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DATE

Tuesday, May 5, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Bill Miller
  • Chief Financial Officer — John Kiernan

TAKEAWAYS

  • Revenue -- $158 million, with all major segments reported; semiconductor contributed $109 million (69%), compound semiconductor $19 million (12%), data storage $10 million (6%), and scientific and other $20 million (13%).
  • Gross Margin -- 36% for the quarter; management cited the shipment loss of one LSA system to a China customer, impacting both gross margin and revenue by approximately $8 million.
  • Non-GAAP Diluted EPS -- $0.14 on 62 million shares, within prior guidance.
  • Q2 2026 Outlook -- Anticipated revenue of $170 million to $190 million, gross margin between 38% and 40%, operating expenses of $52 million to $55 million, net income of $12 million to $21 million, and diluted EPS of $0.20 to $0.32 on 64 million shares.
  • Major Orders -- Over $250 million in orders for MOCVD, wet processing, and Spectre ion beam deposition systems to support indium phosphide laser manufacturing; shipments begin in Q3, with ramp-up anticipated in Q1 2027.
  • Capacity Expansion -- Plans to scale up Spectre IBD capacity approximately 10-fold by early 2027, with possible future doubling; wet processing capacity to expand via both internal facilities and outsourced Southeast Asian manufacturing partners.
  • Balance Sheet -- Quarter-end cash and short-term investments totaled $383 million, a $7 million decline; accounts receivable rose $40 million to $151 million, inventory up $7 million to $282 million, accounts payable up $5 million to $60 million, customer deposits increased $19 million to $69 million.
  • Guidance Reaffirmation -- Full-year 2026 guidance kept unchanged with revenue expected between $740 million and $800 million and non-GAAP diluted EPS between $1.50 and $1.85; management anticipates accelerated growth in the second half.
  • Axcelis Merger Progress -- Both companies' shareholders have approved the combination, with all regulatory clearances except for outstanding antitrust approval in China; closure still targeted for 2026.
  • Served Available Market (SAM) Projections -- Management forecasts 2030 SAM of $1.3 billion for annealing, $500 million for ion beam deposition, $1 billion for advanced packaging, $700 million for silicon photonics/indium phosphide lasers, $550 million for other photonics, and $250 million for GaN power.

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RISKS

  • Revenue and gross margin were directly reduced by the inability to ship one LSA system to a China customer due to export license requirements, causing an $8 million negative top-line impact and pressure on margin.
  • Management confirmed ongoing headwinds and a "declining business in China for mature node," with limited new 40- and 28-nanometer fab investment expected.

SUMMARY

Veeco Instruments (VECO 2.73%) achieved record order momentum led by AI and high-performance computing investments, particularly in indium phosphide laser manufacturing, advanced packaging, and logic/memory annealing. The company secured over $250 million in multi-product orders, fueling capacity expansions and driving revenue visibility well into 2027, with shipment ramp-ups set for 2026 and peak activity in early 2027. Management reaffirmed 2026 financial guidance and projected durable, multiyear market growth, while acknowledging an operational setback from reduced shipments to China due to export controls.

  • CEO Miller emphasized, "We have plans to increase our Spectre IBD capacity about 10x from its base level we are at today, starting to hit that kind of level in early 2027, and we are looking at future capacity needs to potentially double that again."
  • In the data storage segment, production and order books for IBD equipment are fully committed for 2026, with shipment growth concentrated in the second half and manufacturing capacity investments underway for 2027.
  • Management cited robust advanced packaging demand: "our advanced packaging business more than doubled year over year, reflecting strong customer adoption and accelerating capacity investments."
  • The pending merger with Axcelis nears completion, lacking only Chinese antitrust approval, as Veeco advances integration planning with expectations for closure within the current year.

INDUSTRY GLOSSARY

  • MOCVD: Metal Organic Chemical Vapor Deposition, a process technology for creating compound semiconductor device layers.
  • LSA: Laser Spike Annealing, a precision thermal process used for semiconductor device fabrication.
  • IBD: Ion Beam Deposition, a thin-film deposition technology for advanced materials in semiconductor manufacturing.
  • SAM: Served Available Market, the portion of total addressable market targeted by the company's specific solutions and products.
  • OSAT: Outsourced Semiconductor Assembly and Test, providers that offer manufacturing services for packaging and testing semiconductor devices.
  • EUV: Extreme Ultraviolet Lithography, an advanced photolithography technology used to produce fine features in semiconductor manufacturing.
  • HBM: High-Bandwidth Memory, a high-speed computer memory used in conjunction with processors for AI and HPC applications.
  • IDM: Integrated Device Manufacturer, a company that designs, manufactures, and sells semiconductor devices.
  • HAMR: Heat-Assisted Magnetic Recording, a data storage technology used to increase the storage density of hard disk drives.
  • GaN: Gallium Nitride, a semiconductor material used for high-efficiency power devices and RF applications.

