What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-08 · 94 added, 40 removed, 141 unchanged (49% of the section changed)

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Consolidation and partnering within the semiconductor manufacturing industry has resulted in a small number of customers representing a substantial portion of our business.

Our ten largest customers accounted for 72.9% of total revenue for the three months ended March 31, 2026.

Sales of our systems in the first three months of 2026 were down compared to the same period in the prior year, as customers have moderated the pace of investments into mature process node technologies.

During the three months ended March 31, 202 6, the overall mature process segment represented 68% of our shipped systems revenue, with the remainder represented by 32% of shipments to dynamic random-access memory (“DRAM”) applications.

Our ten largest customers accounted for 68.5% of total revenue for the six months ended June 30, 2026.

Sales of our systems in the first half of 2026 were down slightly compared to the same period in the prior year.

During the six months ended June 30, 2026 , the overall mature process segment represented 77% of our shipped systems revenue, with the remainder represented by 22% of shipments to dynamic random-access memory (“DRAM”) applications and 1% of shipments to advanced logic.

Of the mature process segment, power device shipments comprised 38% of total systems revenue with the general mature segment representing 39%, which includes image sensor applications.

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For further information regarding the Merger, see Note 19 to the consolidated financial statements included in this report.

On February 6, 2026, Axcelis held a special meeting of stockholders at which the Company Stock Issuance was approved.

On February 6, 2026, Axcelis held a special meeting of stockholders at which the issuance of Company common stock to the Veeco stockholders in the Merger was approved.

The completion of the Merger remains subject to other customary closing conditions, including the final pending regulatory approval from the State Administration for Market Regulation of the People’s Republic of China.

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Total revenue

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Total revenue

Product revenue, which includes systems sales, sales of spare parts, product upgrades and used systems, was $188.0 million, or 94.5% of revenue, during the three months ended March 31, 2026, compared with $182.8 million, or

94.9% of revenue, for the three months ended March 31, 2025.

The $5.2 million increase in product revenue for the three-month period ended March 31, 2026, in comparison to the same period in 2025, was primarily driven by an increase in Aftermarket sales, offset partially by a customer settlement of $4.9 million.

Three months ended June 30, 2026 Compared with Three months ended June 30, 2025

Product revenue, which includes systems sales, sales of spare parts, product upgrades and used systems, was $200.5 million, or 93.2% of revenue, during the three months ended June 30, 2026, compared with $183.4 million, or 94.3% of revenue, for the three months ended June 30, 2025.

The $17.1 million increase in product revenue for the three-month period ended June 30, 2026, in comparison to the same period in 2025, was primarily driven by an increase in Aftermarket sales.

Deferred revenue includes payments received in advance of system sales as well as deferral of revenue from systems sales for installation and other future performance obligations.

The total amount of deferred revenue at March 31, 2026 and December 31, 2025 was $109.6 million and $109.0 million, respectively.

Services revenue, which includes the labor component of maintenance and service contracts and fees for service hours provided by on-site service personnel, was $10.9 million, or 5.5% of revenue, for the three months ended March 31, 2026, compared with $9.7 million, or 5.1% of revenue, for the three months ended March 31, 2025.

The total amount of deferred revenue at June 30, 2026 and December 31, 2025 was $118.5 million and $108.9 million, respectively.

Services revenue, which includes the labor component of maintenance and service contracts and fees for service hours provided by on-site service personnel, was $14.7 million, or 6.8% of revenue, for the three months ended June 30, 2026, compared with $11.1 million, or 5.7% of revenue, for the three months ended June 30, 2025.

Although services revenue typically increases with the expansion of the installed base of systems, it can fluctuate from period to period based on capacity utilization at customers’ manufacturing facilities, which affects the need for equipment service.

Six months ended June 30, 2026 Compared with Six months ended June 30, 2025

Product revenue was $388.5 million, or 93.8% of revenue, during the six months ended June 30, 2026, compared with $366.2 million, or 94.6% of revenue, for the six months ended June 30, 2025.

