NOVA (NVMI) Q1 2025: Revenue Jumps 50% as Gate-All-Around and Advanced Packaging Drive Outperformance
NOVA’s record-setting quarter was fueled by surging demand for gate-all-around and advanced packaging metrology, with broad-based strength across logic, memory, and services. Despite new tariff headwinds and macro uncertainty, management signals confidence in outgrowing wafer fab equipment peers in 2025, underpinned by technology leadership and operational agility. Investors should monitor margin resilience and China exposure as the cycle progresses.
Summary
- Gate-All-Around and Advanced Packaging Surge: Customer adoption and cross-selling drove outsized growth in both segments.
- Margin Model Holds Despite Tariff Drag: Gross margin impact from tariffs remains contained within target range.
- China Revenue Flat as Mix Shifts Global: Robust backlog offsets visibility challenges and regional share declines.
Performance Analysis
NOVA delivered its fourth consecutive quarter of record revenue, reaching $213 million, a 50% year-over-year increase, and 10% sequential growth. Logic and foundry customers accounted for 75% of product revenue, with memory making up the remaining 25%. The surge was driven by accelerating adoption of gate-all-around (GAA, next-generation transistor architecture) and advanced packaging solutions, as well as strong service revenue growth, which jumped more than 30% year-over-year.
Gross margins landed at the upper end of the company’s 57% to 60% target range, supported by favorable product mix and volume leverage. Operating margins also exceeded the updated target model, reaching 34.5% on a non-GAAP basis. The company’s consistent execution is reflected in six straight quarters of record performance. Newly acquired Centronics, chemical metrology specialist, contributed modestly in Q1 but is expected to ramp in Q2 as NOVA transitions to direct sales in key markets. Cash deployment included $20 million in buybacks and $51.7 million for the Centronics acquisition, preserving a robust $812 million liquidity position.
- Segment Outperformance: Prism and Veriflex platforms set sales records, validating technology differentiation in high-value nodes.
- Software and Services Expansion: Machine learning-enabled software and service contracts delivered record revenues, enhancing recurring revenue mix.
- Operational Investment: R&D and sales costs increased as NOVA invests to extend its product roadmap and capture future growth.
While the quarter’s top-line and margin performance were exceptional, investors should watch for the impact of tariffs, which are expected to trim gross margin by 30 to 50 basis points in Q2, and monitor the evolving revenue mix as China’s contribution moderates.
Executive Commentary
"Our revenues grew 50% year-over-year, exceeded our EPS guidance, and increased non-GAAP EPS by 56% year-over-year. Our performance was driven by NOVA's strong standing across market segments, regions, key customers, and technologies."
Gabby Weissman, President and CEO
"We remain fully committed to our gross margin model of 57% to 60%, and we expect to be within this range for the full year."
Guy Kisner, CFO
Strategic Positioning
1. Gate-All-Around and Advanced Packaging Leadership
NOVA’s competitive edge in GAA and advanced packaging metrology is translating into record platform sales and deepening customer relationships. The Prism platform’s spectral interferometry and unique algorithms are winning process control slots for through-silicon via and hybrid bonding, while Veriflex 4’s new capabilities open advanced 3D NAND opportunities. Early-stage wins in pilot lines set the stage for high-volume manufacturing expansion through 2026 and beyond.
2. Cross-Selling and Portfolio Breadth
Integrated metrology and software suites are enabling NOVA to cross-sell between logic, memory, and packaging customers, expanding wallet share and embedding machine learning into production. The Centronics acquisition adds chemical metrology depth, and the new German facility doubles capacity, positioning the company for long-term growth in both legacy and emerging nodes.
3. Resilience Amid Trade and Macro Disruption
Management is proactively navigating tariff and supply chain risks through a diversified manufacturing footprint across the US, Germany, and Israel. Localized supply chains and operational flexibility help NOVA limit gross margin exposure to new tariffs, while selective pricing and operational adjustments are in play to further mitigate risk.
4. Sustainability and Stakeholder Alignment
The publication of NOVA’s 2025 Sustainability Insights Report signals a focus on renewable energy, emissions reduction, and updated ESG KPIs. These initiatives are now embedded in the operating model, aligning environmental and social goals with business execution.
Key Considerations
This quarter’s results underscore NOVA’s ability to capture the structural shift toward advanced nodes and packaging, but the environment remains dynamic. Investors should calibrate expectations around:
- GAA and Advanced Packaging Ramp: Strong first-half demand is expected to accelerate as pilot lines transition to volume production, with 2026 set to outpace 2025.
- China Revenue Stability: Management expects nominal China revenue to remain flat or slightly decline, with relative share falling as advanced nodes gain prominence elsewhere.
- Tariff Margin Impact: Tariffs are forecast to reduce gross margin by 30–50 basis points, but operational agility and supply chain localization should contain the risk.
- Service Growth Trajectory: Service revenues are modeled to grow 10–15% for the year, reinforcing the recurring revenue base.
Risks
Key risks include a potential slowdown in advanced node investment, further escalation of trade barriers impacting component costs or customer demand, and visibility challenges in China and other mature node regions. Tariff impacts, while manageable so far, could intensify if the global trade climate deteriorates. Investors should also watch for execution risk as NOVA ramps new facilities and integrates acquisitions.
Forward Outlook
For Q2 2025, NOVA guided to:
- Revenue between $210 million and $220 million
- Non-GAAP EPS of $1.96 to $2.14
For full-year 2025, management did not provide explicit guidance but reiterated confidence in outperforming wafer fab equipment (WFE) market growth:
- Gross margin expected to remain within 57% to 60% target range
Management cited continued robust demand for advanced nodes, operational discipline, and close customer alignment as drivers of sustained momentum.
- Tariff headwinds are being offset through supply chain adjustments
- Service and software growth to support margin stability
Takeaways
NOVA’s Q1 2025 results mark a decisive step-up in growth, with technology leadership in GAA and packaging translating to record revenue and margin outperformance.
- Technology Adoption Drives Outperformance: Platform wins in GAA and advanced packaging are setting up multi-year growth as industry transitions accelerate.
- Margin Model Resilient to Tariffs: Gross margin impact from tariffs is contained by localized manufacturing and operational flexibility.
- China and Mature Node Mix Bear Watching: As China’s share moderates, backlog strength in other regions is key to sustaining growth through cycle turns.
Conclusion
NOVA’s record quarter underscores the company’s strategic positioning at the intersection of advanced node proliferation and packaging innovation. While macro and trade risks persist, operational execution and portfolio breadth provide levers to sustain outperformance in the evolving semiconductor landscape.
Industry Read-Through
NOVA’s results highlight the accelerating shift toward advanced process control and metrology in semiconductor manufacturing, with AI and high-bandwidth memory investments driving demand for precision tools. Peers with exposure to GAA, advanced packaging, and software-enabled process control are likely to benefit from similar secular tailwinds. The quarter also signals that localized supply chains and multi-region manufacturing footprints are becoming critical to margin defense as trade barriers rise. China’s flat-to-declining share may foreshadow a broader geographic rotation in industry growth, underscoring the importance of global customer diversification.