Nova (NASDAQ:NVMI) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Summary
Nova reported record revenue of $235.3 million for Q1 2026, driven by strong demand in memory devices, especially advanced DRAM, and advanced packaging applications.
The company gained 400 basis points in market share in film metrology, securing its position as the second largest vendor in the market.
Nova is expanding its global manufacturing footprint with a new facility in Asia, expected to be operational by the end of 2026, to increase production capacity and optimize cost structure.
Record quarterly sales were achieved in multiple product lines, including the Metrion platform and Nova Ancothium, with significant customer wins in both memory and logic segments.
Gross margins were strong, with GAAP margins at 57.7% and non-GAAP margins at 59.4%, supported by favorable product mix and growth in services.
The company expects Q2 2026 revenue between $245 million and $255 million, with continued focus on investing in R&D and supporting customer needs to drive long-term growth.
Nova sees robust demand in hybrid bonding processes, advanced packaging, and broader engagement with leading customers such as Intel, highlighting its strategic importance in these areas.
Supply chain pressures and cost management remain active areas of focus, with the company managing supplier relationships to meet demand effectively.
Full Transcript
OPERATOR
Good day and welcome to Nova's first quarter 2026 financial 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 phone. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Miri Segal, CEO of msir. Please go ahead.
Miri Segal (CEO)
Thank you operator and good day everyone. I would like to welcome all of you to Nova's first quarter 2026 financial conference call. With us on the line today are Gabby Weissman, President and CEO and Guy Kisner, CFO. 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 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.
Gabby Weissman (President and CEO)
Thank you Miri and thank you all for joining us today. I will start the call by summarizing our first quarter performance highlights. Following my commentary, Guy will review the quarterly financial results in detail. Nova delivered another record quarter exceeding guidance across financial and operational metrics. First quarter revenue reached $235.3 million with record profitability. This performance was supported by record revenue from memory devices driven by robust demand for advanced DRAM alongside strong momentum in advanced packaging and gate-all-around applications. We achieved multiple customer wins and record sales in several of our product lines. Our focus on meaningful partnerships with our customers, operational excellence, differentiated solutions and investment in innovative technology are key building blocks in our continuous outstanding results. The latest Gartner Market Share report further attests to the resilience of our long term strategy showing an additional 400 basis points, share gain in film and critical dimension metrology and critical dimension metrology. This is the second consecutive year of significant share growth cementing Nova's position as this market's second largest vendor. AI investments remain a fundamental driver of industry growth with a shift towards agentic AI models, increasing computing and memory requirements. This is accelerating capacity expansion across logic, memory and advanced packaging while also introducing greater manufacturing complexity and yield challenges driving higher process control and metrology intensity. These dynamics reinforce the relevance of nova's portfolio and positions us well to support production ramps, yield improvement and demanding time to market requirements. Capacity expansion across all segments and tighter alignment with our customers planning are improving our visibility and supporting our momentum. Our customers understand the importance of early engagement and we are working closely with them to plan capacity and inventory levels to meet their demand. As part of this planning, we are making strides in expanding our global manufacturing footprint with the construction of the new facility in Asia. This investment is designed to increase our production capacity, optimize our cost structure and improve load balancing across regions while positioning us closer to key customers and supply chain partners. The new facility is expected to become operational toward the end of 2026. Now let me turn to some business highlights for the quarter in memory we delivered record revenue this quarter driven by strong demand for advanced DRAM applications which accounted for approximately two thirds of our memory business. This momentum was reflected in record sales of our Metrios platform, including repeat purchases by a leading memory customer for both advanced 3D, NAND and DRAM devices. As the platform continues to move from initial adoption into broader deployment, our front end chemical Metrology solution Nova Anchorthem also achieved record sales and we gained additional market share at a leading memory customer in Asia with multiple tool deliveries expected over the course of the year. At the same time, capacity expansions supported continued demand for XPS and dimensional metrology solutions. Looking ahead, we also see robust HBM related bookings for our Nova WMC and SemDex stand alone platform in logic. Increasing market demand and ramp up of advanced device production led to record revenue from Nova's integrated Metrology product line driven by gate-all-around and new customer penetration in mature nodes and advanced packaging. A great indicator of our strength in the logic segment is the recent recognition we received from intel when Nova was awarded