Nova Q2 2026 Earnings Call: Complete Transcript

Nova (NASDAQ: NVMI ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

51. The company anticipates double-digit growth for the year, supported by broad-based demand across its portfolio and increased market share. Significant investments in R&D continue, with 15% of revenue allocated to innovation in advanced metrology and software solutions. Advanced packaging contributed nearly 25% of product revenue, driven by demand for AI-related devices and customer investments in high-bandwidth memory.

85, with gross margins expected to remain stable. 7 billion in cash and investments, supporting strategic growth and potential M&A activities. Management highlighted increased visibility and customer collaboration, particularly in logic and memory sectors, with a focus on long-term growth and capacity planning. Full Transcript OPERATOR Good day and welcome to the Nova Limited second quarter 2026 results conference call.

All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone telephone.

To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Ms. Mary Segal, CEO of MSIR.

Please go ahead. Mary Segal, CEO of MSIR Thank you, operator, and good day everyone. I would like to welcome all of you to Nova's second quarter 2026 financial results conference. With us on the line today are Gabi Weissman, President and CEO, and Guy Kizner, Chief Financial Officer.

Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward-looking statements and the safe-harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please view it in the Investor Relations section of the company's website. Gabi will begin the call with a business update followed by Guy with an overview of the financials. We will then open the call for the question-and-answer session.

I will now turn the call over to Gabi Weissman, Nova's President and CEO. Gabi, please go ahead. Gabi Weissman, President and CEO Thank you, Miri, and thank you all for joining us today. I will start the call by summarizing our second quarter performance highlights.

Following my commentary, Guy will review the quarterly financial results in detail. We delivered an exceptional quarter, achieving record revenue of $255 million at the top end of our guidance and record profitability. 50, demonstrating the scale and earning power envisioned in our long-term strategic plan. Looking ahead, we expect to deliver another year of double-digit growth supported by sustained customer investment, broader adoption of our solutions, and continued market share gains.

We are now working on the next phase of our long-term growth strategic planning and we will share more about this in our upcoming Investor Day during the first quarter of 2027. Our results reflect strong execution amid a favorable industry backdrop characterized by accelerating technology transitions and capacity investments. Demand was broad-based across our portfolio, driving record sales in multiple product lines and services, led by advanced logic and advanced packaging applications. With enhanced visibility and a robust pipeline of opportunities, we are well positioned to extend this momentum and deliver another year of profitable growth.

We continue to see strong AI-driven demand across the semiconductor industry supported by ongoing investments in infrastructure and the emergence of agency AI. The need for related leading-edge silicon including CPUs, memory, and storage is robust, supporting continued investments in manufacturing capacity and the process control solutions required to enable it. Sustained investment in innovation remains central to our strategy. We invest approximately 15% of revenue in research and development to ensure that our technology roadmap remains aligned with the industry's most advanced manufacturing challenges.

As device architecture becomes more complex and customers pursue new approaches in advanced logic, memory, and packaging, the need for new metrology capability, higher levels of automation, and greater software intelligence continue to increase. Recent product introductions demonstrate the breadth of our innovation. These include a new generation of PRISM targeted for advanced memory structures, a new generation of VeraFlex for materials metrology, and a new configuration of Nova WMC that extends our dimensional metrology capabilities to panel-level packaging.

In software, we introduced NovaHub, a scalable platform for fleet- and AI-driven analytics that enable advanced applications and support the efficient operation of large metrology fleets. Together, these solutions and additional technological innovations still in the pipeline extend our serviceable market while enabling customers to achieve higher performance, greater productivity, and address critical applications across future technology generations. Now let me turn to some business highlights for this quarter. Revenue associated with advanced logic more than doubled sequentially as customers expanded production capacity.

Demand stretched across product lines and divisions, reflecting the range of process control solutions required in leading-edge logic manufacturing this quarter. Two areas in particular benefited from advanced logic in materials metrology. The VeraFlex XPS platform continued to gain traction, driven by proliferation in gate-all-around manufacturers, as customers continue to increase the number of VeraFlex tools. S.

