Earnings call transcript: Nova Limited beats Q2 2025 forecasts, stock rises

Nova Limited (NVMI) reported its earnings for the second quarter of 2025, surpassing analysts’ expectations with non-GAAP earnings per share (EPS) of $2.20, compared to the forecasted $2.10. The company also reported a record revenue of $220 million, exceeding the anticipated $215.15 million. Following the announcement, Nova’s stock saw a pre-market increase of 4.89%, reaching $270.31 from a previous close of $257.71. Based on InvestingPro analysis, the stock is currently trading near its Fair Value, with three analysts recently revising their earnings expectations upward for the upcoming period.

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Key Takeaways

• Nova Limited reported a 40% year-over-year revenue growth.
• The company achieved a significant earnings beat with a 4.76% EPS surprise.
• Stock prices increased by 4.89% in pre-market trading post-announcement.
• Strong performance in chemical metrology and service business segments.
• Guidance for Q3 2025 indicates stable revenue and EPS expectations.

Company Performance

Nova Limited demonstrated robust performance in Q2 2025, with a record revenue of $220 million, marking a 3% sequential and 40% year-over-year growth. According to InvestingPro data, the company maintains impressive financial health with a "GREAT" overall score of 3.07 out of 4, supported by strong cash flows and solid balance sheet metrics. The company benefited from strong demand in its chemical metrology and service business, as well as strategic expansions in its optical metrology portfolio. Nova’s diversified business model and leadership in integrated metrology contributed to its competitive advantage, reflected in its robust 57.1% gross profit margin over the last twelve months.

Financial Highlights

• Revenue: $220 million, a 40% increase year-over-year.
• Non-GAAP EPS: $2.20, up from the forecasted $2.10.
• Gross margins: 58% GAAP, 60% non-GAAP.
• Operating margins: 30% GAAP, 34% non-GAAP.
• Cash and equivalents: $856 million.
• Free cash flow: $43 million.

Earnings vs. Forecast

Nova Limited surpassed expectations with an EPS of $2.20, compared to the forecasted $2.10, resulting in a 4.76% surprise. The revenue of $220 million also exceeded the forecast of $215.15 million, representing a 2.25% surprise. This performance highlights the company’s strong operational execution and market positioning.

Market Reaction

Following the earnings announcement, Nova’s stock experienced a pre-market surge of 4.89%, climbing to $270.31 from a previous close of $257.71. This positive movement reflects investor confidence in the company’s ability to exceed financial expectations and capitalize on market opportunities. InvestingPro data shows the stock has delivered a strong 25.14% return year-to-date, despite recent volatility. The company’s PEG ratio of 0.58 suggests attractive valuation relative to its growth rate.

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Outlook & Guidance

Looking ahead, Nova Limited provided Q3 2025 guidance with revenue expected between $215 million and $227 million and non-GAAP EPS projected between $2.20 and $2.22. The company anticipates stronger Gate-All-Around revenue in 2026 and has revised its tariff impact estimate to 20 basis points, down from the initial 30-50 basis points.

Executive Commentary

Gabby Weissman, CEO of Nova Limited, stated, "Nova’s ability to thrive in a rapidly evolving industry is rooted in a resilient and diversified business model." Weissman also highlighted the role of AI as a growth engine, driving demand for advanced nodes and packaging. The CEO expressed confidence in the company’s Gate-All-Around strategy, expecting it to become even stronger in the coming year.

Risks and Challenges

• Supply chain disruptions could impact production timelines.
• Market saturation in advanced packaging could pressure margins.
• Geopolitical tensions may introduce regulatory challenges.
• Fluctuating demand in China could affect revenue stability.
• Currency fluctuations might impact international sales.

Q&A

During the earnings call, analysts inquired about the integration of Sintronics and its growth potential. Nova’s management confirmed strong customer positioning in Gate-All-Around and discussed the company’s metrology strategy and new tool evaluations. Insights into geographic and market segment dynamics were also provided.

