Deferred taxes swung to a benefit of $1.1M from an expense of $1.6M.
Capex intensity (capex/CFO) rose to 64% from 34% a year ago, though absolute capex fell 24% to $5.1M. Investing activities generated $17.7M net cash from sale of investments ($35.6M proceeds vs. $12.8M purchases). Financing activities used $9.6M, primarily for restricted stock tax withholdings ($11.0M) partially offset by option proceeds. No free cash flow is disclosed; implied FCF (CFO minus capex) was $2.8M, down from $13.2M. The company ended with $179.5M cash, a $16.1M increase from quarter start.