Another highlight was the increasing need for more powerful capabilities in our dimensional metrology platforms to further increase performance while reducing time to solution. Our AI-enabling modeling solution, which combines physics-based and machine learning algorithms, helps customers address multiple challenges associated with complex 3D device structures. These capabilities play an increasingly important role in managing the expanding Nova installed base in gate-all-around manufacturing.

Another highlight was the record sales of our front-end chemical metrology solution Nova Encocene, supported by both advanced memory and mature logic applications, reflecting increasing adoption, deeper engagement with existing customers, and continued market share gains at the front end of the line. Encocene's strong performance demonstrates its growing role as an important revenue driver and further reinforces our leadership in chemical approach. Advanced packaging was another area of strength during this quarter, with record sales contributing nearly one quarter of our overall product revenue, driven by our dimensional metrology portfolio.

This performance was fueled by our customers' continued investment in advanced packaging and high-bandwidth memory capacity to support growing demand for AI-related devices. An important growth driver was the Nova WMC platform, which continued to gain traction across advanced packaging applications, including a recent tool-of-record selection by a leading foundry customer for multiple-layers measurement in advanced packaging production flows. We also saw accelerating adoption of the Nova WMC across memory and foundry customers, positioning us to benefit from further investments in advanced packaging and high-bandwidth memory.

Manufacturing service revenue reached another record level in the quarter, augmented by valuable services. This included customer investment in upgrading existing tools to address new process requirements such as tool upgrades. Coupled with enhancements to our chemical metrology fleet, these enable customers to address new applications, materials, and chemistry. The strength and breadth of demand we see across our end markets provide us with increased visibility into the remainder of the year and into 2027.

Customer roadmaps and planned capacity investments continue to support a favorable outlook. Importantly, the drivers behind this demand appear increasingly durable in nature. Given these trends, we believe we are on a path to reaching our organic growth objectives sooner than originally planned, reinforcing our confidence in Nova's long-term growth. Now, for some more details on our financials, let me hand over the call to Guy.

Guy Kizner, Chief Financial Officer Thanks, Gabi. Good day, everyone. I will begin by reviewing our quarterly financial achievements and then provide guidance for the third quarter. Total revenues in the second quarter of 2026 reached a record level of $255 million at the high end of our guidance.

This performance reflects growth of 8% quarter over quarter and 16% year over year, driven by continued strength across our customer base and solid demand for our differentiated process control solutions. Product revenue distribution was approximately 73% from Logic and Foundry and 27% from Memory and others. Product revenues included two customers and four territories, each contributing 10% or more to product revenues. In the second quarter, blended gross margins were 57% on a GAAP basis and 58% on a non-GAAP basis.

Gross margins remained healthy and supported our record revenue and strong profitability performance. 9 million on a non-GAAP basis. This increase reflects our disciplined approach to reinvesting growth into product development and roadmap expansion, positioning the company for continued long-term success. Operating margins in the second quarter reached 30% on a GAAP basis and 33% on a non-GAAP basis, on the upper range of our target model of 28% to 33%.

This excellent result was driven by the revenue growth and the company's robust operational model. The effective tax rate in the second quarter was approximately 16%. 51 per diluted share, exceeding the high end of our second quarter guidance. Next, I would like to outline our guidance for the third quarter of 2026.

We currently expect revenues for the quarter to be between $277,000,000 and $287,000,000. 61. 85. At the midpoint of our third quarter 2026 estimates, we anticipate gross margins of approximately 57% on a GAAP basis and approximately 59% on a non-GAAP basis.

Operating expenses on a GAAP basis to increase to approximately $74 million. Operating expenses on a non-GAAP basis to increase to approximately $68 million. Financial income on a non-GAAP basis to remain similar to that of the second quarter. Effective tax rate is expected to be approximately 17%.

Looking back at the first half of 2026, we are pleased with the strong momentum across the business. We achieved record revenues, delivered operating margins at the upper end of our target model, and generated earnings above the high end of our guidance. These results highlight both the demand for our solutions and the leverage inherent in our operating model. 7 billion in cash and investments, providing substantial flexibility to continue investing in R&D, support strategic growth initiatives, and pursue selective M&A opportunities that align with our long-term objectives.