Full transcript - Nova Measuring Instruments Ltd (NVMI) Q2 2025:

Conference Operator: Welcome to the Nova Limited Second Quarter twenty twenty five Results Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ms.

Mircee Gull, CEO of MS IR. Please go ahead.

Mircee Gull, IR Representative, Nova Limited: Thank you, operator, and good day, everyone. I would like to welcome all of you Nova’s second quarter twenty twenty five financial results 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 the 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, Nova Limited: 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 Kissner, Nova’s Chief Financial Officer, will review the quarterly financial results in detail. Nova delivered another record quarter with revenue at the top end of our guidance and profitability that exceeded guidance. Our quarterly revenue grew 3% sequentially and 40% year over year.

This performance was driven by multiple revenue streams with record revenue of our chemical metrology division and service business. Our product portfolio and value proposition, which support technological transitions and improvements in yield and productivity resulted in record results in the logicfoundry and advanced packaging segments. In the 2025, our revenue grew 45% compared to the same period last year, fueled by logic capacity build out across advanced and mature nodes, DRAM and advanced packaging capacity increases driven by higher metrology intensity. We continue to invest in expanding our business and market share, building on the growing technological complexity of our customers’ processes. Nova’s ability to thrive in a rapidly evolving industry is rooted in a resilient and diversified business model.

Our multiple revenue streams are designed to balance fluctuations and sustain growth. This foundation is strengthened by long standing customer partnerships, agile operations and the steadfast commitment of our teams. Together, these elements position us to capitalize on emerging opportunities, navigate challenges effectively and execute on our long term strategic vision with confidence. AI is a secular growth engine driving an increasing demand for a variety of highly efficient devices resulting in more sophisticated designs and manufacturing processes, which in turn drive investment in advanced nodes, packaging and related metrology. Larger die sizes, greater design diversity and yield requirements are accelerating development cycles and creating a need for advanced metrology at additional steps.

Moreover, there is a demand for advanced packaging solutions specifically designed to accommodate and process wafers of various forms and shapes. All of these translate into demand for more metrology capabilities and create new opportunities. Nova’s recent performance offers compelling validation of the alignment of our strategic direction with the market. The strength and relevance of our portfolio are increasingly evident as we continue to deliver solutions that not only align with customer priorities, but also anticipates their future needs. This reinforces our position as a trusted partner in enabling their success and ours in a shifting industry landscape.

More specifically, for the June, there are four areas I want to highlight today. Nova is in a pole position to take advantage of the industry’s shift to gate all around architecture. We are already working with the four leading customers who are implementing this process. Notably this quarter, we recognized revenue from a gate all around customer that adopted multiple Nova platforms across the entire portfolio with additional solutions currently under evaluation. This quarter’s record performance in advanced packaging has further reinforced our standing in this rapidly expanding segment with our chemical metrology division performing exceptionally well.

In addition, our optical metrology portfolio for advanced packaging, which has expanded to include NovaSyntronics platform, supports evolving customer needs and captures the increasing demand in this critical segment. To round out key market segments, Nova is also well positioned in the memory market, particularly in DRAM and high bandwidth memory. Our leadership in chemical metrology continues to expand supported by record results in high bandwidth memory and a recent win at a leading memory manufacturer, which expanded our market share in front end chemical metrology for interconnect applications. In optical metrology, a leading memory manufacturer has adopted the Nova Syntronics platform for key applications in high bandwidth memory. This recent acceptance is the result of the solution’s unique ability to address major challenges such as high warpage, non symmetric shapes and different surface conditions.

