Nova (NVMI) Q2 2025: Advanced Packaging Revenue Jumps 31% as Metrology Demand Accelerates
Nova’s record-setting quarter was powered by surging demand for advanced metrology and packaging solutions, with all core divisions outperforming and service revenue extending its growth streak. The company’s diversified business model, spanning logic, memory, and packaging, is translating technology inflections like AI and gate-all-around (GAA) into tangible top-line gains. Management’s robust guidance and visibility into 2026 reinforce Nova’s position as a critical enabler of semiconductor manufacturing complexity.
Summary
- Metrology-Driven Expansion: Advanced packaging and chemical metrology units delivered outsized growth, validating Nova’s technology alignment with industry transitions.
- Service Revenue Momentum: Value-added services posted a tenth consecutive quarter of growth, highlighting recurring demand from the installed base.
- 2026 Visibility Strengthens: Management’s confidence in the $500M GAA revenue target signals sustained secular tailwinds and robust customer adoption.
Performance Analysis
Nova posted its fifth consecutive record quarter, with total revenue reaching $220 million, up 3% sequentially and 40% year over year. The company’s product mix skewed toward higher-margin offerings, driving blended gross margin to the upper end of the target range at 58% GAAP and 60% non-GAAP. Operating margin also exceeded expectations, reaching 30% GAAP and 34% non-GAAP, reflecting both scale and disciplined cost management.
Segment performance was broad-based: Logic and foundry contributed 75% of product revenue, while memory, including DRAM and high bandwidth memory (HBM), made up the remainder. Advanced packaging and chemical metrology were standouts, with service revenue up 31% year over year and 7% quarter over quarter, marking a decade-long streak of consecutive growth quarters. The Centronics, advanced packaging solutions, acquisition is now integrated and contributing to top-line and geographic diversification.
- Product Mix Leverage: Higher-margin product sales and diversified customer concentration supported margin expansion above guidance.
- Geographic Breadth: Four customers and territories each contributed at least 10% of product revenue, underscoring a balanced global footprint.
- Free Cash Flow Strength: Free cash flow reached $43 million, with a robust cash balance of $856 million, supporting ongoing R&D and M&A flexibility.
Tariff headwinds proved less severe than feared, with management revising expected margin impact to just 20 basis points, down from the prior 30–50 basis point range. This, coupled with robust execution across all divisions, positions Nova for continued outperformance into the back half of 2025.
Executive Commentary
"Our product portfolio and value proposition, which support technological transitions and improvements in yield and productivity, resulted in record results in the logic foundry and advanced packaging segments."
Gabby Weissman, President and CEO
"Operating margins in the second quarter reached 30% on a gap basis and 34% on a non-gap 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."
Guy Kisner, CFO
Strategic Positioning
1. Gate-All-Around (GAA) and Advanced Node Leadership
Nova’s pole position in GAA architectures, a next-generation transistor design, is translating into both revenue and long-term visibility. The company is engaged with all four leading GAA customers and reaffirmed its $500 million cumulative GAA revenue target through 2026. Management cited stable demand in H2 2025 and expects 2026 to be even stronger, reinforcing Nova’s critical role in enabling semiconductor scaling.
2. Chemical and Optical Metrology Portfolio Strength
Record performance in chemical metrology and the adoption of the Centronics portfolio underscore Nova’s ability to address complex customer challenges, such as high warpage and surface diversity in HBM and advanced packaging. The VeraFlex platform’s new active charge compensation feature is driving adoption in 3D NAND, expanding Nova’s footprint in memory manufacturing.
3. Service and Recurring Revenue Expansion
Service revenue posted its tenth straight quarterly record, with value-added services focused on install-base productivity and new application enablement. This recurring revenue stream provides a stabilizing counterweight to cyclical equipment spending and deepens customer stickiness.
