Veeco Instruments (NASDAQ:VECO) reported fourth-quarter and full-year 2025 results and provided an outlook that management said is supported by a higher backlog and accelerating order activity tied to AI and high-performance computing demand. Executives also reiterated progress toward the company’s pending all-stock merger with Axcelis Technologies, though management said it would not address merger-related questions beyond prepared remarks.
2025 results: semiconductor revenue grew, backlog climbed
CEO Bill Miller said Veeco “executed well in 2025,” highlighting record annual semiconductor revenue driven primarily by laser spike annealing (LSA), wet processing, and ion beam technology used in EUV applications. Miller said the company also shipped an LSA evaluation system to a second Tier 1 DRAM customer, which he described as an important step in expanding Veeco’s footprint in memory.
Kiernan said full-year revenue declined 7% year-over-year, but semiconductor revenue increased 2% to $477 million, accounting for 72% of company revenue. He added that, as previously disclosed, two LSA tool shipments to customers in China were under customs review and were later resolved, allowing Veeco to recognize $15 million of revenue in the fourth quarter related to those systems.
By market segment in 2025, Kiernan reported:
- Semiconductor: $477 million
- Compound semiconductor: $60 million
- Data storage: $39 million
- Scientific and other: $89 million
Veeco ended 2025 with order backlog of $555 million, up $145 million from the prior year. Kiernan said the 35% backlog growth reflected “strong acceleration in orders in the second half of 2025,” positioning the company for revenue growth in 2026 “principally in the second half.”
Technology focus: memory penetration, advanced packaging, EUV roadmap
Miller emphasized Veeco’s position in annealing for foundry and logic customers while describing memory as a major strategic focus. He said Veeco’s LSA tool is “production tool of record at all three Tier 1 logic customers,” and that the company’s next-generation nanosecond annealing (NSA) system has two evaluations at Tier 1 logic customers, with plans to ship an evaluation system to the third Tier 1 logic customer in 2026. Miller said Veeco expects sign-off of two NSA evaluations during 2026, with the potential for pilot line orders to follow.
In DRAM, Miller said Veeco is a production tool of record at a leading high-bandwidth memory (HBM) DRAM customer and has shipped an LSA evaluation system to a second DRAM manufacturer. He also said two IBD300 systems are under evaluation at leading DRAM customers, with evaluations extended into 2026, and described IBD300 as enabling deposition of low-resistance films relevant to advanced DRAM structures.
Miller also called Veeco the market leader for ion beam deposition (IBD) EUV systems used to deposit defect-free mask blanks, and said the company is expanding into EUV pellicles. In advanced packaging, he said Veeco’s business doubled to $150 million in 2025 from $75 million in 2024, driven by AI-related demand and shipments of wet processing and lithography systems for 3D packaging.
Merger update: shareholder approvals and regulatory progress
Management noted that Veeco and Axcelis shareholders approved proposals related to the pending merger at special meetings held on February 6, 2026. Miller said Veeco has secured regulatory approvals in several key jurisdictions and remains engaged with authorities in China for final clearance. Based on progress to date, he said Veeco anticipates completing the transaction in the second half of 2026.
2026 guidance: revenue growth led by semis, compound semis, and data storage
For the first quarter of 2026, Kiernan guided revenue of $150 million to $170 million, gross margin of 37% to 38%, and non-GAAP diluted EPS of $0.14 to $0.24.
For the full year 2026, Veeco forecast revenue of $740 million to $800 million, gross margin of 41% to 43%, and non-GAAP diluted EPS of $1.50 to $1.85. Kiernan said the “momentum of orders secured in the back half of 2025” is expected to drive meaningful revenue growth primarily in the second half of 2026.
In Q&A, Kiernan provided midpoint expectations by segment, saying Veeco expects growth in semiconductor, compound semiconductor, and data storage, while scientific and other is expected to decline after what he called a strong 2025 that included “large quantum computing orders” not currently expected to repeat in 2026.
- Semiconductor: about $550 million (approximately 15% growth)
- Compound semiconductor: about $80 million (up about a third)
- Data storage: about $80 million (about doubling)
- Scientific and other: about $60 million (down about 33%)
On data storage, Kiernan said Veeco saw increased order activity in the second half of 2025 and is “fully booked” for system orders in 2026, with multiple orders extending into 2027. He attributed customer momentum to increasing capital intensity tied to broader heat-assisted magnetic recording (HAMR) adoption, higher CapEx, and capacity expansion.
On the company’s Propel 300mm GaN-on-silicon system, Kiernan said an evaluation system at a leading power IDM is going well and that Veeco received a pilot line order for shipment in 2026 that he said should drive incremental business “approaching $15 million.” He added Veeco has a 300mm Propel tool in backlog for a MicroLED application and is conducting demos with multiple customers.
Margins and tariffs: mix headwinds near term, improvement expected later
Kiernan said fourth-quarter gross margin was affected by a product mix shift toward advanced packaging, which he described as having a lower gross margin profile, as well as impacts tied to evaluation system sign-offs. He guided first-quarter gross margin in a similar range to the fourth quarter, but said Veeco expects gross margin to improve in the second half of 2026, aided by higher-margin new products, increased data storage volumes, and higher overall volumes. He said that in the second half of 2026, Veeco would expect to see gross margins at its 45% target.
Asked about tariffs, Kiernan said the company began to see an impact principally in the second half of 2025, running about a 100 basis point gross margin headwind relative to the pre-tariff regime, and that Veeco is baking in a “slightly higher tariff regime” in its 2026 forecast compared to 2025.
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.
