===============================================================================

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                               ----------------

                                   FORM 10-Q

              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED MAY 1, 1998               COMMISSION FILE NUMBER: 0-26968

                               ----------------

                              ETEC SYSTEMS, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                NEVADA                               94-3094580
    (STATE OR OTHER JURISDICTION OF     (I.R.S. EMPLOYER IDENTIFICATION NO.)
    INCORPORATION OR ORGANIZATION)

               26460 CORPORATE AVENUE, HAYWARD, CALIFORNIA 94545
             (ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510)783-9210

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                                 Yes  X  No

  22,062,960 shares of Common Stock were outstanding as of May 29, 1998.




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<PAGE>
Part 1.  Financial Information
Item 1.   Consolidated Financial Statements
                               ETEC SYSTEMS, INC.
                          CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                     April 30,     July 31,
                                                     1998          1997
                                                     ------------  ------------
<S>                                                  <C>           <C>
                              ASSETS
Current assets:
Cash and cash equivalents..........................      $40,874       $55,975
Marketable securities..............................       56,317        34,262
Accounts receivable, less allowance for
 doubtful accounts of $1,189 and $1,136............       86,940        54,879
Inventory..........................................       84,410        67,202
Deferred tax assets................................       22,822        22,822
Other current assets...............................        6,384         3,322
                                                     ------------  ------------
 Total current assets..............................      297,747       238,462
Property, plant and equipment, net.................       45,252        42,013
Other assets.......................................        4,222         4,068
                                                     ------------  ------------
                                                        $347,221      $284,543
                                                     ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................      $21,417       $20,830
Accrued and other liabilities......................       75,299        53,028
Taxes payable......................................       14,438         8,301
                                                     ------------  ------------
 Total current liabilities.........................      111,154        82,159
Deferred gain on sale of asset.....................        2,670         2,871
Other liabilities..................................        1,587         1,872
                                                     ------------  ------------
 Total liabilities.................................      115,411        86,902
                                                     ------------  ------------
Commitments and contingencies

Stockholders' equity:
Preferred Stock, par value $0.01 per share;
 10,000,000 shares authorized; none outstanding....         --            --
Common Stock, par value $0.01 per share; 60,000,000
 and 40,000,000 shares authorized; 22,057,598 and
 21,679,636 issued and outstanding.................          221           217
Warrants...........................................          600           631
Additional paid-in capital.........................      204,990       198,557
Cumulative translation adjustments.................       (1,518)         (719)
Net unrealized gain on investments.................            9         --
Retained earnings (accumulated deficit)............       27,508        (1,045)
                                                     ------------  ------------
 Total stockholders' equity........................      231,810       197,641
                                                     ------------  ------------
                                                        $347,221      $284,543
                                                     ============  ============
</TABLE>
          See accompanying notes to consolidated financial statements.
<PAGE>
                               ETEC SYSTEMS, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                       Three Months Ended    Nine Months Ended
                                            April 30,            April 30,
                                       -------------------  -------------------
                                       1998      1997       1998      1997
                                       --------- ---------  --------- ---------
<S>                                    <C>       <C>        <C>       <C>
Revenue:
  Products...........................   $60,969   $61,717   $173,101  $143,428
  Services...........................     9,059     7,984     27,460    24,840
                                       --------- ---------  --------- ---------
                                         70,028    69,701    200,561   168,268
                                       --------- ---------  --------- ---------
Cost of revenue:
  Products...........................    27,145    28,827     76,750    68,102
  Services...........................     7,133     6,149     20,850    19,343
                                       --------- ---------  --------- ---------
                                         34,278    34,976     97,600    87,445
                                       --------- ---------  --------- ---------
Gross profit.........................    35,750    34,725    102,961    80,823
                                       --------- ---------  --------- ---------
Operating expenses:
  Research, development and
   engineering.......................    13,056     9,470     37,388    24,066
  Selling, general and
   administrative....................     7,362     8,287     24,735    20,472
  Write-off of in-process  
   technology acquired...............        --     3,874         --     3,874
                                       --------- ---------  --------- ---------
                                         20,418    21,631     62,123    48,412
                                       --------- ---------  --------- ---------
Income from operations...............    15,332    13,094     40,838    32,411
Interest expense.....................      (257)     (287)      (617)     (797)
Other income, net....................     1,222       981      3,371     2,802
                                       --------- ---------  --------- ---------
Income before income tax provision...    16,297    13,788     43,592    34,416
Income tax provision.................     5,623     6,182     15,039    12,240
                                       --------- ---------  --------- ---------
Net income...........................   $10,674    $7,606    $28,553   $22,176
                                       ========= =========  ========= =========

Basic earnings per share.............     $0.49     $0.36      $1.30     $1.08
                                       ========= =========  ========= =========

Weighted-average common shares.......    22,004    21,334     21,881    20,538
                                       ========= =========  ========= =========

Diluted earnings per share...........     $0.47     $0.34      $1.25     $1.02
                                       ========= =========  ========= =========

Dilutive potential common shares.....    22,916    22,498     22,827    21,807
                                       ========= =========  ========= =========
</TABLE>
          See accompanying notes to consolidated financial statements.
<PAGE>

                               ETEC SYSTEMS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                            Nine Months Ended
                                                               April 30,
                                                          ---------------------
                                                          1998       1997
                                                          ---------- ----------
<S>                                                       <C>        <C>
Cash flows from operating activities:
Net income...............................................   $28,553    $22,176
Adjustments to reconcile net income to net cash
 used in operating activities:
  Write-off of in-process technology acquired............        --      3,874
  Depreciation and amortization..........................     5,459      2,996
  Deferred taxes.........................................        --     (1,162)
  Changes in assets and liabilities:
  Accounts receivable....................................   (38,319)   (12,021)
  Factoring of accounts receivable.......................     6,200         --
  Inventory..............................................   (18,021)   (21,986)
  Other current assets.................................     (14,115)        --
  Other assets...........................................      (456)      (207)
  Accounts payable.......................................       646      2,683
  Accrued and other liabilities..........................    19,722     18,628
                                                          ---------- ----------
    Net cash provided by (used in) operating activities..   (10,331)    14,981
                                                          ---------- ----------
Cash flows from investing activities:
  Purchases of marketable securities, net................   (22,055)   (21,946)
  Capital expenditures for property and equipment, net...    (8,781)   (18,219)
  Payment for purchase of Ebetech, net of cash acquired..        --     (4,682)
  New building construction costs........................        --     (4,500)
  Proceeds from sale of facilities.......................    11,000      5,000
                                                          ---------- ----------
    Net cash used in investing activities................   (19,836)   (44,347)
                                                          ---------- ----------
Cash flows from financing activities:
  Repayment of debt and capital leases...................       (93)    (2,742)
  Financing from (repayment to) intermediary.............    12,115    (13,842)
  Repurchase of warrants.................................        --     (2,633)
  Collection of (issuance of) notes receivable
    from (to) stockholders...............................       201       (201)
  Proceeds from issuance of Common Stock.................     4,128     40,522
                                                          ---------- ----------
    Net cash provided by financing activities............    16,351     21,104
                                                          ---------- ----------
Effect of exchange rate changes on cash..................    (1,285)    (1,509)
                                                          ---------- ----------
Net change in cash and cash equivalents..................   (15,101)    (9,771)
Cash and cash equivalents at the beginning
  of the period..........................................    55,975     44,472
                                                          ---------- ----------
Cash and cash equivalents at the end of the period.......   $40,874    $34,701
                                                          ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................      $531       $727
                                                          ========== ==========

Cash paid during the period for income taxes.............    $6,734     $7,831
                                                          ========== ==========

SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Tax benefits from stock option transactions..............    $2,077     $2,830
                                                          ========== ==========

</TABLE>
          See accompanying notes to consolidated financial statements.
<PAGE>


                               ETEC SYSTEMS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

        In the opinion of the management of Etec Systems, Inc. ("Etec" or 
the "Company"), the unaudited consolidated interim financial statements 
included herein have been prepared on the same basis as the July 31, 
1997 audited consolidated financial statements and include all 
adjustments, consisting of normal recurring adjustments, necessary for a 
fair presentation of the interim period results.

        The results of operations for current interim periods are not 
necessarily indicative of results to be expected for the current year or 
for any other period. 

        These consolidated financial statements should be read in 
conjunction with the audited consolidated financial statements and notes 
thereto for the fiscal year ended July 31, 1997 included in the 
Company's Annual Report on Form 10-K (File No. 0-26968).  The July 31, 
1997 balance sheet included herein was derived from audited consolidated 
financial statements, but does not include all disclosures required by 
generally accepted accounting principles.

        For purposes of presentation, the Company has indicated its 
interim fiscal periods as ending April 30, 1998 and April 30, 1997.  As 
the Company's fiscal period is accounted for on a 52-53 week year, the 
interim period consolidated financial statements included herein 
represent results for each of the three- and nine-month periods ended 
May 1, 1998 and May 2, 1997.