The $22.3 million increase in product revenue for the six-month period ended June 30, 2026, in comparison to the same period in 2025, was primarily driven by an increase in Aftermarket sales, partially offset by a customer settlement of $4.9 million.

Services revenue was $25.6 million, or 6.2% of revenue, for the six months ended June 30, 2026, compared with $20.9 million, or 5.4% of revenue, for the six months ended June 30, 2025.

Revenue Categories used by Management

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Aftermarket and Systems Revenue

Included in total revenue of $199.0 million during the three months ended March 31, 2026 is revenue from our Aftermarket business of $72.6 million, compared with $55.0 million of Aftermarket revenue for the three months ended March 31, 2025.

Three months ended June 30, 2026 Compared with Three months ended June 30, 2025

Included in total revenue of $215.2 million during the three months ended June 30, 2026 is revenue from our Aftermarket business of $82.8 million, compared with $61.3 million of Aftermarket revenue for the three months ended June 30, 2025.

Aftermarket revenue fluctuates from period to period primarily based on capacity utilization at customers’ manufacturing facilities, which affects the sale of spare parts and demand for equipment service.

Aftermarket revenue can also fluctuate from period to period based on the demand for system upgrades or used equipment.

The remaining $126.4 million of revenue for the three months ended March 31, 2026 was systems revenue, compared with $137.6 million of systems revenue for the three months ended March 31, 2025.

The remaining $132.4 million of revenue for the three months ended June 30, 2026 was systems revenue, compared with $133.2 million of systems revenue for the three months ended June 30, 2025.

Systems revenue fluctuates from period to period based on our customers’ capital spending.

Six months ended June 30, 2026 Compared with Six months ended June 30, 2025

Included in total revenue of $414.1 million during the six months ended June 30, 2026 is revenue from our Aftermarket business of $155.4 million, compared with $116.2 million of Aftermarket revenue for the six months ended June 30, 2025.

The remaining $258.7 million of revenue for the six months ended June 30, 2026 was systems revenue, compared with $270.9 million of systems revenue for the six months ended June 30, 2025.

Gross Profit / Gross Margin

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Total gross profit

Gross margin from product revenue was 43.8% for the three months ended March 31, 2026, compared to 48.3% for the three months ended March 31, 2025.

Three months ended June 30, 2026 Compared with Three months ended June 30, 2025

Gross margin from product revenue was 46.6% for the three months ended June 30, 2026, compared to 47.9% for the three months ended June 30, 2025.

The decrease in gross margin resulted from a less favorable mix of system shipments.

Gross margin from services revenue was (15.5)% for the three months ended March 31, 2026, compared to 4.6% for the three months ended March 31, 2025.

The decrease in gross margin is attributable to changes in the mix of service contracts .

Gross margin from services revenue was (15.7)% for the three months ended June 30, 2026, compared to (5.4)% for the three months ended June 30, 2025.

The decrease in gross margin is primarily attributable to changes in the mix of service contracts and fluctuations of service expenses .

Occasionally, we experience negative gross margin on service revenue as contract costs can vary significantly from one period to another based on customer demand.

Six months ended June 30, 2026 Compared with Six months ended June 30, 2025

Gross margin from product revenue was 45.2% for the six months ended June 30, 2026, compared to 48.1% for the six months ended June 30, 2025.

The decrease in gross margin primarily resulted from a less favorable mix of system shipments.

Gross margin from services revenue was (15.6)% for the six months ended June 30, 2026, compared to (0.7)% for the six months ended June 30, 2025.

The decrease in gross margin is primarily attributable to changes in the mix of service contracts and fluctuations of service expenses .

Operating Expenses

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and professional fees, travel and depreciation expenses.

Personnel costs are our largest expense, representing $35.7 million, or 49.2%, of our total operating expenses for the three months ended March 31, 2026, compared to $35.4 million, or 59.4%, of our total operating expenses for the three months ended March 31, 2025.

The slightly higher personnel costs for the three months ended March 31, 2026 are primarily due to increases in salary and benefits expenses, partially offset by a decrease in separation program expenses.

