Semiconductor quality control company Nova (NASDAQ: NVMI) announced better-than-expected revenue in Q2 CY2026, with sales up 15.9% year on year to $255 million. Guidance for next quarter’s revenue was better than expected at $282 million at the midpoint, 1.8% above analysts’ estimates. Its non-GAAP profit of $2.51 per share was 4.1% above analysts’ consensus estimates.
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Nova (NVMI) Q2 CY2026 Highlights:
- Revenue: $255 million vs analyst estimates of $250.9 million (15.9% year-on-year growth, 1.6% beat)
- Adjusted EPS: $2.51 vs analyst estimates of $2.41 (4.1% beat)
- Adjusted Operating Income: $85.25 million vs analyst estimates of $81.77 million (33.4% margin, 4.3% beat)
- Revenue Guidance for Q3 CY2026 is $282 million at the midpoint, above analyst estimates of $277 million
- Adjusted EPS guidance for Q3 CY2026 is $2.78 at the midpoint, above analyst estimates of $2.71
- Operating Margin: 29.9%, in line with the same quarter last year
- Free Cash Flow Margin: 15.1%, down from 19.5% in the same quarter last year
- Inventory Days Outstanding: 152, down from 163 in the previous quarter
- Market Capitalization: $12.79 billion
Company Overview
Headquartered in Israel, Nova (NASDAQ: NVMI) is a provider of quality control systems used in semiconductor manufacturing.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Nova’s sales grew at an exceptional 23.4% 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).
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore’s Law) could make yesterday’s hit product obsolete today. Nova’s annualized revenue growth of 29.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. 
This quarter, Nova reported year-on-year revenue growth of 15.9%, and its $255 million of revenue exceeded Wall Street’s estimates by 1.6%. Beyond the beat, this marks 10 straight quarters of growth, showing that the current upcycle has had a good run - a typical upcycle usually lasts 8-10 quarters. Company management is currently guiding for a 25.6% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 29.3% over the next 12 months, similar to its two-year rate. This projection is above average for the sector and implies its newer products and services will help maintain its recent top-line performance.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’s 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 152, which is 30 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Nova’s Q2 Results
It was great to see a material improvement in Nova’s inventory levels. We were also glad its operating income outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. Investors were likely hoping for more, and shares traded down 1.3% to $397.34 immediately after reporting.
Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