Full Conference Call Transcript

Bill Miller: Veeco Instruments Inc. executed well in the first quarter and we believe we are strategically positioned to benefit from the evolving semiconductor landscape driven by artificial intelligence and high-performance computing. Reviewing our first-quarter results, revenue was $158 million, non-GAAP operating income was $9 million, and non-GAAP diluted earnings per share was $0.14, all within our guidance ranges. Now let me take a moment to highlight our top five key takeaways for the quarter. First, we are poised to benefit from the significant industry inflection driven by the global build-out of AI infrastructure. Veeco Instruments Inc. is well positioned across our portfolio, with highly differentiated process equipment aligned with high-growth opportunities.

Second, order activity that accelerated in 2025 continued into 2026, and our pipeline of new opportunities continues to expand. Third, as it pertains to the compound semiconductor market, a stronger-than-expected opportunity has emerged for Veeco Instruments Inc. to capture multiyear revenue in the production of indium phosphide lasers. This is a result of the broader transition from copper to optics within data centers over the next few years for increased speed and bandwidth to meet the scale-up needs of the AI landscape. This opportunity for Veeco Instruments Inc. spans across multiple products, particularly for epitaxy and laser facet coatings, which I will provide more details on later in the call.

Fourth, from an operational standpoint, we are expanding our manufacturing footprint and capacity to support increasing customer demand and enable timely deliveries. Lastly, as a result of accelerated bookings activity and ongoing customer engagements, we have increased visibility with significant orders for delivery well into 2027. Overall, we believe Veeco Instruments Inc. is well positioned for durable, multiyear growth driven by AI infrastructure and high-performance computing, and we remain focused on disciplined execution to deliver long-term value. Before I move to the next slide, as a brief reminder, we continue to make progress on our proposed merger with Axcelis.

The transaction has been approved by shareholders of both companies, and all regulatory approvals have been received other than antitrust approval in China. We remain engaged with the authorities in China and continue to expect the transaction to close in 2026. Integration planning is progressing well, and we remain excited about the strategic fit and long-term potential for value creation. Moving to the next slide, I will discuss Veeco Instruments Inc.’s critical role in the semiconductor manufacturing landscape, which represents the majority of our revenue. Capital spending is being driven by AI investments and is becoming increasingly concentrated at the leading-edge areas where Veeco Instruments Inc. is differentiated in technology.

In logic and foundry, Veeco Instruments Inc. has a long-standing and trusted position supporting advanced annealing applications across leading nodes. Our LSA platform continues to be the production tool of record at all three Tier 1 logic customers, driving repeat business and strong customer engagement pushing towards more complex device structures with low cost of ownership. At the same time, our next-generation nanosecond annealing platform is progressing through evaluations at Tier 1 logic customers addressing critical low-thermal-budget applications, such as contact annealing, materials modification, and 3D device integration. These evaluations are advancing well, and we are anticipating an additional evaluation tool shipment to a third Tier 1 logic customer in the coming months.

Expanding our penetration within our memory customers within the semiconductor market remains one of our most important strategic priorities. The transition toward AI-centric architectures, high-bandwidth memory, and increasingly complex stacked devices is driving new thermal and materials requirements where we believe Veeco Instruments Inc.’s technologies provide a clear advantage. During the first quarter, we continued to make solid progress with our top Tier 1 memory customers. In addition to serving as the production tool of record at a leading HBM supplier, we are advancing our LSA evaluation system at a second Tier 1 DRAM manufacturer, with the potential for initial pilot-line and high-volume manufacturing orders in 2027. We are also extending our memory opportunity through ion beam deposition.