        The preparation of financial statements in conformity with 
generally accepted accounting principles requires management to make 
estimates and assumptions that affect the reported amounts of assets and 
liabilities and disclosures of contingent assets and liabilities at the 
date of the financial statements and the reported amounts of revenues 
and expenses during the reporting periods.  Actual results could differ 
from those estimates.


Recent Accounting Pronouncements

        In June 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 130, "Reporting 
Comprehensive Income" (SFAS 130) and Statement of Financial Accounting 
Standards No. 131, "Disclosures about Segments of an Enterprise and 
Related Information" (SFAS 131).  SFAS 130 establishes standards for 
reporting and display of comprehensive income and requires the Company 
to report additional information on comprehensive income to supplement 
the reporting of income.   SFAS 130 is effective for fiscal years 
beginning after December 15, 1997.  Comparative financial statements 
must be provided for all periods presented and require reclassification 
adjustments. The Company will adopt SFAS 130 in fiscal 1999 and does not 
expect its provisions to have a material effect on the Company's 
presentation of its consolidated financial statements.  

        SFAS 131 establishes standards for reporting information about 
operating segments in annual and interim financial statements and also 
establishes standards for related disclosures about products and 
services, geographic areas and major customers.  SFAS 131 is effective 
for fiscal years beginning after December 15, 1997.  The Company will 
adopt SFAS 131 in fiscal 1999 and is currently studying its provisions. 


NOTE 2 - CASH EQUIVALENTS AND MARKETABLE SECURITIES

        At April 30, 1998, the Company's investments were classified as 
available-for-sale.  The difference between the cost and fair value of 
those investments is shown as a separate component of stockholders' 
equity.  At April 30, 1998, these available-for-sale securities totaling 
approximately $29.7 million were included in cash and cash equivalents 
or marketable securities on the balance sheet.  The investment portfolio 
at April 30, 1998 is comprised of money market funds, corporate 
debentures, asset-backed obligations, U.S. Government agency securities, 
certificates of deposit, commercial paper, auction-rate preferreds, and 
municipal obligations.  


NOTE 3 - INVENTORY


                                                   April 30,    July 31,
                                                     1998         1997
                                                  -----------  -----------
                                                       (in thousands)

       Purchased parts.......................        $29,079      $20,325
       Work-in-process.......................         39,435       35,972
       Spares................................         15,896       10,905
                                                  -----------  -----------
                                                     $84,410      $67,202
                                                  ===========  ===========


NOTE 4 - INCOME TAXES 

         The Company recorded provisions for income taxes for the nine 
months ended April 30, 1998 and 1997 of $15.0 million and $12.2 million, 
respectively. The Company's provision for income taxes for the nine 
months ended April 30, 1998 reflects the utilization of research and 
development tax credits and tax benefits from the use of a foreign sales 
corporation, partially offset by foreign earnings taxed at higher rates. 
During the second quarter of fiscal 1998, the Company reduced its fiscal 
1998 effective tax rate from the 35.5% used in the first quarter to 
34.5% in order to reflect revised estimates of certain tax credits.  The 
provision for the nine months ended April 30, 1997 includes a $1.2 
million benefit which reflects the fiscal 1997 first quarter release of 
valuation allowances previously recorded against the Company's deferred 
tax assets.  Management's evaluation of the recoverability of the 
Company's deferred tax assets is based in part upon the current product 
backlog and the Company's presumed ability to increase manufacturing 
capacity.  Management will continue to evaluate the recoverability of 
the deferred tax assets in future periods.

NOTE 5 - LEASES

        In November 1997, the Company completed the purchase of 
approximately 15.2 acres of land in Hillsboro, Oregon at a cost of 
approximately $2.4 million.  The Company is having a new facility 
constructed on this site to meet development and manufacturing 
requirements for its laser mask pattern generation products and to back 
up its electron-beam manufacturing capabilities in Hayward, California.

        In December 1997, the Company entered into an agreement to lease 
the facility to be constructed on the land described above.  The lessor 
of the buildings has committed to spend up to $60.0 million for the 
construction and the Company will act as construction agent for the 
lessor. The lease term begins upon completion of construction (which is 
expected in the middle of calendar year 1999) and ends in November, 
2004.  With the approval of the lessor, the Company may extend the lease 
term for up to three one-year periods.  The Company has the option to 
purchase the facility at any time during the lease term at the lessor's 
capitalized cost.  If the Company does not elect to purchase the 
property at the end of the lease term, the Company is required to 
guarantee the minimum residual value which shall not exceed $49.8 
million.