Personnel costs are our largest expense, representing $39.2 million, or 55.3%, of our total operating expenses for the three months ended June 30, 2026, compared to $35.9 million, or 61.5%, of our total operating expenses for the three months ended June 30, 2025.

Personnel costs were $74.9 million, or 52.2%, of our total operating expenses for the six months ended June 30, 2026, compared to $71.3 million, or 60.4%, of our total operating expenses for the six months ended June 30, 2025.

The higher personnel costs for the three months ended June 30, 2026 are primarily due to increases in salary, benefits, commissions, and stock-based compensation expenses.

The higher personnel costs for the six months ended June 30, 2026 are primarily due to increases in salary, benefits, commissions, and stock-based compensation expenses, slightly offset by a decrease in separation program expenses.

Research and Development

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Accordingly, based on our strategic plan, we establish annual research and development budgets to fund programs that we expect will solve customers’ high value, high impact, ion implantation challenges.

Research and development expense was $28.5 million during the three months ended March 31, 2026, an increase of $1.4 million, or 5.1%, compared with $27.1 million during the three months ended March 31, 2025.

Three months ended June 30, 2026 Compared with Three months ended June 30, 2025

Research and development expense was $29.0 million during the three months ended June 30, 2026, an increase of $1.9 million, or 7.1%, compared with $27.1 million during the three months ended June 30, 2025.

The increase is primarily due to higher personnel costs and an increase in consulting expenses.

Six months ended June 30, 2026 Compared with Six months ended June 30, 2025

Research and development expense was $57.5 million during the six months ended June 30, 2026, an increase of $3.3 million, or 6.1%, compared with $54.2 million during the six months ended June 30, 2025.

The increase is primarily due to higher personnel costs and an increase in consulting expenses.

Sales and Marketing

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Our sales and marketing expenses result primarily from the sale of our equipment and services through our direct sales force.

Sales and marketing expense was $17.4 million during the three months ended March 31, 2026, an increase of $2.2 million, or 14.7%, compared with $15.1 million during the three months ended March 31, 2025.

The increase is primarily due to higher personnel expenses and an increase in freight expenses.

Three months ended June 30, 2026 Compared with Three months ended June 30, 2025

Sales and marketing expense was $19.6 million during the three months ended June 30, 2026, an increase of $4.6 million, or 30.3%, compared with $15.0 million during the three months ended June 30, 2025.

The increase is primarily due to higher personnel expenses and increases in freight expenses and evaluation tool costs.

Six months ended June 30, 2026 Compared with Six months ended June 30, 2025

Sales and marketing expense was $36.9 million during the six months ended June 30, 2026, an increase of $6.8 million, or 22.5%, compared with $30.1 million during the six months ended June 30, 2025.

The increase is primarily due to higher personnel expenses and increases in freight expenses and evaluation tool costs.

General and Administrative

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Our general and administrative expenses result primarily from the costs associated with our executive, finance, information technology, legal and human resource functions.

General and administrative expense was $26.8 million during the three months ended March 31, 2026, an increase of $9.4 million, or 54.2%, compared with $17.4 million during the three months ended March 31, 2025.

The increase is primarily due to an increase in Merger related professional fees.

Three months ended June 30, 2026 Compared with Three months ended June 30, 2025

General and administrative expense was $22.4 million during the three months ended June 30, 2026, an increase of $6.1 million, or 37.2%, compared with $16.3 million during the three months ended June 30, 2025.

The increase is due to an increase in professional fees related to the Merger.

Six months ended June 30, 2026 Compared with Six months ended June 30, 2025

General and administrative expense was $49.1 million during the six months ended June 30, 2026, an increase of $15.5 million, or 45.9%, compared with $33.7 million during the six months ended June 30, 2025.

The increase is due to an increase in professional fees related to the Merger.

Other Income (Expense)

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dollar against local currencies of the countries in which we operate and forward currency exchange contracts.

Other income was $2.7 million for the three months ended March 31, 2026, compared with other income of $3.9 million for the three months ended March 31, 2025.

The $1.3 million decrease in other income (expense) compared to the same prior year period was primarily due to a decrease in interest income of $1.1 million and an increase in net foreign exchange losses of $0.1 million.

