Nova Ltd. (NVMI) Earnings

Management highlights

### Overall Financial and Strategic Milestones - Delivered record Q2 2026 revenue ($255 million) and profitability, with revenue surpassing the $250 million milestone and non-GAAP diluted EPS exceeding $2.50, meeting long-term strategic scale targets. - Management expects continued double-digit full-year 2026 growth, supported by sustained customer investment, broader solution adoption, and ongoing market share gains. - The company is developing the next phase of its long-term growth strategic plan, with details to be shared at an investor day in Q1 2027. ### Market Demand Drivers - Strong AI-driven demand across the semiconductor industry, supported by ongoing infrastructure investments and the emergence of agentic AI, creating robust need for leading-edge silicon (CPUs, memory, storage) and the process control solutions NOVA provides. - Demand is broad-based across NOVA's product portfolio, with record sales across multiple lines driven by advanced logic and advanced packaging applications. ### Innovation and Product Development - Sustained 15% of annual revenue is invested in R&D to align the company's technology roadmap with advanced semiconductor manufacturing challenges. - Recent new product launches include: a new generation of prisms for advanced memory structures, an updated Veriflex platform for materials metrology, an expanded Nova WMC configuration for panel-level packaging dimensional metrology, and Nova Hub, a scalable fleet management and AI analytics platform for large metrology fleets. - These innovations expand NOVA's serviceable addressable market and enable customers to address requirements for future technology generations. ### Operational Updates - Completed a clean room manufacturing capacity expansion in California, which doubles domestic US production capacity to meet growing Veriflex XPS platform demand. - Nova WMC was selected as tool of record by a leading foundry customer for multi-layer measurement in advanced packaging production flows, with accelerating adoption across memory and foundry customers.

Guidance

- Third quarter 2026 revenue is expected to be in the range of $277 million to $287 million, representing continued sequential double-digit growth. - GAAP diluted EPS for Q3 2026 is guided between $2.46 and $2.61, while non-GAAP diluted EPS is guided between $2.70 and $2.85. - At the midpoint of Q3 guidance, GAAP gross margins are expected to be approximately 57%, and non-GAAP gross margins approximately 59%, which remains within the company's long-term target range of 57% to 60%. - GAAP operating expenses for Q3 are expected to increase to approximately $74 million, while non-GAAP operating expenses are expected to increase to approximately $68 million. - Management reaffirmed confidence that the company will reach its organic long-term growth objectives sooner than originally planned, driven by durable demand drivers and strong end-market visibility extending into 2027. - Full-year 2026 gross margin is expected to be approximately 59%, consistent with the company's target model.

Segment performance

Total company revenue in Q2 2026 reached a record $255 million, representing 8% quarter-over-quarter growth and 16% year-over-year growth. Of total product revenue, 73% came from the Logic and Foundry segment, and 27% came from the Memory and other segment. Advanced logic product revenue more than doubled sequentially quarter-over-quarter, driven by expanded customer production capacity for leading-edge manufacturing. Advanced packaging achieved record product sales, contributing nearly 25% of total product revenue, fueled by customer investments in AI-related device capacity. Front-end chemical metrology solution Nova Ancocene delivered record sales, supported by both advanced memory and mature logic applications. Service revenue reached a new record high in the quarter, driven by value-added tool upgrade services for existing customer tools.

Risks & headwinds

No material new risks or operational failures were explicitly discussed during the call. The only minor risk factors noted were: stretched global supply chains and moderately higher memory component costs; NOVA management noted that memory components represent a small share of total bill of materials costs, and gross margin targets remain intact. No other operational issues, unexpected disruptions, or major risk factors were disclosed.

Analyst Q&A

• Q: Analyst Trip Smith asked, given the 73%/27% Logic Foundry/Memory product revenue split implies a 14% sequential quarter-over-quarter drop in Memory revenue, what are the key factors driving this split, and can NOVA support projected 40% 2027 WFE growth of ~$215B? /

  A: Management stated NOVA projects Memory will represent ~30% of full-year 2026 revenue, with long-term target split of 60% Logic Foundry / 40% Memory. DRAM demand is strong while NAND demand remains muted in 2026, but both segments are growing, with stronger growth intensity in advanced logic nodes. NOVA already has 2027 delivery visibility and customer orders, with pull-ins driving first-half 2026 growth, and the company is adjusting production and supply chain to meet increased demand. (409 characters)

• Q: Analyst Atif Malik asked how current semiconductor cycle visibility, particularly on the DRAM side, compares to prior memory cycles, and what is the impact of higher memory component costs on gross margins? /

  A: Management noted this cycle is unprecedented: customers are providing longer-term visibility into 2027 plans, a level of collaboration that did not occur in prior cycles, enabling better supply chain and capacity planning. On component costs, higher memory prices have minimal impact because memory is a small share of NOVA's total BOM, and the 57-60% long-term gross margin target range remains fully intact. (398 characters)

• Q: Analyst Shane Brett asked if NOVA expects process control intensity to recover in 2027, and if NOVA can outgrow overall process control market growth next year, plus asked for an update on hybrid bonding and advanced packaging growth. /

  A: Process control intensity varies by end market: intensity is higher in logic and advanced packaging, while NAND process control intensity is currently muted due to upgrade-focused growth. Structural drivers (increasing device complexity, market share gains, technology wins) for NOVA's outperformance remain intact. Advanced packaging reached ~25% of Q2 product revenue, and hybrid bonding increases metrology requirements, making advanced packaging a multi-year structural growth opportunity for NOVA. (456 characters)

• Q: Analyst Vidvati Shrotri asked how lead times have changed over the past three months, and what is the expected full-year 2026 contribution from advanced packaging? /

  A: Despite stretched supply chains, NOVA has made significant efforts to maintain stable lead times, which range from 4 to 12 months depending on product line, and remain best-in-class for the industry. Management initially projected advanced packaging would contribute 20-25% of full-year 2026 product revenue, and now expects it will edge closer to 25% for the full year. (321 characters)