the Intel EPIC Supplier Award, the highest honor in Intel's global supply chain. Out of thousands of suppliers intel works with. Nova is included in a select list of companies to receive this award in 2026. This recognition underscores the scale and depth of our engagement and collaboration with intel in advanced packaging. The strong demand drove yet another record quarterly revenue. Our portfolio is well matched with the evolving demand in 2.5 and 3D packaging production. One such example is the Nova WMC that addresses the critical issue of increased warpage and non uniform surfaces introduced by new advanced packaging schemes that bring forth new material and structural challenges. AI and broader scaling limitations are among the drivers of hybrid bonding processes. Adoption is progressing faster than expected in several advanced device segments because the process depends on direct copper to copper interfaces and ultra fine pitch interconnects. It is highly metrology intensive requiring tight control of surface planarity, alignment accuracy and interface integrity throughout multiple process steps. Our portfolio positions us well to support this transition. This has already translated into strong positioning of our optical and chemical metrology platforms across top tier manufacturers. Turning to services, we delivered record service revenue this quarter, marking the 13th consecutive quarter of sequential growth. This consistent performance reflects the expanding scale and increasing utilization of our install base and the deep operational engagement our teams have with customers worldwide. To summarize my part, NOVA delivered an all round record quarter highlighting the value of our tools and services. Customer schedule considerations are expected to have a positive impact on the first half of the year and we expect the second half to run higher. We are setting the stage and solidifying our investments in technology and infrastructure towards the anticipated industry growth. Now for some more details on our financials, let me hand over the call to Guy Thanks Gabi. Good day everyone.
Guy Kisner (Chief Financial Officer)
I will begin by reviewing our financial achievements for the first quarter of this year and then provide guidance for the second quarter. We delivered record revenue of $235.3 million in the first quarter of 2026, exceeding the high end of our guidance range. Revenue grew 6% quarter over quarter and 10% year over year, demonstrating the strength of customer demand and the momentum of our product portfolio. Revenue mix was approximately 66% from logic and foundry customers and 34% from memory customers, reflecting a broad based contribution across our end markets. We also continue to benefit from a diversified customer and geographic footprint with four customers and five geographic regions each contributing more than 10% of total product revenue in the first quarter. Blended gross margins were 57.7% on a GAAP basis and 59.4% on a non GAAP basis. In the upper end of our target model range of 57% to 60%, the strong gross margins performance was driven by a favorable product mix alongside continued growth in our services business which contributed positively to overall gross margin performance. Operating expenses in the first quarter totaled $64.9 million on a GAAP basis and $59.4 million on a non GAAP basis. We continue to invest strategically in R and D and go to market capabilities to accelerate innovation, support our expanding product roadmap and capture future growth opportunities. Operating margins in the first quarter reached 30% on a GAAP basis and 34% on a non GAAP basis exceeding the upper end of our target model range of 28% to 33%. This performance highlights the strength of our operating model and our continued focus on profitable growth. The effective tax rate in the first quarter was approximately 17%, modestly above our guidance, primarily reflecting the geographic and entity mix of income in the quarter. We expect this dynamic to normalize as the year progresses. Earnings per share in the first quarter on a GAAP basis were $2.04 per diluted share and earning per share on a non GAAP basis were $2.33 per diluted share, exceeding the high end of our first quarter guidance and driven by record quarterly performance. Next, I would like to share the details of our guidance for the second quarter of 2026. We currently expect revenue for the quarter to be between $245,000,000 and $255,000,000. GAAP earning per diluted share to range from $2.10 to $2.24. Non GAAP earning per diluted Share to range from $2.34 to $2.48. At the midpoint of our second quarter 2026 estimate, we anticipate the 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 $72 million. Operating expenses on a non GAAP basis to increase to approximately $66 million. Financial income on a non GAAP basis is expected to be approximately $16 million. Effective tax rate is expected to be approximately 15%. As we conclude, we are pleased with our strong start to 2026, delivering record revenue and record profitability for the quarter. The continued momentum across our business reflect healthy customer demand, the value of our product portfolio and disciplined execution across the organization. Looking ahead, we remain focused on investing in innovation, supporting our customers, evolving needs and driving sustainable long term growth while continuing to deliver strong financial results. With that, we will be pleased to take your questions. Operator
OPERATOR
we will now begin the question and answer session. To ask a question, you may press Star then one on your touchtone phone. If you're 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. The first question today comes from Elizabeth sun with Citi. Please go ahead.