Net foreign exchange losses for the three months ended March 31, 2026 includes $1.7 million of gains related to forward currency exchange contracts, offset by foreign exchange losses of $2.2 million.

Net foreign exchange losses for the three months ended March 31, 2025 includes foreign exchange losses of $1.2 million from forward currency exchange contracts, partially offset by foreign exchange gains of $0.8 million.

Three months ended June 30, 2026 Compared with Three months ended June 30, 2025

Other income was $5.1 million for the three months ended June 30, 2026, compared with other income of $6.0 million for the three months ended June 30, 2025.

The $1.0 million decrease in other income (expense) compared to the same prior year period was primarily due to a decrease in interest income of $0.9 million, partially offset by a slight increase in net foreign exchange gains of $0.2 million.

Net foreign exchange gains for the three months ended June 30, 2026 includes $1.5 million of gains related to forward currency exchange contracts and foreign exchange gains of $0.2 million.

Net foreign exchange gains for the three months ended June 30, 2025 includes foreign exchange gains of $7.3 million, partially offset by foreign exchange losses from forward currency exchange contracts of $5.8 million.

Six months ended June 30, 2026 Compared with Six months ended June 30, 2025

Other income was $7.7 million for the six months ended June 30, 2026, compared with other income of $10.0 million for the six months ended June 30, 2025.

The $2.2 million decrease in other income (expense) compared to the same prior year period was primarily due to a decrease in interest income of $2.0 million, partially offset by a slight increase in net foreign exchange gains of $0.1 million.

Net foreign exchange gains for the six months ended June 30, 2026 includes $3.2 million of gains related to forward currency exchange contracts, partially offset by foreign exchange losses of

$2.0 million.

Net foreign exchange gains for the six months ended June 30, 2025 includes foreign exchange gains of $8.1 million, partially offset by foreign exchange losses related to forward currency exchange contracts of $7.0 million.

Income Tax Provision

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Percentage of revenue

Income tax expense was $1.4 million for the three months ended March 31, 2026, compared to $4.5 million for the three months ended March 31, 2025.

The $3.1 million decrease was primarily due to the decrease in pre-tax book income.

The reported effective tax rate for the three months ended March 31, 2026 was 13.3% compared to 13.6% for the three months ended March 31, 2025.

The effective tax rate for the three months ended March 31, 2026 was less than the U.S.

Income tax expense was $2.1 million for the three months ended June 30, 2026, compared to $3.6 million for the three months ended June 30, 2025.

The $1.6 million decrease was primarily due to the decrease in pre-tax book income and an increase in stock-based compensation deduction.

The reported effective tax rate for the three months ended June 30, 2026 was 8.1% compared to 10.3% for the three months ended June 30, 2025.

The effective tax rate for the six months ended June 30, 2026 was less than the U.S.

statutory rate of 21%, primarily attributable to the Foreign Derived Intangible Income deduction and Federal research and development tax credits.

Liquidity and Capital Resources

At March 31, 2026, we had $150.8 million in unrestricted cash and cash equivalents, $215.8 million in short-term investments and $203.3 million in long-term investments, in addition to $10.6 million in restricted cash.

At June 30, 2026, we had $155.0 million in unrestricted cash and cash equivalents, $247.2 million in short-term investments and $174.8 million in long-term investments, in addition to $10.6 million in restricted cash.

Management believes that maintaining a strong cash balance is necessary to fund a continuing ramp in our business which can require significant cash investment to meet sudden demand.

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Our liquidity is affected by many factors.

Some of these relate specifically to the operations of our business, for example, the rate of sales of our products, and others relate to the uncertainties of global economic conditions, including tariff programs implemented in countries in which we operate as well as the availability of credit and the condition of the overall semiconductor equipment industry.

Some of these relate specifically to the operations of our business, including for example, the rate of sales of our products, and others relate to the uncertainties of global economic conditions, including tariff programs implemented in countries in which we operate as well as the availability of credit and the condition of the overall semiconductor equipment industry.