Multiple IBD 300 systems remain under evaluation at leading DRAM customers, with activity extending throughout 2026. The systems enable low-resistance film deposition for advanced DRAM bit line, providing an additional pathway to expand our served available market. Veeco Instruments Inc. remains a market leader in ion beam deposition for EUV mask blanks, a critical enabling technology as logic and memory customers expand EUV adoption and prepare for high-NA lithography. We also have broadened our exposure to EUV pellicles, which are increasingly required to protect these critical masks as EUV usage scales. Advanced packaging supported by our wet processing and lithography tools continues to be a significant revenue driver for AI-related demand.

As we discussed last year, our advanced packaging business more than doubled year over year, reflecting strong customer adoption and accelerating capacity investments. During the first quarter, we secured major volume orders for our wet processing systems from leading OSAT customers supporting high-volume manufacturing of next-generation AI accelerators built on 2.5D advanced packaging architectures. These systems are scheduled to ship throughout the remainder of 2026 and into 2027, providing strong revenue visibility. To support this growth, we are continuing to expand our manufacturing footprint and production capacity, positioning the business to meet sustained customer demand as advanced packaging plays an increasingly critical role in AI infrastructure.

As we turn to the next slide, we outline our forecast served available market within our semiconductor segment through 2030. This outlook continues to be driven by sustained investment in AI and high-performance computing. In annealing, we project the SAM to be $1.3 billion by 2030 as devices continue to shrink and shallower and more precise anneals are required to improve performance. These trends support long-term opportunities for both LSA and next-generation NSA platforms.

Next, in ion beam deposition, our IBD 300 platform for low-resistance metals together with our leadership position in IBD EUV mask blanks, as well as the emerging opportunity in pellicles where we are the production tool of record at a leading customer, all represent meaningful market opportunity and total a SAM projection of $500 million by 2030. As devices become more power constrained and EUV adoption broadens, the opportunities for our technologies continue to increase. Finally, in the back-end semiconductor process, our advanced packaging business for our wet processing and lithography tools continues to expand rapidly and the SAM is projected to reach $1 billion by 2030.

We continue to demonstrate our ability to support our customers’ high-volume manufacturing ramps driven primarily by AI. Moving to the next slide, I want to spend time discussing our stronger-than-expected momentum in the compound semiconductor market. We are seeing a clear industry inflection point underscored by NVIDIA’s recent investments in optical networking leaders. In silicon photonics, the industry is transitioning from copper interconnect to co-packaged optics as AI data centers require higher speeds, greater bandwidth density, and improved power efficiency. Indium phosphide laser manufacturing is a critical component of this shift and a foundational technology for next-generation AI optical infrastructure.

As the industry transitions towards future capacity requirements, we believe this represents a growth opportunity of approximately $2 billion over the next several years. Veeco Instruments Inc. plays a critical role across multiple steps of the indium phosphide manufacturing process, and we are seeing rapidly accelerating order demand across several of our product lines. Beginning with epitaxy, MOCVD is a critical step, and we are seeing increasing orders for our Lumina MOCVD indium phosphide platform as leading photonics customers expand capacity to support AI-driven data center growth. We also support downstream process steps with our WaferEtch and WaferStorm wet processing technologies for advanced etching and surface preparation.

What I would like to highlight for investors is that the laser facet coating and epitaxy opportunities are similar in size and significant for the manufacturing of indium phosphide lasers. Our Spectre ion beam deposition system, designed for the critical laser facet coating step, is essential to the process. Veeco Instruments Inc. is a market leader in ion beam deposition and is differentiated from traditional approaches such as e-beam evaporation, ion-assisted deposition, or PVD. Compared to other approaches, the Spectre ion beam deposition tool delivers low-loss optical films with tight control of thickness, uniformity, and reflectivity. Precision is required for anti-reflective and highly reflective facet coatings on indium phosphide lasers.

We have engagements with industry leaders that will drive the growth of our Spectre IBD business in 2027 and beyond. As announced in today’s press release, we received over $250 million in orders from multiple customers for our MOCVD, wet processing, and ion beam deposition tools to support the manufacturing of indium phosphide lasers, with delivery starting in 2026 and significantly accelerating in 2027. A large portion of these orders is for our Spectre IBD system from leading suppliers of next-generation 800G and 1.6T optical transceivers for hyperscale customers. This significant order activity underscores the long-term value of our ion beam deposition technology leadership and our expanding role in this rapidly growing market.