Elizabeth Sun (Equity Analyst)
Hi, thanks for taking my question. This is Elizabeth for Atif. I guess my first question is. Gabby, in your prepared remarks you talk about you had multiple customers win in several products line. So I was wondering if you could elaborate a little bit on that. Is it more on memory or foundry logic customers and is it driven mostly by new products or like really like overall strength across the portfolio? Thanks.
Gabby Weissman (President and CEO)
Thank you so much Elizabeth for the question. So it's across logic and memory and across several of our product lines. I believe I mentioned they are chemical metrology solutions. And I also indicated the fact that we have a broader adoption of our inline sims, the Metrion solution, but we see some wins across our product portfolio and definitely across segments.
Elizabeth Sun (Equity Analyst)
Got it. And then on the share gain perspective this year, are you expecting similar outperformance versus last two years and where do you see the most share gain opportunities this year? Is it more from front end or packaging side?
Gabby Weissman (President and CEO)
So in terms of the share gain, I indicated the fact that based on the Gartner report recently published, we grew about 400 basis points in 2025 compared to 2024. And this is the second consecutive year of growth making us the second last largest vendor in this space. We definitely aim to continue and drive market share. This is a primary objective that we have that we offer to our customers and we look at all segments. Advanced packaging is definitely one of them. We have good traction with advanced packaging customers across the board, top tier customers as well as growth in the Chinese advanced packaging realm. We also see some initial good traction and adoption in hybrid bonding also with top tier customers and a higher metrology intensity there, which gives us, which gives us good opportunity to grow our market share as a result of the metrology challenges such as flatness or interconnect yield. So we see good opportunities across the board and definitely advanced packaging in particular is a growth area for us.
Elizabeth Sun (Equity Analyst)
Thanks Gabby.
OPERATOR
Next question comes from Michael Manny with Bank of America. Please go ahead.
Michael Manny (Equity Analyst)
Hi. Thanks so much for taking my question. To start, could you give us your sense of where you think Nova scope could end up for the full year maybe relative to WFE and maybe in context of some of the systems revenue guides and full year WFE guides that some of your peers have given and you know, very strong memory mix this quarter? You know, how do you expect the mix between Foundry and Logic and Memory to kind of look for this year for you relative to prior years? Thank you.
Gabby Weissman (President and CEO)
Thank you Michael for the question. So first of all in terms of wfe, the way we read the market today, we expect WFE to reach mid teens growth and this is higher than what we were looking at back in February. We are expecting to outperform this number. The growth is driven by both logic, memory, advanced packaging and within memory. Of course, it's primary dram. We did give a target as part of our strategic plan to reach $1 billion in revenue by 2027. And we are on track, of course to reach this number. As you know, we are not providing guidance beyond that, but we're definitely on track in terms of the memory versus logic. We saw a growth in the memory share this quarter compared to last year and I expect memory to become more dominant this year compared to last one on the backdrop of investments in advanced dram.
Michael Manny (Equity Analyst)
Great, thank you. And for my follow up, I just want to ask about gross margin. So nice strength there in the first half of this year, the upper end of your target, you know, what were the drivers kind of led to you being able to kind of sustain at this 59% level. And do you think staying at these levels is possible through the second half? Just what are the puts and takes there? Thank you very much.
Gabby Weissman (President and CEO)
Yeah, so our target model as I mentioned is 57 to 60%. Currently based on the business dynamic and obviously based on the first half results, we see gross margins for 2026 will be within the same rate that we are giving the guidance for the first half of the year. So we'd say this will be sustainable during the year.
Michael Manny (Equity Analyst)
Thank you.
OPERATOR
The next question comes from Shane Brett with Morgan Stanley. Please go ahead.
Shane Brett (Equity Analyst)
Thank you for letting me ask a question I want to follow up on. The WFE growth benchmark for this year as mid teens is a little bit lower than what the process tool companies have talked about this year because they're talking about growth well into the 20s. Some of the drivers for WFE this year are just greenfield DRAM and 3-nanometer logic, where I perceive the process control intensity to be a little bit lower than 2-nanometer, where the process control intensity is quite high. But just how should we think about your ability to outperform WFE in what can be perceived as a little bit of a challenging year for process control?
