Camtek Ltd. (CAMT) Earnings

Management highlights

- Market Demand and Order Intake: Year-to-date total orders through Q2 exceed $600 million, with 80% of these orders for advanced packaging applications. Over 50% of total order intake comes from OSATs, and over 20% of total orders come from HBM manufacturers driven by the industry transition to HBM4 and ongoing capacity expansion. 5% of total year-to-date orders are for photonics applications, which management expects to grow meaningfully in coming years. Strong multi-system orders have already been received from leading foundries, IDMs, and OSATs for 2.5D and 3D IC packaging capacity expansion. Demand for advanced packaging is driven by the AI revolution and sustained investment in AI compute and semiconductor manufacturing, with AI adoption still in the early stages. - Product Portfolio: 50% of Q2 system revenue came from the new generation Eagle G5 and Oak platforms, with this contribution expected to increase in coming quarters as customer adoption accelerates. The Hawk platform, with enhanced optical capabilities and integrated AI technology, has strengthened competitive positioning and opened access to new process steps including hybrid bonding. Management continues to expand the product portfolio with new application-specific modules, such as a high-resolution backside inspection module and fluorescence illumination technology for organic residue detection. The new NanoProf metrology platform, developed from acquired FRT technology, expands Camtech's metrology capabilities for new and existing advanced packaging process steps. - Operational and Supply Chain: Management successfully expanded production capacity and strengthened the supply chain in advance to handle unprecedented demand, enabling on-time customer delivery. The company is scaling organizational infrastructure including manufacturing capacity, system integration, sales, and customer support to support substantially higher future annual revenue. Increased R&D operating expenses in Q2 are driven by investment in new technologies and resources from the Visual Layer acquisition to strengthen AI capabilities. - Geographic Revenue: 92% of Q2 revenue came from Asia, with China expected to account for ~45% of full-year 2026 revenue, down from 49% in 2025 due to stronger growth in other regions.

Guidance

- Q3 2026 revenue is expected to be in the range of $158 million to $160 million, representing a ~20% sequential increase over Q2 2026. - Second half 2026 total revenue is expected to grow more than 30% compared to first half 2026, with double-digit sequential revenue growth expected in Q4 2026, followed by continued growth into 2027. - Profitability is expected to gradually improve over the coming quarters: gross margin is projected to reach 52% to 53% by the end of 2026, and operating margin is projected to reach 30% to 32% by the end of 2026. The improvement is driven by operating leverage and a product mix shift toward higher ASP new platforms including Eagle G5 and Hawk. - Full-year 2026 advanced packaging revenue is expected to grow 35% to 45% year-over-year, with AI/HPC-related advanced packaging growing faster than conventional advanced packaging. - Management expects Camtech will deliver growth that matches or outperforms overall wafer fab equipment (WFE) growth from Q2 2026 to Q2 2007, consistent with its historical performance.

Segment performance

Total Q2 2026 revenue hit a record $133.2 million, an 8% year-over-year increase and 10% sequential increase from Q1 2026. 1. Advanced Packaging Segment: Generated ~75% of total Q2 revenue ($99.75 million), with 75% of this segment revenue supporting AI-related applications. Management expects the advanced packaging share of total revenue to rise to ~80% by the end of 2026, with a projected 45% growth in the second half of 2026 compared to the first half 2026, and 70% higher advanced packaging revenue in Q4 2026 compared to Q1 2026. 2. 2D Inspection and Other Segments: Generated the remaining 25% of total Q2 revenue ($33.3 million), spanning 2D inspection, photonic, and other applications. This segment is expected to decline as a share of total revenue through 2026 as advanced packaging grows. The emerging photonics segment (including silicon photonics and compound semiconductors) currently makes up 5% of total year-to-date orders, and is expected to grow as a share of revenue in 2027.

Risks & headwinds

Management did not discuss specific new material risks or operational failures during this call. Standard risk disclosures for forward-looking statements were referenced in the pre-call reminder, directing investors to review risk factors in Camtech's recent earnings release and SEC Form 20-F filing.

Analyst Q&A

• Q: Can you confirm if 70% Q4 2026 over Q1 2026 advanced packaging growth implies advanced packaging will reach 80% of total revenue by end 2026, and can you speak to your capacity readiness for demand and whether you can fulfill earlier-than-planned 2026 deliveries? /

  A: Management confirms advanced packaging will reach ~80% of total revenue by end 2026, in line with the 70% Q4 over Q1 advanced packaging growth projection. The company pre-expanded capacity, secured all required supply chain and subcontractor arrangements, and is fully confident it can ship systems on time with no capacity obstacles. Most current new orders are for 2027 delivery, with very few remaining 2026 orders, and Camtech has already built a strong 2027 backlog that significantly improved business visibility.

• Q: With strong current order momentum improving 2027 visibility, is the current exiting quarterly growth rate of 35-40% year-over-year sustainable through 2027, and what is the update on China business dynamics? /

  A: It is too early to publish a full 2027 forecast, but the strong early order build for 2027 and ongoing customer capacity expansion plans are positive signals. Camtech's China business has been stable for the past few years, and China continues to invest heavily in semiconductors, so management expects the China business to remain strong with solid growth opportunities through 2026 and 2027.

• Q: How large is the current silicon photonics revenue opportunity, and what is the 2026/2027 order split for the $600 million year-to-date order backlog? /

  A: 5% of the $600 million year-to-date orders are for photonics, providing a strong initial base in this newly emerging market, and this share is expected to grow in 2027. The two main photonics segments Camtech serves are silicon photonics (for transceivers) and compound semiconductors (for diodes). While it is too early for a full 2027 revenue breakdown, the strong early order momentum and customer plans for 2027 capacity expansion give positive signals for continued growth next year, and management expects full 2027 visibility within 1-2 more quarters.

• Q: What is driving the 45% second half 2026 advanced packaging half-on-half growth: market growth, share gains, or higher process intensity? And will Camtech outperform overall WFE growth in 2007? /

  A: The growth comes from all three factors: strong overall market growth from widespread industry capacity expansion across HBM, CoWoS, and fan-out packaging segments, plus share gains in key growing application areas. Historically Camtech has outperformed overall WFE growth. While the timing of this cycle makes near-term comparison tricky, management expects Camtech will match or outperform WFE growth for the 12-month period from Q2 2026 to Q2 2027.

• Q: How would you characterize your competitive position in the OSAT market, and where is the incremental traction for your new Hawk and Eagle G5 platforms coming from? /

  A: Camtech has held a long-standing dominant market position in the OSAT segment, which makes up 50% of current total order intake, and management feels very confident in its competitive positioning against new entrants. The Hawk platform is seeing strong traction in high-volume HBM applications, with superior performance that addresses upcoming next-generation process requirements. The Eagle G5 offers better resolution, throughput, and lower cost of ownership than prior generations, leading existing Eagle customers to upgrade to the new platform and opening access to future advanced applications.