On the materials metrology front, we recently introduced the active charge compensation feature on the Nova Veriflex platform for three d NAND application. This innovative solution further enhances accuracy in X-ray metrology by effectively addressing photoelectron induced charge distortion, enabling precise analysis of critical memory cell components such as nitrogen. With shipments to two leading memory manufacturers this quarter, we believe that active charge compensation will further accelerate the adoption of the VERIFLEX platform in advanced three d NAND manufacturing. Finally, our service business continues to act as a growth driver for us with ten consecutive quarters of revenue increase and yet another quarterly record. Service revenue grew 7% sequentially and 31% year over year.

An important driver of this performance is value added services, which focus on productivity improvements in our installed base and adding capabilities to address new applications. In summary, our teams demonstrated effective execution and delivered consistently strong results in all segments, markets and regions. Our near term guidance remains solid and we continue to focus on investing in our portfolio, which proves to be well matched with our customers’ expectations and technology inflection. Most importantly, we are fully aligned and committed to executing our strategic plan, which continues to guide our long term priorities and investments. In October, Guy and I will attend SemiCon West and we’ll be available for in person meetings.

I invite you to reach out to our IR contact to schedule a meeting. We look forward to having meaningful conversations with you. Now for some more details on our financials, let me hand over the call to Guy.

Guy Kisner, CFO, Nova Limited: Thanks, Gabi. Good day, everyone, and thank you for joining our twenty twenty five second quarter conference call. I will begin by reviewing our second quarter financial achievements and then provide guidance for the third quarter. Total revenues in the 2025 reached a record level of $220,000,000 marking the fifth consecutive quarter of record breaking results. This performance reflects a growth of 3% quarter over quarter and 40% year over year.

Product revenue distribution was approximately 75% from logic and foundry and 25% from memory. Product revenues included four customers and four territories, which contributed each 10% or more to product revenues, highlighting the company’s well balanced and diversified reach across markets and customers. In the second quarter, blended gross margins were 58% on a GAAP basis and 60% on a non GAAP basis. In the upper end of our target model range of 57% to 60%. The high gross margin in the quarter was attributed to a product mix weighted towards higher margin offerings.

As expected, operating expenses increased to $61,600,000 on a GAAP basis and $56,900,000 on a non GAAP basis. Operating margins in the second quarter reached 30% on a GAAP basis and 34% on a non GAAP basis, surpassing the upper range of our target model of 28% to 33%. This excellent result was driven by a healthy quarterly gross margin and the company’s robust operational model. The effective tax rate in the second quarter was approximately 15.5%. Earnings per share in the second quarter on a GAAP basis were $2.14 per diluted share and earnings per share on a non GAAP basis were $2.2 per diluted share, exceeding the high end of our second quarter guidance, marking the seventh consecutive quarter of record breaking performance.

This achievement underscores the effectiveness of our business strategy and the increasing value our solution deliver to customers and stakeholders alike. Turning to the balance sheet, we ended the second quarter with $856,000,000 in cash, cash equivalent, bank deposit and marketable securities. Our free cash flow for second quarter reached $43,000,000 An additional $4,700,000 was paid in connection with the acquisition of Sintronics as part of the final purchase price adjustment. Next, I’d like to outline our guidance for the 2025. We currently expect revenue for the quarter to be between $215,000,000 and $227,000,000 GAAP earnings per diluted share to range from $1.77 to $1.97 non GAAP earnings per diluted share to range from $2.2 to $2.22 At the midpoint of our third quarter estimates, we anticipate the following 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 $63,000,000 Operating expenses on a non GAAP basis to increase to approximately $57,500,000 Financial income on a non GAAP basis to remain similar to that of the second quarter.

Effective tax rate is expected to be approximately 16%. Before I conclude my remarks, I would like to note the following. Nova’s first half twenty twenty five revenues increased more than 45% over the comparable 2024, outperforming WFE growth forecast. The company’s solid guidance for the third quarter of the year positions Nova to continue on performing on a year over year basis throughout the rest of 2025. In addition, in our last earnings call, we shared our expectation that the newly implemented tariffs will reduce gross margins by approximately 30 to 50 basis points.

