Veeco expects more sales. Why did it cut its earnings forecast?
The chip-equipment maker missed its margin target despite a tariff refund. Stronger orders are bringing in cash, but expanding capacity is also costing money.
Veeco expects more sales this year but less adjusted profit per share than it forecast in August. Strong demand for chip-manufacturing equipment is lifting revenue, while a less favorable product mix and spending on capacity weigh on margins.
The company raised its annual revenue range to $790 million to $820 million, from $780 million to $810 million. It lowered adjusted diluted earnings guidance to $1.32 to $1.52 a share, from $1.36 to $1.61.
| Measure | August forecast | Actual result |
|---|---|---|
| Revenue | $200 million to $220 million | $209.4 million |
| Adjusted diluted earnings per share | $0.35 to $0.49 | $0.36 |
| Adjusted gross margin | 41% to 42% | 39.1% |
Revenue and adjusted earnings landed within their original ranges. Gross margin, the share of sales left after direct production costs, did not.
Why stronger sales did not deliver the expected margin
Veeco says its year-over-year margin decline reflected a less favorable mix of products and higher costs, including logistics and investment in manufacturing capacity and the supply chain. A $2.8 million tariff refund reduced cost of sales and helped the quarter's gross profit.
Veeco's adjusted gross margin excludes stock compensation recorded in production costs but retains that refund. Its adjusted earnings also remove stock compensation elsewhere in the business, acquired-intangible amortization, merger costs and noncash interest, with a tax adjustment.
There is substantial demand underneath the margin shortfall. Compound-semiconductor equipment revenue rose to $40.2 million from $10.9 million a year earlier. These tools serve areas such as optical connections, which are important to artificial-intelligence infrastructure. Management also cited orders in front-end semiconductor manufacturing and advanced packaging.
Total quarterly revenue rose to $209.4 million from $165.9 million. Reported net income increased to $13.6 million from $10.6 million, even though adjusted diluted earnings remained $0.36 a share.
For the fourth quarter, Veeco expects revenue of $230 million to $260 million and an adjusted gross margin of 43% to 44%. That would be a recovery from the third quarter's 39.1%.
Chief Executive Officer Bill Miller said Veeco believes it is well positioned to exceed $1 billion in revenue in 2027. Turning that demand into profit depends partly on earning more from each dollar of sales as the company expands.
Cash reflects orders that have not shipped yet
Operating cash flow rose to $117.3 million in the first nine months, from $44.6 million a year earlier. A $112.6 million increase from contract liabilities was a major source of cash. Those liabilities reflect advance billings and customer payments for products and services that have not yet been delivered.
Long-term customer deposits included $54.4 million for orders scheduled to ship more than a year later. Veeco's September cash and cash equivalents were $205.3 million, alongside $277.2 million of short-term investments.
The operating results arrive while the proposed Axcelis combination remains pending. The companies already moved their expected closing into the first quarter of 2027, with Chinese approval and a renewed U.S. antitrust process still to complete. Our earlier analysis of the merger delay explains that separate development.
The Veeco company profile preserves the earlier forecasts and tracks the current cash, debt and merger terms.