Our industry requires ongoing investments in operations and research and development that are not easily adjusted to reflect changes in revenue.

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Stock repurchases, as discussed below, also reduce our cash balances.

During the three months ended March 31, 2026 and 2025, we generated $18.1 million and $39.8 million, respectively, of cash related to operating activities.

Investing activities for the three months ended March 31, 2026 resulted in a cash usage of $10.6 million, $1.8 million of which was used for capital expenditures and $160.7 million of which was used to purchase short-term and long-term investments, partially offset by $151.9 million related to maturities and sales of short-term investments.

Investing activities for the three months ended March 31, 2025 resulted in cash generated of $40.5 million, $5.0 million of which was used for capital expenditures and $252.5 million of which was used to purchase short-term investments, offset by $297.9 million related to maturities and sales of short-term investments.

Financing activities for the three months ended March 31, 2026 resulted in a cash usage of $1.4 million.

During the first three months of 2026, (i) $1.0 million was used for payments to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, where units are withheld by us to cover taxes, and (ii) $0.4 million was used to reduce the liability under the finance lease of our corporate headquarters.

In comparison, financing activities for the three months ended March 31, 2025 resulted in cash usage of $20.1 million, of which (i) $18.2 million related to the repurchase of our common stock (ii) $1.6 million related to payments made to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, and (iii) $0.3 million relating to the reduction of our finance lease liability.

As of March 31, 2026, we had a security deposit of $5.9 million related to the lease of our corporate headquarters in the form of a cash collateralized letter of credit, which is classified as long-term restricted cash on our balance sheet.

During the six months ended June 30, 2026 and 2025, we generated $36.5 million and $79.5 million, respectively, of cash related to operating activities.

Investing activities for the six months ended June 30, 2026 resulted in a cash usage of $16.7 million, $5.4 million of which was used for capital expenditures and $223.2 million of which was used to purchase short-term and long-term investments, partially offset by $211.9 million related to maturities of short-term investments.

Investing activities for the six months ended June 30, 2025 resulted in cash generated of $35.9 million, $6.9 million of which was used for capital expenditures and $345.2 million of which was used to purchase short-term and long-term investments, offset by $388.0 million related to maturities and sales of short-term investments.

Financing activities for the six months ended June 30, 2026 resulted in a cash usage of $9.2 million.

During the first six months of 2026, (i) $9.5 million was used for payments to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, where units are withheld by us to cover taxes, (ii) $0.2 million related to the excise taxes paid for the repurchase of our common stock, and (iii) $0.8 million was used to reduce the liability under the finance lease of our corporate headquarters.

These amounts were partially offset by $1.3 million of proceeds related to the purchase of shares under our 2020 ESPP during the first six months of 2026.

In comparison, financing activities for the six months ended June 30, 2025 resulted in cash usage of $67.1 million, of which (i) $63.5 million related to the repurchase of our common stock (ii) $4.2 million related to payments made to government tax authorities for income tax withholding on employee compensation arising from the vesting of RSUs, and (iii) $0.7 million relating to the reduction of our finance lease liability.

These amounts were partially offset by $1.2 million of proceeds related to the purchase of shares under our 2020 ESPP during the first six months of 2025.

As of June 30, 2026, we had a security deposit of $5.9 million related to the lease of our corporate headquarters in the form of a cash collateralized letter of credit, which is classified as long-term restricted cash on our balance sheet.

We believe that based on our current market, revenue, expense and cash flow forecasts, our existing cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements for the short- and long-term.

Commitments and Contingencies

Significant commitments and contingencies at March 31, 2026 are consistent with those discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 16 to the consolidated financial statements included in our 2025 Form 10-K.

Significant commitments and contingencies at June 30, 2026 are consistent with those discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 16 to the consolidated financial statements included in our 2025 Form 10-K.

Quantitative and Qualitative Disclosures about Market Risk.

As of March 31, 2026, there have been no material changes to the quantitative information about market risk disclosed in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” included in our 2025 Form 10-K.

As of June 30, 2026, there have been no material changes to the quantitative information about market risk disclosed in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” included in our 2025 Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis