Nova Ltd shares tumbled 7.72% in pre-market trading on Thursday, as investors digested the company's latest quarterly earnings report that showed narrowing gross margins and rising operating expenses, overshadowing an otherwise solid top-and-bottom-line performance.

The semiconductor equipment maker reported second-quarter revenue of $255 million, up 8% quarter-on-quarter and 16% year-on-year. GAAP net income rose 8% sequentially to $75 million, while non-GAAP net income climbed 14% year-on-year to $86.5 million. However, gross margin slipped to 56.5% from 57.7% in the prior quarter, and operating expenses increased to $68 million from $64.9 million.

Adding to the pressure, the company's third-quarter revenue guidance of $277 million to $287 million appeared to fall short of market expectations, prompting the sell-off. CEO Gaby Waisman highlighted record sales in front-end chemical metrology and Sentronics advanced-packaging tools, but the cautious outlook and margin erosion weighed heavily on sentiment.