Based on the latest updates and improved visibility, we now estimate the impact will be closer to 20 basis points, a more favorable outcome than initially anticipated. With that, we will be pleased to take your questions. Operator?

Conference Operator: Thank you. We will now begin the question and answer session. The first question we have is from Atif Malik of Citi. Please go ahead.

Atif Malik, Analyst, Citi: Hi, thank you for taking my questions. First question for Gabby. Gabby, you highlighted gate all around as a major shift for you guys. Some of your peers saw their Taiwan sales decline sequentially in the June, but the Japan sales go up. I was just curious with respect to your aggregate all around sales, how did this appear in the June and what kind of trajectory you see in second half for aggregate all around wafer starts or sales across multiple regions?

And then I

Charles Chi, Analyst, Needham and Company: have a follow-up for Guy.

Gabby Weissman, President and CEO, Nova Limited: Definitely. Thank you so much, Atif, for the question. Overall, we are currently positioned well across all four Galore Round customers and we’re very excited about this opportunity. We also mentioned that we are we have a plan to reach an aggregate of 500,000,000 from GalerAround revenue till the 2026 and we’re on track to achieve that. We saw a strong demand in the first half of this year, and we see stability in the second half from Gatele Around.

So overall, we are very encouraged by that and by the momentum that Gabriel Around continues to provide us.

Atif Malik, Analyst, Citi: Great. And then Guy, the gross margins were strong, 60% versus 58% guide and you talked about the product mix. If you can just provide more color, are the record chemicals business driving the upside to the gross margins? And was there any tariff impact to the 60% number for the June?

Guy Kisner, CFO, Nova Limited: So the tariffs impact were marginal. The stronger results for the first half as I mentioned was driven by product mix, not necessarily the contribution for chemical metrology, but it’s a specific mix of variety of our offering that drove this exceptional gross margin result.

Atif Malik, Analyst, Citi: Great. Thank you.

Conference Operator: The next question we have is from Vivek Arya of Bank of America Securities. Please go ahead.

Michael Mani, Analyst, Bank of America Securities: Hi. This is Michael Mani on for Vivek Arya. Thanks so much for taking our questions. Wanted to start on Centronics. Could you talk about the momentum you’ve received in the business so far this year?

And more specifically, how much did it contribute to growth in June? And how much has it contributed in September? Essentially, I’m trying to parse out is how much the organic business is growing, if you’d be able to offer that? Thank you.

Gabby Weissman, President and CEO, Nova Limited: So thank you for the question, Michael. We’re very encouraged by the integration of Sintronics into our business and we are investing in ensuring the go to market in which we concluded the transition into Nova, whereas most of our sales are currently direct as part of our global business group. We see very encouraging signs of adopting the Syntronics portfolio with multiple customers and the expansion to various territories. So overall, we are very optimistic and very bullish about the growth and the potential accretive addition of Syntronics to our business.

Michael Mani, Analyst, Bank of America Securities: Got it. And on Gate All Around, one of your larger IDM customers has pretty meaningfully cut down their CapEx for next year. I know you just mentioned that you’re still on track to complete your $500,000,000 sales again all around by next year. So could you just help us unpack maybe how impactful that customer was to achieving that goal? And if more broadly you’ve seen any changes in the roadmap there with them or in any customers that maybe give us a little more pause into next year?

Thank you.

Gabby Weissman, President and CEO, Nova Limited: Thank you for the question. So overall, I think that exposure we have and the strong positioning across all four Ghet All Around customers provides us the ground to for confidence in our ability to achieve the overall growth and revenue that we forecast from Galen around. We are well on track with that and we believe that next year is going to be even stronger than this year in that respect.

Michael Mani, Analyst, Bank of America Securities: Great. Thank you. And if I could just ask one more quick question. Sure. You’ve talked about in the past this laptop strategy that will especially help drive growth in your materials metrology segment where you’re sole source.

