VEECO INSTRUMENTS INC (VECO)

The Merger Agreement was approved by Veeco’s board of directors (except for one (1) independent director who serves on the Axcelis board of directors as well and thus recused himself) and, on February 6, 2026, by the stockholders of each company, but is still pending certain regulatory approvals and other customary mutual closing conditions. See Note 17 “Merger” to the accompanying Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. ​ Markets ​ Our products are purchased by customers in the following four end-markets: 1) Semiconductor; 2) Compound Semiconductor; 3) Data Storage; and 4) Scientific & Other. ​ Our systems are used in the production of a broad range of microelectronic components, including logic, dynamic random-access memory (“DRAM”), photonics devices (including laser diodes and micro-LEDs), power electronics, RF filters and amplifiers, magnetic heads for hard disk drives, and other semiconductor devices.

Many of our systems are used to deposit advanced materials critical to the operation of the device and some of our systems are used in cleaning and surface preparation as well as the precise removal of critical materials. We are also a leader in systems used in the advanced packaging process flow of microelectronic components such as flip chip, fan-out wafer level packaging (“FOWLP”), and other wafer level packaging approaches used in the modern integration of diverse semiconductor products, especially in consumer electronics. In general, our customers purchase our systems to both produce current-generation devices in volume and to develop next-generation products which deliver more efficient, cost-effective, and advanced technological solutions.

We operate in several highly cyclical business environments, and our customers’ buying patterns are dependent upon industry trends and buying patterns for consumer electronics. As our products are sold into multiple markets, the following table describes these markets and the applicable Veeco technologies. ​ ​ 5 Markets Description Applicable Veeco Technologies Semiconductor The Semiconductor market refers to process steps in logic and memory applications where silicon wafers are processed. There are many different wafer level process steps in forming patterned wafers, such as deposition, etching, masking, and doping. As device architectures continue to shrink with advanced nodes, more precise process control is paramount to achieving high yields and competitive cost.

One such process step is called Laser Annealing, which uses a very precise method to activate dopants, reduce contact resistance and modify material grain structure. The Veeco laser annealing technology enables our customers to have a lower thermal budget by annealing at higher temperatures over a shorter period of time. ​ This market also includes mask blank production for extreme ultraviolet (“EUV”) lithography, where Veeco’s Ion Beam Deposition technology is used for deposition of the multi-layer EUV reflective coating. […]

Compound Semiconductor Market ​ Compound Semiconductor revenue increased by 45% in the second quarter from the comparable prior year period, comprising 11% of total revenue. In the Compound Semiconductor market, we have a broad portfolio of products which are gaining momentum due to a significant inflection point within the industry due to the AI data center infrastructure build-out. ​ We continue to benefit from the growing demand tied to AI, particularly through our exposure to Silicon Photonics and the Indium Phosphide (“InP”) lasers used for optical connectivity applications. Industry investment remains focused on hyperscalers' need for higher bandwidth and optical connectivity across increasingly large AI data clusters. As bandwidth requirements continue to accelerate, the industry is increasingly focused on overcoming the "copper wall," where traditional electrical interconnects become less efficient at supporting higher-speed data transmission.

As of June 30, 2026, we had $29.2 million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. tax has previously been provided. Approximately $14.2 million of undistributed earnings will be subject to foreign withholding taxes if distributed back to the United States and we have accrued $1.4 million for foreign withholding taxes for the undistributed earnings. ​ We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months, including scheduled principal and interest payments on our convertible senior notes, purchase commitments, and payments required under our operating leases. ​

Discussions of 2025 items that are not included in this Form 10-Q can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of our Quarterly Report on Form 10-Q for the interim period ended June 30, 2025, filed on August 6, 2025. ​ Executive Summary ​ We are an innovative manufacturer of semiconductor process equipment. Our proven ion beam, laser annealing, lithography, MOCVD, and single wafer wet processing technologies play an integral role in the fabrication and packaging of advanced semiconductor devices. With equipment designed to optimize performance, yield and cost of ownership, Veeco holds leading technology positions in the markets we serve.