We have long-standing partnerships with our customers spanning more than two decades, and we are well positioned across our multiple differentiated products to meet their growing needs in silicon photonics. Our focus remains on supporting customer production ramps, executing early deployments, and expanding our footprint to meet customer demand. With that, I will flip to the next slide to share our projected served available market within the compound semiconductor space. In silicon photonics, specific to the manufacturing of indium phosphide lasers, we project our SAM to be $700 million in 2030. As we discussed on the previous slide, demand is accelerating across several of our products driven by AI data centers.

Our Lumina MOCVD batch platform, WaferStorm and etch, and our Spectre ion beam deposition for the laser facet coatings are gaining significant traction. Other photonics driving SAM growth include red microLEDs, solar cells for low Earth orbit satellites, and AR/VR applications. Additionally, a global optoelectronic solution provider accepted and qualified our Lumina Plus MOCVD system for high-volume arsenide phosphide production, including for use in microLEDs. We expect these other photonics application SAMs to total $550 million by 2030. In GaN power, we project our SAM to be $250 million by 2030, as we continue to see strong long-term drivers tied to AI data center power efficiency, electrification, and high power density applications.

Importantly, at a leading power IDM customer, we have an evaluation for our PROPEL 300 system in place, and we received the pilot-line order for a multi-chamber system, which we previously announced in 2025. This represents an important validation point as customers move from development to early production. Looking ahead, as this customer ramps and finalizes long-term capacity plans, there is potential for additional system orders in 2026 for delivery in 2027. In the next several years, we expect our compound semiconductor served available market opportunity to meaningfully grow as AI, power efficiency, and advanced connectivity continue to reshape the industry. I would now like to hand the call over to John to walk through the financials.

John Kiernan: Thank you, Bill. Revenue came in at $158 million, slightly below the midpoint of our guidance in the previous quarter. Our semiconductor business reported $109 million, a decline of 1% and comprising 69% of revenue. Revenue in the semiconductor market was largely driven by laser annealing systems covering foundry logic and memory customers and wet processing systems for advanced packaging. Compound semiconductor revenue totaled $19 million, a 6% decline from the prior quarter, totaling 12% of revenue. Data storage revenue was $10 million, flat to the prior quarter, representing 6% of revenue. Scientific and other revenue declined 16% to $20 million, comprising 13% of revenue.

Turning to the quarterly revenue by region, revenue from the Asia-Pacific region, excluding China, was 57%, no change from the prior quarter. Sales were driven by leading semiconductor customers in Taiwan for our laser annealing system and wet processing systems for advanced packaging. The U.S. accounted for 20% of revenue, an increase from the previous quarter, primarily from semiconductor customers. Our China portion was 13% of revenue, a decrease from the previous quarter. EMEA and the rest of the world accounted for 10% of revenue. Turning to the first-quarter non-GAAP results, first-quarter gross margin came in at 36%, and operating expenses totaled $49 million. Income tax expense was approximately $1 million, resulting in an effective tax rate of approximately 11%.

Net income was approximately $9 million and diluted EPS was $0.14 on 62 million shares. Moving to the balance sheet and cash flow highlights, we ended the quarter with cash and short-term investments of $383 million, a decline of $7 million. From a working capital perspective, our accounts receivable increased by $40 million to $151 million. Inventory increased by $7 million to $282 million. Accounts payable increased by $5 million to $60 million. Customer deposits, included within contract liabilities on the balance sheet, increased $19 million to $69 million. Cash flow from operations totaled $8 million and CapEx totaled $5 million during the quarter. Next, I will turn to our second-quarter non-GAAP outlook.

Second-quarter revenue is expected to be between $170 million and $190 million. Gross margin is expected to be between 38% and 40%. We expect OpEx between $52 million and $55 million, net income between $12 million and $21 million, and diluted EPS between $0.20 and $0.32 on 64 million shares. Based on our current visibility, we are reiterating our full-year 2026 revenue guidance between $740 million and $800 million, with growth accelerating in the second half of the year, as well as reiterating our diluted non-GAAP EPS between $1.50 and $1.85. I will now provide additional commentary to each of our markets.

