Nova (Nasdaq: NVMI) reported second-quarter 2026 revenue of $255.0 million, up 16% from $220.0 million a year earlier, while GAAP diluted EPS increased to $2.20 from $2.14. For the quarter ended June 30, demand for advanced logic and advanced packaging supported record revenue, although GAAP gross margin narrowed to 56.5% and operating cash flow declined to $40.9 million.
Core financial results
Revenue grew faster than gross profit because gross margin contracted by 1.3 percentage points year over year. Operating expenses rose 10% to $68.0 million, but that was slower than revenue growth, allowing operating income to increase 16% while operating margin remained close to 30%.
Below the operating line, financing income fell to $12.9 million from $15.2 million and income tax expense increased to $14.1 million from $12.5 million. GAAP net income consequently grew about 10%, while a higher diluted share count limited GAAP EPS growth to approximately 3%.
| Metric | Q2 2026 | Q2 2025 | Year-over-year change |
|---|---|---|---|
| Revenue | $255.0 million | $220.0 million | +16% |
| Gross profit / margin | $144.2 million / 56.5% | $127.2 million / 57.8% | +13%; margin -1.3 pp |
| Operating income / margin | $76.2 million / approximately 29.9% | $65.6 million / approximately 29.8% | +16% |
| GAAP net income | $75.0 million | $68.3 million | Approximately +10% |
| GAAP diluted EPS | $2.20 | $2.14 | Approximately +3% |
| Non-GAAP net income | $86.5 million | $70.4 million | Approximately +23% |
| Non-GAAP diluted EPS | $2.51 | $2.20 | +14% |
| Operating cash flow | $40.9 million | $45.7 million | Approximately -10% |
Nova’s non-GAAP results exclude items including stock-based compensation, amortization of acquired intangible assets, debt issuance costs, lease and intercompany loan revaluation, and related tax effects.
Business and product performance
Product revenue increased approximately 13% to $201.5 million, while service revenue rose about 27% to $53.5 million. Services therefore grew faster than the larger product business, contributing to the overall 16% revenue increase.
Nova reported record revenue from advanced logic devices, supported by the transition to Gate-All-Around architectures and demand for advanced process nodes. Advanced packaging solutions also reached record revenue as logic and memory manufacturers expanded capacity.
Management highlighted record sales for front-end chemical metrology and Sentronics dimensional metrology products used in advanced packaging. CEO Gaby Waisman attributed the quarter’s performance to broad customer demand, market-share gains, and deeper engagement with customers in leading-edge device markets.
Revenue growth outpaced cash conversion as receivables rose
Operating cash flow declined to $40.9 million even as net income increased to $75.0 million. The main working-capital pressure was accounts receivable, which used $33.8 million of cash during the quarter compared with $9.0 million a year earlier. Inventory used another $7.2 million, while a $12.0 million increase in accounts payable provided a partial offset.
Trade receivables reached $210.3 million at June 30, up from $151.9 million at December 31, 2025. The increase in receivables helps explain why record accounting earnings did not produce stronger operating cash flow during the quarter.
Nova ended June with $124.8 million in cash and cash equivalents, $408.8 million in interest-bearing and restricted deposits, and approximately $1.18 billion in marketable securities. Its convertible senior notes were classified as a $733.6 million current liability at quarter-end, compared with $731.7 million classified as non-current at the end of 2025.
The diluted share count rose approximately 7% to 34.45 million from 32.05 million. This increase explains why GAAP diluted EPS grew more slowly than GAAP net income.
Q3 2026 guidance
For the quarter ending September 30, 2026, Nova guided to revenue of $277 million to $287 million. That range would represent approximately 9% to 13% sequential growth from Q2 if achieved, accompanied by higher projected GAAP and non-GAAP diluted EPS.
| Metric | Q3 2026 guidance |
|---|---|
| Revenue | $277 million to $287 million |
| GAAP diluted EPS | $2.46 to $2.61 |
| Non-GAAP diluted EPS | $2.70 to $2.85 |
The non-GAAP EPS reconciliation includes estimated adjustments for stock-based compensation, acquired intangible asset amortization, debt issuance cost amortization, and related tax effects.
Risks investors should monitor
- Gross-margin pressure: GAAP gross margin fell to 56.5% from 57.8% a year earlier and 57.7% in the previous quarter. Continued contraction could limit the profit benefit from revenue growth.
- Receivables and cash conversion: Higher accounts receivable reduced operating cash flow despite increased net income. Collections and working-capital requirements will be important for determining whether cash generation catches up with earnings.
- Share-count growth: The higher diluted share count caused EPS growth to trail net income growth and could continue to affect per-share results.
- Dependence on leading-edge investment: Advanced-node transitions and packaging capacity additions were important revenue drivers. Growth will remain sensitive to customers’ spending in these areas.
- Convertible notes classified as current: The $733.6 million current classification materially increased reported current liabilities, making the treatment of these notes and associated liquidity planning important balance-sheet considerations.
Summary
Nova’s Q2 2026 results combined record revenue with growth across advanced logic, advanced packaging, products, and services. Operating profit kept pace with revenue, but lower gross margin, rising receivables, and a larger diluted share count tempered the flow-through to cash generation and EPS. Q3 guidance points to further sequential expansion, with gross-margin stability and improved cash conversion among the key items to monitor.
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