To learn more about Veeco’s systems and service offerings, visit www.veeco.com . ​ Merger with Axcelis Technologies, Inc. ​ On September 30, 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Axcelis Technologies, Inc., a Delaware corporation (“Axcelis”), and Victory Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Axcelis (“Merger Sub”). Pursuant to the Merger Agreement, and subject to the satisfaction or waiver of the conditions specified therein, Merger Sub shall be merged with and into Veeco (the “Merger”), with Veeco surviving as a wholly-owned subsidiary of Axcelis. The Merger Agreement was approved by our board of directors (except for one (1) independent director who serves on the Axcelis’ board of directors as well who recused himself) and, on February 6, 2026, by the stockholders of each company.

The completion of the Merger remains subject to the satisfaction or (to the extent permissible) waiver of customary closing conditions, including the final pending regulatory approval from the State Administration for Market Regulation of the People’s Republic of China, and is currently expected to close in the second half of 2026. ​ For more information regarding the Merger, see Note 10 “Merger” to the accompanying Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. ​ Business Update ​ Overview ​ The Semiconductor industry experienced robust growth in 2025 and, looking ahead, industry analysts are forecasting long-term growth of the industry, driven by secular growth trends such as artificial intelligence (“AI”), high-performance computing, advanced connectivity, and the electrification of the automotive industry.

Additionally, government investments in the Semiconductor industry are projected to accelerate global spending in next-generation technologies. ​ Growth in the Semiconductor industry driven by AI investments, coupled with increasing technological complexity of Semiconductor chips, are expected to drive long-term growth in Wafer Fab Equipment (“WFE”) spending. In an effort to improve chip performance, optimize power consumption, and reduce costs, today’s most advanced Semiconductor manufacturers are shrinking device geometries, investing in more complex transistor designs such as Gate-All-Around and exploring 3D architectures. As a result, growth of the WFE market is forecasted to keep pace with long-term growth 25 of the Semiconductor industry, which we believe should benefit semiconductor capital equipment providers, including Veeco. ​

Veeco’s technologies are at the forefront of enabling new technical innovations in the manufacturing of high-performance AI chips, advanced connectivity and High-Bandwidth Memory (“HBM”). We continue to invest in new technologies to expand our Serviceable Available Market (“SAM”) to a broad range of new applications. ​ Semiconductor Market ​ Semiconductor revenue comprised 68% of second quarter total revenue primarily driven by system shipments of our Laser Spike Annealing (“LSA”) technology, and our Advanced Packaging technology, particularly for our wet processing products. Semiconductor revenue increased 5% from the comparable prior period due to increase in sales to our leading-edge foundry/logic and memory customers. ​ In logic and foundry, we have long-standing and trusted customer relations and our annealing solutions continue to gain traction at advanced node customers.

Our LSA platform is production tool of record at all three Tier 1 logic customers, driving repeat business. […]

Risks Related to Intellectual Property and Cybersecurity ​ ● Disruptions in our information technology systems or data security incidents could result in significant financial, legal, regulatory, business, and reputational harm to us. ● We may be unable to effectively enforce and protect our intellectual property rights. ​ Financial, Accounting and Capital Market Risks ​ ● Our operating results may be adversely affected by tightening credit markets. ● We are subject to foreign currency exchange risks. ● We may be required to take impairment charges on assets. ● Our current debt facilities may contain certain restrictions, covenants and repurchase provisions that may limit our ability to raise the funds necessary to meet our working capital needs, which may include the cash conversion of the Notes or repurchase of the Notes for cash upon a fundamental change. ​

Risks Related to the Planned Merger with Axcelis Technologies, Inc. ​ ● The planned merger with Axcelis Technologies, Inc. is subject to certain closing conditions, including the receipt of consents and approvals from governmental authorities, which may impose unexpected delays in the completion of the merger, or the merger may not be completed at all. ● Failure to complete the Merger in a timely manner or at all could materially and adversely affect our stock price and future business and financial results. ● The pendency of the Merger could materially and adversely affect our business and operations. ● Our current stockholders will have a reduced ownership interest and voting power in the combined company after the Merger. ​

13 General Risk Factors ​ ● The price of our common shares is volatile and could decrease. ● Our inability to attract, retain, and motivate employees could have a material adverse effect on our business. ● We are subject to risks of non-compliance with environmental, health, and safety regulations. ​ Key Risk Factors That May Impact Future Results ​ Stockholders should carefully consider the risk factors described below when evaluating the Company. Any of these factors, many of which are beyond our control, could materially and adversely affect our business, financial condition, operating results, cash flow, and stock price. ​ Risks Related to Our Business and Industry ​ Unfavorable market conditions have adversely affected, and may adversely affect, our operating results. ​