Beginning with the semiconductor market, in 2026, we expect strong growth from our Tier 1 customers driven by AI and high-performance computing, more than offsetting declines in the mature-node China business. Additionally, our advanced packaging wet processing systems are forecasted to contribute to revenue growth as customers increase manufacturing capacity to support AI workloads. In the compound semiconductor market, we see strong growth in silicon photonics, particularly for indium phosphide laser manufacturing driven by AI data center demand. We are also seeing emerging opportunities for low Earth orbit satellites, microLEDs, AR/VR applications, and GaN power. We have received significant orders in the first quarter across this market, which is driving meaningful revenue growth into 2027.

In data storage, we secured orders in 2025 and experienced continued order activity in 2026 for our IBD equipment. We are seeing an increase in AI-driven demand for higher-capacity HDDs, supporting investments in capacity and new technologies, such as HAMR. Customer engagements remain strong, with our business fully booked in 2026 and extending into 2027. As we look ahead, we are seeing continued acceleration for several of our core markets, supported by increased customer engagement, expanding pipelines, and strong order visibility. Our focus remains on disciplined execution as we support customer production ramps and deliver against the next phase of growth. We will now open the call for questions.

I would now like to turn the call to the operator for Q&A. Thank you.

Operator: We will now be conducting a question-and-answer session. As a reminder, given the pending merger with Axcelis, Veeco Instruments Inc. management will not be addressing questions related to the transaction. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Let us wait for a moment while we poll for questions. Our first question comes from Denis Pyatchanin with Needham & Company. Please state your question.

Denis Pyatchanin: I appreciate it. Thank you. Maybe we can start with this $250 million order. With the orders beginning in 2026, could you tell us maybe which quarter would you expect us to start, Q3 or Q4? And then at what point in 2027 do you think this will kind of hit its revenue quarterly peak?

Bill Miller: Yes, Denis. I would say we will start shipping against those $250 million-plus of aggregate orders in the third quarter, but I would say the most significant ramp will probably start in Q1 2027.

Denis Pyatchanin: Great. And then for these systems, just the aluminum for the Spectre, for the wet processing, what are your current lead times, and what do you think are your maximum capacities to meet demand for these systems on an annual basis?

Bill Miller: We have plans to increase our Spectre IBD capacity about 10x from its base level we are at today, starting to hit that kind of level in early 2027, and we are looking at future capacity needs to potentially double that again. In wet processing, we are looking to add some expansion capacity to our existing facility, as well as looking to an outsourced partner contract manufacturer in Southeast Asia for further capacity expansion.

Denis Pyatchanin: Great. Thank you. And then my final one is about gross margins. It looks like we came down a little bit to 36% from 37.7%. Is this predominantly due to mix, like heavier advanced packaging, or were there some other variables contributing?

John Kiernan: Yes. I think specific to Q1, one of the factors contributing is that we had one less LSA system to a China customer. We were informed by BIS that customer would require a license to ship to certain fabs for that customer. So that had about an $8 million impact on the top line for Q1 and also put us outside, as you mentioned, the gross margin guidance range.

Denis Pyatchanin: Well, great. That is it for me. Congratulations on that big quarter. Thank you.

John Kiernan: Thank you, Denis. Our next question comes from David Duley with Steelhead Securities. Please state your question.

David Duley: Yes. Excuse me. Thanks for taking my question. A few other questions on the significant order activity. I was wondering, you kind of addressed it, but it sounds like there are three tools involved in the big order here. Are they equally split, or could you just talk about the volume of each tool in the $250 million order? And then as far as the ramp-up of this business, did you take this business from another competitor, and are you sole sourced, or are you sharing the business?

Bill Miller: Yes, Dave. Let me give you some color here. We have not historically talked a lot about the indium phosphide solutions that we have. There are really three pieces that Veeco Instruments Inc. serves in indium phosphide laser manufacturing. First is the epi step, which is pretty well known and discussed. Veeco Instruments Inc. and our competitor provide MOCVD equipment to make the business end of the laser, the indium phosphide epitaxy that makes the device. We also have wet processing—wet etch and wet clean steps—as part of the formation of the laser.

And then also a part that is probably not as well known by investors is Veeco Instruments Inc. has an ion beam deposition product called the Spectre that deposits anti-reflective and highly reflective coatings to create the laser facet coatings in the laser. As you might guess, having followed the company, ion beam deposition can deposit films much better than PVD or e-beam deposition, etc., so we can deposit films with much better optical properties, very similar to the fact that we can make better IBD EUV films or better ion beam deposition films for low-resistance metal.