Gabby Weissman (President and CEO)
Thank you. Thank you, Shane for the question. So it's too early to call how process control specifically will look like this year, but Nova capitalizes on growth vectors of both process and process control, which is a factor in driving growth. So in process, for example, where our integrated products are embedded in dimensional as well as chemical metrology that are correlative to the growth in the process sector, process control, where our dimensional metrologies, such as our standalone products are well positioned and obviously material metrology portfolio plays and also the Lab two fab growing factor in terms of adoption where we address emerging critical applications for advanced nodes. All in all, whether it's going to be the mid teens or higher numbers, this is continuously updated as you know, over the last few months. We do expect to outperform, but it's too early to say how process control looks like versus process and as I mentioned we tap into both.
Shane Brett (Equity Analyst)
Understood, that's very clear. And for my follow up so we're seeing a broadening of leading Edge logic investment with one of the players you actually mentioned in your prepared remarks talking a lot more about increasing process control intensity in line inspection. We're also seeing just a lot more investment in 3 nanometer. Just how are you looking at the dynamics right now in leading edge logic? Just given the breadth of players expanding, but maybe a little bit more investment on N1 node. Thank you,
Gabby Weissman (President and CEO)
thank you for that. So yes, we are well positioned across all gate all around players and we're very of course honored to take part of their growth in providing them support on process control. And we continue to invest in R and D in order to maintain our differentiation and provide the value as we did. As we did in the past. We are seeing growing investment in areas such as 3nm. Obviously the metrology intensity in the gate-all-around around is higher, but we do tap into the growth of those advanced FinFET technologies as well and obviously that would intensify once investment shifts or continues to grow on the gate all around as well.
Shane Brett (Equity Analyst)
Thank you very much.
OPERATOR
The next question comes from Matthew Prisco with Cantor. Please go ahead.
Matthew Prisco (Equity Analyst)
Hey guys, thanks for taking the questions. So I guess first, maybe could you just give us an update on where lead times stand today and how we should think about your visibility both in terms of kind of customer orders and how those customer conversations are going. Are Those extending into 2027 and 2028 at this point?
Gabby Weissman (President and CEO)
Thanks. Thank you Matthew. So first, we do have improved the visibility towards next year. Customers are definitely planning further ahead and we're working closely with them to, I would say, plot capacity and inventory levels. We do see some pull inside, by the way, driving the first half higher than originally forecasted, as you've seen from our guidance. And in some cases we are already receiving orders and planning the 2027 deliveries. Our lead times are still shorter than some of our peers, but we do have higher visibility, as I mentioned, than before, and more confidence in our annual performance. I would also say that in terms of timing of the deliveries, this is definitely driven by the customers based on their demand structure. Okay, that's helpful.
Matthew Prisco (Equity Analyst)
And then for a follow up on the supply side, given this robust demand backdrop, how are you thinking about that capacity today? Are any constraints arising on your side? And if we're in kind of a 180 billion-plus WFE world next year, is that something you can support and continue outgrowing the market? Thanks.
Gabby Weissman (President and CEO)
So I did indicate the fact that we are launching a new production center in Asia, which is expected to be operational towards the end of this year. This is part of our answer to the growing demand making sure that we have the right capacity to support our customers. We see, I would say, some pressure on the supply chain and we're mitigating that by working with a few suppliers in order to have the agility and flexibility to support the demand. We're also seeing, by the way, some cost pressures at the supplier level, mainly tied to the higher chip prices and other factors. But we have been able to manage and mitigate by applying active cost management and leveraging long term relationships and the bottom line. And the most important is that we are managing suppliers to meet demand. Thanks guys.
OPERATOR
The next question comes from Sharos Chi with Needham and company. Please go ahead.
Sharos Chi (Equity Analyst)
Thanks for taking my question. Maybe the first one. Gabby, can you talk a little bit about your positioning in X ray technology and we are hearing from your peers. There seems to be expanding opportunities for X ray. There are things like CD measurement as well as things like void detection for hybrid bonding. And we know Nova is a leader in X ray, especially xps. What's your view on the latest, let's say market landscape in X ray and how does ANOVA view those opportunities while hearing and how do you plan to capture those opportunities?