4. Materials Metrology and Lab-to-Fab Strategy
Nova’s materials metrology segment, including the XPS and XRF platforms, is gaining traction through expanded applications and cost-of-ownership improvements. Multiple new tools, such as Metreon and Ellipson, are under evaluation by advanced node manufacturers, with growing evidence of repeat orders and multi-tool adoption. Management’s focus on converting these evaluations into process tool-of-record status is a key lever for future growth.
5. Geographic and Customer Diversification
Nova’s revenue is balanced across regions, with both China and ex-China markets showing resilience. The company’s three core divisions—chemical, material, and dimensional metrology—each exhibit distinct demand drivers, insulating Nova from single-market or customer volatility. The integration of Centronics further expands reach in advanced packaging and new territories.
Key Considerations
Nova’s quarter was defined by broad-based execution, deepening technology relevance, and a business model built for volatility. Investors should weigh the following:
Key Considerations:
- GAA Revenue Visibility: Management’s on-track progress toward $500 million GAA revenue through 2026 provides rare multi-year demand clarity.
- Service Revenue as a Shock Absorber: Recurring, value-added service growth helps smooth cyclical swings in equipment spending.
- Product and Customer Mix: Margin upside was driven by favorable product mix and diversified customer base, reducing dependency on any single region or vertical.
- Centronics Integration: The acquisition is delivering on both direct sales and technology cross-sell, expanding Nova’s advanced packaging reach.
- Tariff Impact Muted: Lower-than-expected tariff drag offers incremental margin flexibility for future quarters.
Risks
Nova’s outlook is exposed to semiconductor capital spending cycles, customer concentration in advanced nodes, and the pace of adoption for new metrology platforms. While management downplayed any near-term GAA demand risk from individual customer capex cuts, a sharp slowdown in AI or memory investment could affect growth. Regulatory actions, particularly around trade and tariffs, remain a watchpoint, though recent impacts have been less severe than forecast.
Forward Outlook
For Q3 2025, Nova guided to:
- Revenue between $215 million and $227 million
- GAAP EPS of $1.77 to $1.97; non-GAAP EPS of $2.02 to $2.22
- Gross margin of approximately 57% GAAP and 59% non-GAAP
- Operating expenses to increase modestly
For full-year 2025, management highlighted:
- Continued year-over-year outperformance and strong H2 visibility
- Tariff impact now expected to be only 20 basis points on gross margin
Management emphasized ongoing investment in R&D, portfolio expansion, and customer partnership as key drivers for sustained growth through 2026.
Takeaways
Nova’s Q2 results reinforce its strategic importance in semiconductor process control and yield management, with all core divisions contributing to record performance and robust forward visibility.
- Advanced Packaging and GAA Are Secular Tailwinds: Nova’s pole position in these segments is translating into outsized growth and multi-year revenue visibility.
- Recurring Revenue and Product Mix Drive Margin Upside: Service momentum and favorable mix provide resilience and operating leverage.
- Watch for Platform Adoption and Regional Shifts: Conversion of new metrology tools to process tool-of-record status and continued geographic diversification will be critical for sustaining above-market growth.
Conclusion
Nova’s diversified model and technology leadership are enabling it to capture outsized gains from semiconductor complexity and packaging innovation. With robust execution, recurring revenue streams, and strong visibility into 2026, the company remains well-positioned for both cyclical resilience and secular growth.
Industry Read-Through
Nova’s results are a direct read-through on the intensifying demand for advanced metrology, driven by AI, GAA, and advanced packaging investments across the semiconductor value chain. The company’s outperformance relative to peers in both China and ex-China markets signals that technology differentiation and customer diversification are critical for navigating regional volatility. For semiconductor capital equipment and process control peers, Nova’s record service revenue growth and muted tariff impact highlight the value of recurring revenue and agile operations in a turbulent macro environment. The accelerating adoption of new metrology platforms like VeraFlex, Metreon, and Ellipson also underscores the arms race in process control sophistication as nodes shrink and packaging complexity rises.