        In February 1998, the Company entered into an agreement to amend 
the existing lease on its Hayward facilities to accommodate a $50.0 
million planned expansion of production and research and development 
facilities and  renovation of existing production facilities via 
construction lease allowances.  The lease amendment also included the 
leaseback of $11.0 million of building improvements on existing 
facilities sold to the lessor via the lease amendment.  The initial term 
of the lease expires in May, 2014, and, if not cancelled by the Company, 
will be automatically extended for three five-year renewal periods and 
one additional eight-month renewal period.


NOTE 6-REVOLVING LINE OF CREDIT

        In April 1998, the Company extended the term of its existing $50.0 
million revolving line of credit from May 1999 to November 1999.  As of 
May 1, 1998, no amounts have been drawn under this line of credit.  
During the quarter, the covenants were revised to be substantially the 
same as those under the Hillsboro, Oregon lease agreement.  In addition, 
the Company amended the interest rate from the London Interbank Offered 
Rate plus 1.25% to the London Interbank Offered Rate plus 0.95%. 


NOTE 7 - NET INCOME PER SHARE

        The Company calculates earnings per share in accordance with 
Statement of Financial Accounting Standards No. 128, "Earnings Per Share 
(SFAS 128).  Basic EPS is computed by dividing net income available to 
common stockholders (numerator) by the weighted-average common shares 
(denominator) during the period.  Diluted EPS gives effect to all 
dilutive potential common shares outstanding during the period including 
stock options and warrants, using the treasury stock method.  In 
computing diluted EPS, the average stock price for the period is used in 
determining the number of shares assumed to be purchased from the 
exercise of stock options and warrants.

Following is a reconciliation of the numerators and denominators of the 
basic and diluted earnings per share computations under SFAS 128:

<TABLE>
<CAPTION>

                                                  Three Months Ended         Nine Months Ended
                                                       April 30,                 April 30,
                                                  ------------------------  --------------------
                                                  1998         1997         1998       1997
                                                  -----------  -----------  ---------  ---------
                                                  (In thousands, except per share amounts)
<S>                                               <C>          <C>          <C>        <C>
BASIC EPS COMPUTATION
       Net income.................................   $10,674       $7,606    $28,553    $22,176
                                                  ===========  ===========  =========  =========

       Weighted-average common shares.............    22,004       21,334     21,881     20,538
                                                  ===========  ===========  =========  =========

       Basic earnings per share...................     $0.49        $0.36      $1.30      $1.08
                                                  ===========  ===========  =========  =========

DILUTED EPS COMPUTATION
       Net income.................................   $10,674       $7,606    $28,553    $22,176
                                                  ===========  ===========  =========  =========

       Weighted-average common shares.............    22,004       21,334     21,881     20,538
       Plus shares from assumed conversion:
         Effect of dilutive options and warrants..       912        1,164        946      1,269
                                                  -----------  -----------  ---------  ---------
       Dilutive potential common shares...........    22,916       22,498     22,827     21,807
                                                  ===========  ===========  =========  =========

       Diluted earnings per share.................     $0.47        $0.34      $1.25      $1.02
                                                  ===========  ===========  =========  =========

ANTIDILUTIVE SECURITIES*
       Options outstanding at end of period.......       184          209        187        245
                                                  ===========  ===========  =========  =========

       Weighted-average exercise price............    $59.22       $36.87     $59.20     $36.46
                                                  ===========  ===========  =========  =========
</TABLE>
------------
*Antidilutive securities consist of options excluded from the computation 
of diluted earnings per share because the exercise price of each of these 
options was greater than the average market price of the Company's Common 
Stock during the period.  


                               ETEC SYSTEMS, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

A.      Results of Operations


Quarters Ended April 30, 1998 and April 30, 1997

        Revenue. Revenues are primarily comprised of sales of ALTA, MEBES, 
and CORE systems, accessories and upgrades, and the provision of 
technical support, maintenance and other services.  The Company derives 
most of its revenues from the sale of a small number of systems and 
upgrades.  As such, any delay in the recognition of revenue for a single 
system or upgrade can have a material adverse effect on the Company's 
consolidated results of operations in a particular period.  