So here is another example of this ion beam core technology where Veeco Instruments Inc. sold over 100 tools during the dot-com boom lighting up DWDM fiber, and then that business went away for quite a long time. But during that time, Veeco Instruments Inc. maintained deep technical relationships with a number of key customers where we are the process tool of record in their laser facet coating business. It is probably worth noting that when you look at the size of the three opportunities in front of us, the epitaxy market and the laser facet coating market opportunities are about the same size. They are significant markets.

I would characterize our laser facet coating opportunity as having a very strong incumbent position—not everywhere, but at a number of key companies—whereas in the epitaxy space, as I think you know, our competitor has a very good incumbent position, but Veeco Instruments Inc. has, over the past number of years, developed products to improve our competitiveness. And in that $250 million-plus of orders number, we did receive a number of MOCVD orders as part of that ramp. I would say a large portion of that was for the IBD laser facet opportunity, but it also includes very important orders for wet processing, because that is a critical step in the device manufacturing, as well as the epitaxy step.

David Duley: Okay. So the epi step is the one where you have gone head to head with, like, Aixtron and you have—

Bill Miller: Correct.

David Duley: I guess, one part of the business here. Would you say you are a second source or a primary source? And it mentioned in the press release multiple customers. Could you elaborate a little bit more about your positioning?

Bill Miller: Yes. I would say in laser facet coating, we have a very strong incumbent position. In the epitaxy step, we are probably more the second provider today, as a second source. And in wet process, we have a strong position with a number of the leaders there.

David Duley: Okay. Final question for me, and I will turn it over to others. It is the GaN opportunity. I think you talked about it, and you have received an order in the past from a 300-millimeter GaN customer. How big of a market do you think that could be if you are able to penetrate and capture some of the business? I am assuming all these GaN parts are going into the data center, but maybe I am wrong. Maybe you could elaborate a little bit about that. That is it for me. Thanks.

Bill Miller: Yes, Dave, you are right on there. I would say the adoption of 300-millimeter GaN on silicon is squarely targeted at the AI data centers. We have had, as you know, a tool out with a major IDM for some time. The performance of our tool set is doing quite well. We have a pilot-line tool order from the customer, and we are in the process of manufacturing that and would expect to ship that at the end of the year timeframe. So, yes, it is definitely squarely in the AI data center applications.

John Kiernan: Thank you.

Bill Miller: Thank you, Dave.

Operator: Our next question comes from Gus Richard with Northland Capital Markets. Please state your question.

Gus Richard: Yes, thanks for taking the question, and congratulations on the huge order momentum. To hit the high end of the range for the full year, what are the levers to get there? Is it delivery times?

John Kiernan: Thanks for the question, Gus. I think our opportunity to go to the higher end of the range right now primarily rests in the semiconductor piece of our business, and I would say in the areas of laser annealing and lithography are probably the drivers there. If I look at the other markets and I look at, for example, the data storage market, given our lead times and how we work with our customers on built-to-order, there could be some upside in service and aftermarket business, but the systems business is pretty much booked out for this year, and we are booking orders into next year.

And in the compound semiconductor market, we are able to get some of this new business into the back half of the year as Bill mentioned earlier in answering an earlier question about some tools coming into Q3 and Q4, and we were anticipating that as part of our view for the year already anyway. But the predominant increase in capacity and bringing on and meeting the customers’ ship dates principally happens in 2027.

Gus Richard: Got it. And the underneath question is the Spectre. Does that have a similar three-quarter lead time as ion beam deposition for HDD?

John Kiernan: We will work on that lead time. We have been in this business for a long period of time. Recent business is a few tools a quarter, and I think the lead times are more in that nine-month lead time. As we look to ramp up this business, we will look to reduce lead and cycle times for that business in order to meet customer shipment requirements. But mainly, we are going to see a step up in the output for that business starting in 2027.

Gus Richard: Okay. Got it. Makes complete sense. And then just in terms of some of the evals that are going on, the IBD for the memory market, do you think you can reach conclusion on those evals in the next quarter or two? What are your prospects on getting over the finish line?

Bill Miller: Yes. The feedback from our customers is that it is not a matter of if, it is a matter of when. They are very impressed with the film performance, and we are working on a few CIP improvements to the tool to address some shortcomings. I would say the customer is quite excited about the opportunity, but we do have some engineering work left to do to demonstrate the high-volume requirements of front-end semi.