Gabby Weissman (President and CEO)
Thanks. Thank you Charles for that question. So first of all, there are multiple challenges and inflection points, both the front end and in advanced packaging for X ray applications. And there's also a broad spectrum of technologies that can address these challenges. And of course, X ray is one of them. We believe that X ray could play out in a very significant role in addressing those challenges. We have a strategy that taps into hybrid metrology. This is something that was at our cornerstone of the strategy that we have for years now. And we do have a broad portfolio, both optical and X ray, both homegrown. We have engaged in collaboration with customers on those aspects or those challenges. And as an example, we published several papers, one with Samsung on hybrid OCD plus Raman plus machine learning with IBM on hybrid OCD with X ray and machine learning. And we also see emerging XPS and Material metrology in other spheres, both in the front end as I mentioned, including advanced packaging. We are also seeing emerging XPS and Material metrology competition and we have it from both a local vendor in China as well as other potential growing competition in years to come. So we are investing in our roadmap to broaden our competitive advantage and provide value to our customers in order to maintain our dominant position in this space. Thanks Gabby, can you talk about your China expectation for this year? I recall last time you talked about maybe flat to slightly up, but has anything changed and how you view your China growth this year? Thank you. So China is a significant part of our business and also from the overall WFE spending. As a result of advanced nodes growth, China's share of our revenue is expected to decrease as we've already seen last year compared to 2024. In the long term we expect China to stabilize in the range of 25 to 30% of our business. We see also an increase in demand in China for packaging with a multitude of new customer engagements around advanced packaging and high bandwidth memory. China is also a very competitive market as you know and we focus on ensuring and reassuring our customers with offering the best of breed products and the best possible value and cost of ownership as a differentiating factor. We are encouraged to see some potential growth in China this year. So there is some positive momentum in the business in China compared to last quarter.
Sharos Chi (Equity Analyst)
Thank you. Appreciate that.
OPERATOR
The next question comes from Vedvati Shrotre with Evercore isi. Please go ahead.
Vedvati Shrotre (Equity Analyst)
Yeah, hi, thanks for taking my question. The first one I have is you're seeing your logic customers sort of put their roadmap together. How are you thinking about the 500 million gate all round revenue target and what do you think happens to the gate all round revenues next year?
Gabby Weissman (President and CEO)
Thank you. So we're on track for the forecasted $500 million the cumulative gate all around revenue that we provided and we are very well positioned with all gate all round manufacturers across the portfolio. We do see growth in gatel around investments in 2027 compared to this year as well.
Vedvati Shrotre (Equity Analyst)
Understood and also on a similar line. What are you thinking about advanced packaging growth this year or into the second half versus the first half this year?
Gabby Weissman (President and CEO)
I would say that advanced packaging for Nova is edging towards the middle 20s of product revenue this quarter with the majority coming from Logic. Looking forward we also see healthy hybrid memory bookings and for the year in general we see similar levels of growth in advanced packaging to what our peers have already mentioned.
Vedvati Shrotre (Equity Analyst)
Understood. Thank you again.
OPERATOR
If you have a question, please press star then one. The next question comes from Thomas o' Malley with Barclays. Please go ahead.
Tripp Smith
Hi, this is Tripp Smith on Fatah O'. Malley. Thank you for the question today. Just wanted to step back to gross margins. Gross margins are coming down sequentially in the guide in your range. Just curious the drivers there and why A bit of the step down.
Gabby Weissman (President and CEO)
We guided the gross margin for the second quarter for a non GAAP of 59%. Usually when we are guiding it's plus minus 1%. So it's within the same magnitude I would say.
Tripp Smith
Okay, thank you. And then just as a follow up, I was curious about the timeline around hybrid bonding. You guys have talked about it being a driver there. So just curious what you're seeing in that market and any color there be great. Thank you.
Gabby Weissman (President and CEO)
Yeah, so we're very encouraged by the traction that we see in hybrid bonding. We have already a good positioning with top tier customers. We see a higher metrology intensity in hybrid bonding. I indicated the fact that we see challenges such as flatness such as CMP uniformity within wafer and within die warpage edge roll of interconnect yield and the multitude of challenges that are emerging. Obviously this is providing higher intensity on top of the advanced packaging which already seen incremental metrology steps compared to the past. We do see some pull ins for hybrid bonding with some customers, especially memory. So there is definitely an opportunity for us to continue and tap into this part of advanced packaging. Thank you.
OPERATOR
This concludes our question and answer session. I would like to turn the conference back over to Gabby Weissman.
Gabby Weissman (President and CEO)
Thank you operator and thank you all for joining our call today.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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