Combined with our positive third-quarter outlook, we believe we are well positioned to continue driving profitable growth throughout 2026. With that, we will be pleased to take your questions. Operator. OPERATOR Thank you.

We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone telephone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.

At this time we will pause momentarily to assemble our roster. First question is from Tom O'Malley, Barclays. Tripp Smith, Analyst Hi team, how are you? This is Tripp Smith on for Tom O’Malley.

Thank you for the question and nice results today. I was just a little curious about what's going on in the split between logic foundry and memory. Just based on the numbers you guys gave, the 73/27 split implies nice sequential growth for logic foundry, but a step down in memory, down 14% quarter over quarter. I was just wondering what the puts and takes were there.

Thank you. Gabi Weissman, President and CEO Thank you, Tripp, for the question and thank you for the kind comments. We are projecting memory to be about 30% for us this year. Obviously the intensity in logic is higher and our long-term model calls for about 60/40 in favor of logic.

But we do see strong demand from DRAM, somewhat muted demand from 3D NAND still this year, which may change, but we see growth in both logic and memory, whereas intensity and growth on the advanced nodes in logic is obviously higher. Tripp Smith, Analyst Thank you. And then just as a quick follow-up, we've heard, you know, buy side, sell side talking about potentially 40% growth next year for WFE. That implies something closer to like 210, 215 billion.

I'm just wondering if you could support those levels today or what you might need to do to support those levels. Thank you for the questions. Gabi Weissman, President and CEO Sure. So we do have visibility into 2027 where our customers are planning further ahead and obviously we're working closely with them to plot capacity and inventory levels.

In some cases we're already receiving orders and planning the 2027 deliveries. We did see some pull-ins, by the way, that drove both the first half and are obviously driving the second half of the year. But overall customers are planning further ahead and we do work closely with them on the capacity planning. It's too early to say whether 2027 will grow 40%.

We do anticipate it to be a growth year for us and therefore we are working to ensure that our supply chain can provide us with the needed capacity. They are stretched, but we are managing production as well as the supply chain to ensure that we are meeting the lead times and the increased demand from our customers. Tripp Smith, Analyst Thank you very much. OPERATOR Next question is from Atif Malik, Citi.

Atif Malik, Analyst at Citi Hi, thank you for taking my questions. Gabi, you used the word enhanced visibility in your prepared remarks and I was curious if you can compare or contrast this cycle, particularly on the DRAM side, to any prior memory cycles. Maybe perhaps the NAND cycle in 2001—2007, which was a fairly long investment cycle. But any kind of qualitative commentary you can provide around your customers' behavior—are they putting more down payments, or any backlog and RPO that can help us understand how far your visibility is extending?

Gabi Weissman, President and CEO Yeah, thank you for the question, Atif. I think that it's not really comparable to the previous cycles because we're seeing demands from both logic and memory, and customers understand that in order to provide the product in the lead times that suppliers including Nova are committed to, they should work closely or closer with us on giving us long-term or longer-term visibility into next year that didn't happen in previous cycles, long or short ones.

And we are encouraged by that because it does give us the ability to work with our supply chain and making sure that we have the right planning in terms of capacity in order to address the needs of next year. So I would say that comparably it's an unprecedented cycle in terms of the visibility and also customer intimacy that allows us to have better planning for both the second half of this year as well as into next one. Atif Malik, Analyst at Citi Great. And a follow-up for Guy.

Guy, can you talk about any impact from higher component costs, particularly memory, to your gross margins? And if you can share your philosophy or strategy around pricing, are there any knobs for you to take your target gross margin model higher in this environment of supply constraints? Guy Kizner, Chief Financial Officer Yes. So thank you, Atif.

I would say that we do see some impact on our BOM cost related to memory. Our proportion of the memory portion of our BOM is not significant, so we don't see any major change to our gross margin profile due to that. So I would say the margin profile and the margin range, the gross margin range that we have in our target model, 57% to 60%, is well intact. Gabi Weissman, President and CEO Yes, I would add to that.