Gus Richard: Got it. Alright. Thanks. That is it for me.

Bill Miller: Thank you, Gus.

John Kiernan: Thank you.

Operator: A reminder to all participants, please use your telephone keypad. Our next question comes from David Duley with Steelhead Securities. Please state your question.

David Duley: Yes, again, thanks for taking my further questions. Could you talk a little bit more about the hard disk drive business and what sort of second-half growth profile we should expect versus the first half? And then you talked about having the order book full and manufacturing slots full for 2026. Are you expanding capacity for 2027 at this point? It would seem to me the storage guys are going to add a lot of capacity given what they are seeing from the AI data centers, but maybe I am wrong.

Bill Miller: Yes. I would say, Dave, we are looking to double that business in 2026 over 2025, and the trajectory is more second-half loaded. The first system shipment is planned to happen in Q2, not in Q1, and then ramping in Q3 and Q4, just based on lead times. As you know, we do a build-to-order model; we are not a build-to-forecast model. That keeps the industry healthy and seems to work for everybody.

What we are seeing year to date at this point is that both of our major customers are continuing to place orders not only for front-end equipment at the wafer level but also the back end—what they call the slider fabs—which clearly means increases in the number of heads they are producing. I would guess based on the order activity we are seeing early in 2026 that 2027 will remain strong, and I would characterize the commercial activity as remaining positive from an order book standpoint. John, I do not know if you would like to add—

John Kiernan: I think you covered that very well, Bill. I think that really sums up well where we are with 2026 and what visibility we have into 2027 at this time.

David Duley: And then final one for me is what you would expect as a rough cut of your semi revenue growth in 2026, and I am guessing it will probably grow higher in 2027. Maybe you could elaborate a little bit on some of the end-takes to growth in both 2026 and 2027.

John Kiernan: Yes. We see a positive environment in 2026 and estimates of a growing WFE environment in 2026 and moving into 2027. Pieces of the business attached to AI and high-performance computing are expected to grow, including advanced foundry logic with our laser annealing product, high-bandwidth memory for our customer that we have penetrated, and continued strength in advanced packaging. The one headwind for us in the semi business—but it is more than offset by the strength in the pieces I just mentioned—is the declining business in China for mature node. We expect that business to have headwind in 2026. We have been foreshadowing this for the last two years, that we saw the business falling off in 2025.

As a reminder, we have a narrow base of business in China. It is predominantly for our LSA product at 40- and 28-nanometer fabs, and we do not see that same level of investment in new fabs that we saw a couple of years ago. Taking all that into consideration, we see our semi business growing this year over last year in the mid-teens.

David Duley: I was going to say since you are taking the China lumps this year, I would guess that your growth rate would probably accelerate next year.

John Kiernan: We are looking at a very positive WFE environment, and we have nice attachments to the areas that are expected to drive WFE. As we have this early look at 2027, 2027 looks positive. Bill mentioned earlier in his remarks that we are increasing our capacity for advanced packaging. We see opportunities for that to continue to grow into 2027, so we are making some investments to increase capacity there as well.

Bill Miller: It is also worth mentioning, Dave, that a lot of the WFE estimates that you see include some pieces of the silicon photonics market, and you will see that show up in our compound semi. So when you look at semi alone, some of the compound semi will probably be categorized as WFE more generally. Our compound semi business is probably going to grow 50%. So when you take the mid-teens that John spoke about and the portion that is significantly growing, we are probably growing much higher than that on a WFE basis.

David Duley: Great point. Thank you.

Bill Miller: Thanks, Dave.

Operator: At this time, we have no further questions. I would now like to turn the call over to Bill Miller for closing remarks.

Bill Miller: Thank you. As we look ahead, we believe Veeco Instruments Inc. is well positioned to meet the evolving needs of our customers as the silicon photonics industry reaches an inflection point driven by AI and high-performance computing. Our technologies across logic, memory, advanced packaging, compound semi, and data storage are becoming increasingly critical as customers push for greater performance, scale, and efficiency. With strong customer demand, expanding served available markets, and disciplined execution, we see meaningful long-term growth and remain focused on delivering sustained value for our shareholders. I would like to thank our employees for their hard work, as well as our customers, partners, and shareholders for their continued trust in Veeco Instruments Inc. Have a great evening.

Operator: Ladies and gentlemen, the conference call of Veeco Instruments Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.