Semiconductor quality control company Nova (NASDAQ: NVMI) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 50.5% year on year to $213.4 million. Guidance for next quarter’s revenue was better than expected at $215 million at the midpoint, 1.6% above analysts’ estimates. Its non-GAAP profit of $2.18 per share was 4.4% above analysts’ consensus estimates.
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Nova (NVMI) Q1 CY2025 Highlights:
- Revenue: $213.4 million vs analyst estimates of $210.2 million (50.5% year-on-year growth, 1.5% beat)
- Adjusted EPS: $2.18 vs analyst estimates of $2.09 (4.4% beat)
- Adjusted Operating Income: $73.63 million vs analyst estimates of $70.07 million (34.5% margin, 5.1% beat)
- Revenue Guidance for Q2 CY2025 is $215 million at the midpoint, above analyst estimates of $211.7 million
- Adjusted EPS guidance for Q2 CY2025 is $2.05 at the midpoint, below analyst estimates of $2.08
- Operating Margin: 29.6%, up from 26.2% in the same quarter last year
- Free Cash Flow Margin: 28%, down from 40% in the same quarter last year
- Inventory Days Outstanding: 175, up from 168 in the previous quarter
- Market Capitalization: $5.88 billion
"Nova delivered an exceptional quarter, with record revenue and profitability that reflect the strength of our unique portfolio. Our strong positioning across markets, segments, and diverse customer base were central to this outperformance," said Gaby Waisman, President and CEO.
Company Overview
Headquartered in Israel, Nova (NASDAQ: NVMI) is a provider of quality control systems used in semiconductor manufacturing.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Nova’s sales grew at an incredible 26.5% compounded annual growth rate over the last five years. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers, a great starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Nova’s annualized revenue growth of 14.3% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 
This quarter, Nova reported magnificent year-on-year revenue growth of 50.5%, and its $213.4 million of revenue beat Wall Street’s estimates by 1.5%. Beyond the beat, this marks 5 straight quarters of growth, implying that Nova is in the middle of its cycle - a typical upcycle generally lasts 8-10 quarters. Company management is currently guiding for a 37.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 11.6% over the next 12 months, a slight deceleration versus the last two years. Still, this projection is healthy and suggests the market sees success for its products and services.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Nova’s DIO came in at 175, which is 9 days below its five-year average. These numbers show that despite the recent increase, there’s no indication of an excessive inventory buildup.
Key Takeaways from Nova’s Q1 Results
We enjoyed seeing Nova beat analysts’ adjusted operating income expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its inventory levels increased. Overall, we think this was a solid quarter with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 2.2% to $197.17 immediately after reporting.
Should you buy the stock or not? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
