NOVA (LTRN) Q3 2025: Advanced Packaging Jumps to 15% of Product Revenue, Powering Outperformance
NOVA extended its record-setting streak, propelled by surging advanced packaging adoption and diversification across device segments. The Centronics acquisition broadens reach into wafer-level packaging, while management signals confidence in outpacing industry growth rates into 2025. Investors should monitor execution on integration and the durability of high-margin product mix as the company leans into next-generation architectures.
Summary
- Advanced Packaging Penetration Accelerates: Segment now accounts for a material share of product revenue, with double-digit growth outlook.
- Centronics Acquisition Broadens TAM: Integration expands addressable market and strengthens portfolio diversification.
- Margin Profile Holds Amid Expansion: Gross and operating margins remain at the upper end of target range, underscoring disciplined execution.
Performance Analysis
NOVA delivered a record quarter and fiscal year, with revenue growth far outpacing industry benchmarks. The company’s top line expanded 30% year-over-year, reaching $672.4 million for the year, while non-GAAP net income grew 38%. Notably, advanced packaging revenue more than doubled to represent 15% of product revenue, highlighting the impact of new applications and customer wins. Product revenue in Q4 was split 72% from logic and foundry and 28% from memory, reflecting balanced exposure across semiconductor segments.
Gross margin performance was robust, with Q4 non-GAAP gross margin at 58% and annual non-GAAP gross margin at 59%, both at the high end of the company’s target model. Operating margin also exceeded expectations, reaching 33% on a non-GAAP basis for both the quarter and the year. Free cash flow generation remained strong at $218 million, supporting share buybacks and strategic M&A. The company’s geographic revenue mix was led by China at 39%, followed by Taiwan, Korea, and the U.S., though management expects China’s share to decline as advanced node growth accelerates elsewhere.
- Advanced Packaging Outpaces Core: Revenue more than doubled, now a meaningful growth lever and margin contributor.
- Product Portfolio Delivers Share Gains: Standalone OCD, chemical, and materials metrology platforms all registered record sales and adoption with leading customers.
- Cash Generation Fuels Flexibility: Ample cash on hand and strong free cash flow underpin continued investment and shareholder returns.
Momentum in advanced logic and packaging, combined with operational discipline, positions NOVA to continue outperforming wafer fab equipment (WFE) market growth rates into 2025.
Executive Commentary
"Our agile operational model and strategic focus continue to generate value to our shareholders, enabling us to drive higher profitability while relentlessly growing our business."
Gabby Weissman, President and CEO
"Achieving a record high EPS this year underscores our ability to drive profitable growth by effectively converting top-line expansion into bottom-line value."
Guy Kisner, CFO
Strategic Positioning
1. Advanced Packaging as a Growth Engine
Advanced packaging, the process of integrating multiple chips in a single package for performance gains, has become a central pillar of NOVA’s growth. The segment doubled in size and now comprises 15% of product revenue. Penetration into four of the top five advanced packaging manufacturers and the integration of Centronics’ modular metrology platforms position NOVA to deepen its reach as demand for 2.5D and 3D architectures accelerates.
2. Portfolio Diversification and Technology Leadership
NOVA’s multi-pronged product strategy—spanning dimensional, materials, and chemical metrology—anchors its competitive edge. Record sales of the Veriflex, Ellipson, and Metreon platforms, alongside strong adoption of standalone OCD (optical critical dimension) solutions, highlight the company’s ability to address evolving process control needs in advanced nodes and memory. The recent launch of Nova Velocity, a high-productivity platform, further extends their value proposition for leading logic manufacturers.
3. Centronics Acquisition: TAM Expansion and Integration
The $60 million Centronics acquisition extends NOVA’s addressable market into specialty wafer-level packaging and new device types. Centronics’ modular, multi-sensor platforms complement NOVA’s portfolio, enabling the company to offer a broader suite of solutions for critical back-end and front-end fabrication steps. Management expects the deal to be accretive within 12 months, with integration efforts already underway.
4. Geographic and Segment Exposure
While China remains the largest single geography at 39% of revenue, management expects its share to decline as growth shifts to advanced nodes and packaging in other regions. The balance of logic, foundry, and memory exposure, plus increasing service revenues, provides some insulation against cyclicality and regional volatility.
Key Considerations
NOVA’s Q3 2025 results reflect strong execution against a backdrop of rising complexity in semiconductor manufacturing. The company’s ability to capture share in advanced packaging and logic, maintain high-margin profile, and deploy capital strategically will be key to sustaining outperformance.
Key Considerations:
- Advanced Packaging Momentum: Double-digit growth outlook and broad customer adoption signal lasting structural demand.
- Integration Execution: Successful onboarding and synergy realization from Centronics will be critical for sustained TAM expansion.
- Margin Sustainability: Product mix and pricing discipline remain pivotal as the company invests in R&D and absorbs new assets.
- Technology Roadmap Investment: Continued R&D spending underpins innovation and future-proofing against competitive threats.
Risks
Risks include integration challenges from the Centronics acquisition, potential margin compression from product mix shifts, and exposure to cyclical industry spending. China concentration, while expected to decrease, remains a watchpoint amid regulatory and trade uncertainties. Execution against aggressive growth targets in advanced packaging and logic will require ongoing technology leadership and operational agility.
Forward Outlook
For Q1 2025, NOVA guided to:
- Revenue between $205 million and $215 million
- Non-GAAP earnings per diluted share of $2.00 to $2.16
For full-year 2025, management did not provide explicit guidance, but reiterated:
- Intent to outperform WFE market growth, supported by advanced logic and packaging demand
Management highlighted several factors that will drive results:
- Broader adoption of advanced packaging and high-bandwidth memory solutions
- Integration and accretion from Centronics acquisition
Takeaways
NOVA’s Q3 2025 results reinforce its status as a high-growth enabler in semiconductor manufacturing, with advanced packaging and diversified metrology solutions driving share gains and margin resilience.
- Product and Segment Leadership: Outperformance in advanced packaging and logic validates technology roadmap and customer alignment.
- Capital Deployment for Growth: Cash generation supports both organic innovation and strategic M&A, with Centronics integration as a near-term catalyst.
- Future Watchpoints: Investors should track Centronics integration, the evolution of advanced packaging mix, and sustainability of margin profile as end-market dynamics shift.
Conclusion
NOVA’s record quarter cements its leadership in advanced packaging and metrology, with disciplined execution and strategic expansion setting the stage for continued outperformance. The company’s ability to maintain high margins while investing for future growth remains a key differentiator as the industry transitions to more complex architectures.
Industry Read-Through
NOVA’s results underscore the accelerating demand for advanced process control in semiconductor manufacturing, particularly as device complexity and packaging requirements escalate. The company’s broad-based growth and margin resilience signal that metrology and inspection remain critical enablers for next-generation nodes and memory. For peers and suppliers, the integration of modular, multi-sensor platforms and the focus on advanced packaging provide a blueprint for TAM expansion and differentiation. Regional exposure and product mix will be key variables for industry participants navigating geopolitical and cyclical volatility.