Where are we in the strategy if you take a step back? Would you say this is something that’s more impactful to growth in the next two years? Will it take longer to play out? Are there certain milestones in terms of customer roadmap inflections that we should be looking for to see when this part of the business really inflects? Just how should we measure progress in that part of the strategy?

Gabby Weissman, President and CEO, Nova Limited: So it’s an excellent question. And I will divide it into a few areas, which relate to our material metrology portfolio and the lab to fab strategy. So first with regards to XPS, our key efforts are on driving additional value for this tool in order to expand the adoption and increase the number of tools per fab. And part of my speech earlier related to another addition of active charge compensation, which is intended to open up a new area of applications for us, especially in three d NAND. And we continue in terms of our roadmap to invest in adding value, improving cost of ownership in order to continue and do so.

And we are very pleased with the traction that we see in the adoption of XPS and XRF across fabs. With regards to the new tools such as the inline SIMs, the Matrion and the Raman, the Ellipson, so we spoke about the additional key evaluations that we embarked on at the beginning of this year that we expect to turn into revenue, two very strategic evaluations for us and we are well on track to achieve that. And with regards to the Ellipson, we already see repeated orders with very encouraging indications from multiple customers, including a leading gate all around customer with potential for multiple tools. So overall, I think that we have a very robust plan in terms of lab to fab focusing of course on material metrology, which is certain around adoption of the well positioned XPS and introduction and expansion of the footprint of the METRION and Ellipson, which are positioned especially for advanced nodes.

Michael Mani, Analyst, Bank of America Securities: Great. Thank you so much for the helpful color.

Gabby Weissman, President and CEO, Nova Limited: Thank you.

Conference Operator: The next question we have is from Blayne Curtis of Jefferies. Please go ahead.

Ezra Wiener, Analyst, Jefferies: Hi, Ezra Wiener on for Blayne. Thanks for taking my questions. Just kind of want to start, a lot of your peers are seeing a lot of strength in China. Can you talk a little bit about your geographic mix and what you’re seeing there and what you think that will do into next year? And then secondly, in terms of HBM, I know it’s not a big piece of your business, but you did mention strength there, which is also not exactly what we’re seeing at peers.

So can you talk about what’s driving that strength?

Gabby Weissman, President and CEO, Nova Limited: Thank you for those questions. So I’ll start with HBM and I’ll relate in general to advanced packaging which is a growing market for us with the continued momentum. Last year it was about 15% of our business and this year we expect a higher percentage. It’s a new market for us. So HBM is growing and in general, it’s about a third of our advanced packaging business.

With regards to the second question relating to China. So earlier this year, we said that China will be flat or slightly lower. We now expect the nominal value to be moderately higher year over year, whereas revenue is slightly skewed towards the first half. Percentage wise, China is forecasted to decrease year over year because of the higher investments in advanced nodes.

Ezra Wiener, Analyst, Jefferies: Got it. Thank you very much.

Conference Operator: The next question we have is from Matthew Pristow of Cantor. Please go ahead.

Matthew Pristow, Analyst, Cantor: Hey, thanks for taking the questions guys. I guess to start in your dimensional metrology business, can you offer an update on the competitive landscape there and any potential changes in share dynamics or adoption trends over the last three months? Thanks.

Gabby Weissman, President and CEO, Nova Limited: Thank you, Matthew. So with regards to dimensional metrology, we have two key product lines, the integrated metrology and the standalone OCD. In terms of the competitive landscape, there is not much change in that respect. We have one key competitor on the integrated metrology and we’re competing with two on the standalone OCD. With regards to integrated metrology, we continue to lead and we saw strong momentum and results in the second quarter of the year and we believe that that leadership will be maintained.

With regards to standalone OCD, we are extremely encouraged by the market share gains that we see in the market. We have a unique technology and value proposition, which drives our market share both in the front end, in the advanced nodes as well as in the advanced packaging. And we believe that there are good grounds to see a continued expansion of that business for us.

