Nova (NVMI) Citi’s 2026 Global TMT Conference summary

Market outlook and industry trends

• Wafer fab equipment (WFE) growth estimates for 2026 have been revised upward, with consensus now above 20%, driven mainly by AI-related demand.

• There is a wide range of WFE growth estimates for 2026, with some analysts projecting up to 38% growth.

• Incremental demand is coming from advanced logic nodes, DRAM capacity expansions, and advanced packaging, while NAND remains in a prolonged down cycle.

• Metrology intensity is lower in DRAM compared to logic, impacting outperformance relative to WFE.

• 2027 is expected to see higher metrology intensity as customers transition to 2nm and Gate-All-Around nodes.

Business performance and growth drivers

• Outperformance versus WFE has been strong in recent years, but 2026 will see less outperformance due to investment mix and lower metrology intensity.

• Advanced packaging now contributes 25% of sales, up from zero a few years ago, driven by acquisitions and redeployment of front-end tools.

• New products like Elipson, Metrion, and Nova WMC are driving growth, with rapid adoption and expanding applications among tier-one customers.

• Hybrid bonding in advanced packaging is a major future opportunity, with current focus on qualifications and future high-volume manufacturing.

• China represents about 30% of revenues, with local competition increasing but a current gap in capabilities remains.

Financial model and capital allocation

• Gross margin is at the high end of the 57%-60% target, supported by scale, technological advances, and value-based pricing.

• Product gross margins are higher than services due to infrastructure and labor intensity in services.

• Achieved $1 billion revenue run rate a year ahead of target; next five-year plan to be outlined at Investor Day in early 2027.

• Operational leverage is expected to increase with further growth.

• $200 million share buyback program announced, with inorganic growth remaining the top capital allocation priority.