Veeco Instruments Inc ((VECO)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Veeco Instruments Inc.’s recent earnings call revealed a mixed sentiment. On the positive side, the company showcased strong growth in its semiconductor and advanced packaging businesses, along with achieving strategic milestones and an improvement in financial performance. However, challenges were highlighted in the data storage sector, the China market, and gross margin pressures due to changes in the product mix. While there are substantial growth opportunities, especially in advanced packaging and AI, these are offset by anticipated declines in certain segments and markets.
Record Semiconductor Revenue
Veeco’s semiconductor division achieved a record revenue of $467 million in 2024, representing a 13% increase year-over-year. This segment now constitutes 65% of the company’s total revenue, underscoring its significance in Veeco’s portfolio.
Growth in Advanced Packaging
The advanced packaging segment experienced robust expansion, propelled by the success of wet processing systems. The company anticipates this segment to double its revenue in 2025, indicating promising prospects for continued growth.
Successful Strategic Milestones
Veeco marked significant strategic achievements by delivering LSA systems to top-tier semiconductor companies for high-volume 2-nanometer logic chip production. Additionally, they received encouraging feedback from a Tier 1 power device customer, reinforcing their strategic position.
Expansion in AI and High-Performance Computing
The company’s revenue from AI is projected to grow significantly, expected to account for 20% or more of total revenue in 2025, up from approximately 10% in 2024. This expansion highlights the company’s strategic focus on AI and high-performance computing.
Improved Financial Performance
Veeco reported a 6% growth in non-GAAP operating income, reaching $116 million, while diluted non-GAAP EPS increased to $1.74. These figures reflect the company’s improved financial health and operational efficiency.
Decline in Data Storage Revenue
Despite successes in other areas, Veeco faces a downturn in the data storage sector, with an expected revenue decline of $60 million to $70 million in 2025. This highlights one of the key challenges the company must navigate.
Challenges in China Market
Revenue from China is anticipated to decrease, with the first half of 2025 expected to represent 25% to 30% of total revenue. This decline poses a challenge for Veeco’s growth in the region.
Gross Margin Pressure
The company experienced a decrease in gross margin to 41.5% in Q4, attributed to a shift in product mix and additional expenditures for evaluation programs. This margin pressure presents a financial challenge moving forward.
Silicon Carbide Business Impairment
Veeco incurred a $28 million impairment charge due to the underperformance of its silicon carbide business, indicating a significant setback in this area.
Forward-Looking Guidance
Looking ahead, Veeco provided detailed guidance for 2025. The company anticipates growth in the semiconductor segment, driven by a doubling of revenue from advanced packaging and gate-all-around technologies. AI-related revenue is expected to rise by 20%, with strong high-bandwidth memory shipments maintained. However, challenges remain with a projected decline in China revenue and a decrease in data storage revenue. The company projects Q1 2025 revenue between $155 million and $175 million, with a gross margin of approximately 42%.
In summary, Veeco Instruments Inc.’s earnings call presented a blend of optimistic growth prospects and notable challenges. While the company is poised for growth in advanced packaging and AI, it must address declines in data storage and China market revenues. The strategic milestones and improved financial performance provide a solid foundation, yet the path forward requires navigating market-specific hurdles.