Matthew Pristow, Analyst, Cantor: Perfect. Thank you. And then maybe specific to Ellipson and Metrion, how are you guys thinking about revenue contribution from these systems in 2025 and potential for growth there in 2026? And maybe how has that outlook changed over the last three months as well? Thank you.

Gabby Weissman, President and CEO, Nova Limited: So Ellipson and Matrion are well on track in terms of our business plan. We are seeing both being adopted by advanced node manufacturers. We’re targeting both memory and logic with these tools. And we have a very strong focus on the evaluations, which will result in becoming a process tool of record and then, of course, the proliferation in lines in which those advanced nodes become high volume. So we see growth year over year.

Obviously, this is something that we need to focus on, especially in becoming these process tool of records for those customers. And then of course with the proliferation of high volume, we expect the relative part of that business Innova to grow.

Matthew Pristow, Analyst, Cantor: Thanks very much.

Conference Operator: The last question we have is from Charles Chi of Needham and Company. Please go ahead.

Charles Chi, Analyst, Needham and Company: Thanks for taking my questions. Gabi and Guy, maybe the first one, you reaffirmed that $500,000,000 cumulative all around revenue from last year to next year. I wonder can you give us a sense on where you are for this year in terms of the progress towards that $500,000,000 Are you like 40% there, 45% there, probably not 50% there, but kind of give us some sense on where you are tracking towards that goal, let’s say by the end of this year? Thank you.

Gabby Weissman, President and CEO, Nova Limited: Thank you, Charles. So first of all, we relate to the fact that ’26 is going to be stronger than ’25, which is in turn stronger than ’24. This is a natural evolution of investments in gator around. So this is still the case, and we see that we are well on track in terms of this year with the Gateway Around revenue.

Charles Chi, Analyst, Needham and Company: Do you any chance you can give us a little bit of quantitative color? I mean, we don’t need it precise, but do you want to see if you can give us some better sense about where you are tracking towards this year?

Gabby Weissman, President and CEO, Nova Limited: I still don’t have those final numbers. I guess that this color could be provided better around the end of this year.

Charles Chi, Analyst, Needham and Company: Thank you. Look forward to that. Maybe a next question. Thanks for the China color you provided. Obviously, numbers have been going up for you guys.

You guys did a good job. But relative to nine days ago, one hundred eighty days ago, let’s say, relative to the beginning of the year, demand environment definitely is improving a little bit further. But if I may, between China versus the ex China demand environment, where have you seen a great upside so far? The reason why I ask this is some of your U. S.

Peers were more or less saying, yes, the ex China outlook is more or less similar to what they see at the what they saw at the beginning of the year, but China has shown good amount of upside so far. Is that something you guys are seeing similarly or you actually have a little bit different dynamics there? Thank you.

Gabby Weissman, President and CEO, Nova Limited: Thank you. We do have different dynamics. So it’s very difficult to relate to peers as we’re acting in different segments and we have a different product portfolio. What I can say is that the resilience we see is due to the fact that we have now three different divisions, the chemical and material dimensional, they’re all acting differently and have their own dynamic plus the new addition of the Sentronics that gives us a stronger footprint in packaging and advanced packaging. So I would say in general that we see different dynamics to result in revenue streams that may be different than other peers in the industry.

Charles Chi, Analyst, Needham and Company: So it feels like a more or less similar upside ex China versus China?

Guy Kisner, CFO, Nova Limited: Yes.

Michael Mani, Analyst, Bank of America Securities: Thank you.

Conference Operator: At this time, it seems we have no further questions. And that concludes the Q and A session. I would like to turn the conference back over to Gabi Wiseman, Nova’s President and CEO, for closing remarks.

Gabby Weissman, President and CEO, Nova Limited: Thank you, operator, and thank you all for joining our call today.

Conference Operator: Ladies and gentlemen, that concludes today’s conference. Thank you for joining us. You may now disconnect your lines.

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