Conditions of the markets in which we operate are volatile and may experience significant deterioration. Changing market conditions require that we continuously monitor and reassess our strategic resource allocation decisions. If we fail to properly adapt to changing business environments, we may lack the infrastructure and resources necessary to scale up our businesses to successfully compete during periods of growth, or we may incur excess fixed costs during periods of decreasing demand. Adverse market conditions relative to our products may result in: ​ ● reduced demand for our products, or the rescheduling or cancellation of orders for our products which may result in negative backlog adjustments; ● asset impairments, including the impairment of goodwill and other intangible assets; ● unfavorable changes in customer mix and product mix; […]

Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ Introduction ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to facilitate an understanding of our business and results of operations. This MD&A should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included elsewhere in this Form 10-K. The following discussion contains forward-looking statements and should also be read in conjunction with the cautionary statement set forth at the beginning of this Form 10-K. ​ The following section generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.

Discussions of 2024 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed on February 14, 2025. ​ Merger with Axcelis Technologies, Inc. ​ On September 30, 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Axcelis Technologies, Inc., a Delaware corporation (“Axcelis”), and Victory Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Axcelis (“Merger Sub”). Pursuant to the Merger Agreement, and subject to the satisfaction or waiver of the conditions specified therein, Merger Sub shall be merged with and into Veeco (the “Merger”), with Veeco surviving as a wholly-owned subsidiary of Axcelis.

The Merger Agreement was approved by our board of directors (except for one (1) independent director who serves on the Axcelis’ board of directors as well who recused himself) and, on February 6, 2026, by the stockholders of each company, but is still pending regulatory approvals and other customary mutual closing conditions. For more information regarding the previously announced merger with Axcelis, see Note 17 “Merger” to the accompanying Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. ​ Executive Summary ​ We are an innovative manufacturer of semiconductor process equipment. Our proven ion beam, laser annealing, lithography, MOCVD, and single wafer wet processing technologies play an integral role in the fabrication and packaging of advanced semiconductor devices.

With equipment designed to optimize performance, yield and cost of ownership, Veeco holds leading technology positions in the markets we serve. To learn more about Veeco’s systems and service offerings, visit www.veeco.com. ​ Veeco executed well during 2025, and accomplished a number of milestones, including: ​ ● Accomplished year-on-year revenue semiconductor market growth, accounting for 72% of total Company revenue ● Shipped a Laser Spike Annealing (“LSA”) system to a second Tier 1 memory customer for evaluation in its advanced DRAM R&D group. Penetrating the annealing market in the memory space, with our LSA system is an important growth opportunity. ● Achieved steady growth in our Advanced Packaging business year-over-year driven by AI-related demand.

Won multiple orders for advanced wet processing and lithography systems from leading foundries, supporting critical end markets through AI, automotive, aerospace, defense, and communications. ● Received multiple orders in the Compound Semiconductor market for our Propel 300mm GaN on Silicon and Lumina+ Arsenide Phosphide new platforms, supporting end markets for AI data centers and low earth orbit space grade solar cells; these are revenue growth opportunities for 2026, principally in the second half. 38 ● Received several orders in the Data Storage market for our ion beam and wet processing equipment from demand for cloud and AI data centers; these are revenue growth opportunities for 2026, principally in the second half.

● Continued investments in next-generation technologies with our Nanosecond Annealing (“NSA”) system being evaluated at two Tier 1 logic customers and our Ion Beam Deposition 300 (“IBD300”) system being evaluated at two DRAM customers. We believe these inflection points position us well to capture our largest SAM growth opportunities in 2026 and beyond. ​ Business Update ​ Sales in the Semiconductor industry are estimated to have increased year-over-year in 2025 to approximately $770 billion dollars, according to Gartner. Looking ahead, industry analysts are forecasting long-term growth of the industry, driven by secular growth trends such as artificial intelligence, high-performance computing, mobile connectivity, and the electrification of the automotive industry. Additionally, government investments in the Semiconductor industry are projected to accelerate global spending in next-generation technologies. ​

Growth in the Semiconductor industry, coupled with increasing technological complexity of Semiconductor chips, are expected to drive long-term growth in WFE spending. […]

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