        Product revenue of $61.0 million for the quarter ended April 30, 
1998 was 1% less than the $61.7 million for the corresponding quarter of 
1997.  Eight systems were sold in the quarter ended April 30, 1998 
compared to nine systems in the quarter ended April 30, 1997.  One 
system scheduled for shipment during the quarter ended April 30, 1998 
was not accepted by the customer because it failed to meet a "stripe 
butting" specification.  After the close of the quarter the 
specification was revised, the customer accepted the system, and the 
Company will recognize the associated revenue during the quarter ending 
July 31, 1998. Sales of accessories and upgrades in the quarter ended 
April 30, 1998 were double those for the quarter ended April 30, 1997.  

        Service revenue increased 13% to $9.1 million from $8.0 million 
for the quarters ended April 30, 1998 and 1997, respectively, due 
primarily to generally higher service activity caused by an increase in 
the number of systems under service contracts.

        Gross Profit.  The Company's gross profit on product revenue 
increased 3% to $33.8 million from $32.9 million for the quarters ended 
April 30, 1998 and 1997, respectively.  The increase is primarily 
attributable to changes in product mix to newer generation products with 
higher average selling prices and corresponding margins.   Gross profit 
as a percentage of revenue decreased on a sequential basis to 55.5% for 
the quarter ended April 30, 1998 from 58.9% for the prior quarter, 
principally because of an unusually rich mix of new products in the 
earlier quarter, but was higher than the 53.3%  margin achieved in the 
quarter ended April 30, 1997.  There can be no assurance that the 
Company will be able to maintain or  increase  gross margin on product 
revenue in future periods.

        The Company's gross profit on service revenue increased 5% to $1.9 
million from $1.8 million for the quarters ended April 30, 1998 and 
1997, respectively.  Gross margin on service revenue was 21% and 23% for 
the quarters ended April 30, 1998 and 1997, respectively, reflecting 
increased headcount on flat revenue.  There can be no assurance that the 
Company will be able to maintain or increase gross margins on service 
revenue in future periods.

        Research, Development and Engineering.  The Company's research, 
development and engineering expenses continue to reflect its commitment 
to increased levels of product development.  These expenses, net of 
third-party funding under cooperative development agreements, increased 
to $13.1 million, representing 19% of revenue, from $9.5 million, 
representing 14% of revenue, for the quarters ended April 30, 1998 and 
1997, respectively.  The increase is primarily due to expenses incurred 
for development of MEBES products, together with costs associated with 
preparing the initial "beta" versions of the Company's new DigiRite 2000 
laser direct imaging system for shipment from the Company's Tucson 
facility. These additional costs were partially offset by $1.5 million 
of reimbursements under cooperative development agreements received 
during the quarter ended April 30, 1998.  No such amounts were received 
during the quarter ended April 30, 1997. 

        Selling, General and Administrative.  Selling, general and 
administrative expenses decreased 11% to $7.4 million, representing 11% 
of revenue, from $8.3 million, representing 12% of revenue, for the 
quarters ended April 30, 1998 and 1997, respectively.  The decrease 
results principally from lower commission costs due to completion in the 
second quarter of 1998 of  the Company's market development fee 
obligations in Asia, offset by an increase in headcount.

        Income Tax Provision.  The Company recorded provisions for income 
taxes for the quarters ended April 30, 1998 and 1997 of $5.6 million and 
$6.2 million, respectively. The Company's provision for income taxes for 
the quarter ended April 30, 1998 reflects the utilization of research 
and development tax credits and tax benefits from the use of a foreign 
sales corporation, partially offset by foreign earnings taxed at higher 
rates.  Beginning with the second quarter of 1998, the Company reduced 
its fiscal 1998 effective tax rate from the 35.5% used in the first 
quarter to 34.5% in order to reflect revised estimates of certain tax 
credits.  Management's evaluation of the recoverability of the Company's 
deferred tax assets is based in part upon the current product backlog 
and the Company's presumed ability to increase manufacturing capacity.  
Management will continue to evaluate the recoverability of the deferred 
tax assets in future periods.


Nine Months Ended April 30, 1998 and April 30, 1997

        Revenue. Product revenue increased 21% to $173.1 million from 
$143.4 million for the nine months ended April 30, 1998 and 1997, 
respectively.  The increase in fiscal 1998 is  primarily due to the sale 
of three more systems and higher average selling prices than for the 
corresponding 1997 period, offset in part by a reduction of sales of 
accessories and upgrades in 1998.

        Service revenue increased 11% to $27.5 million from $24.8 million 
for the nine months ended April 30, 1998 and 1997, respectively, due 
primarily to generally higher service activity caused by an increase in 
the number of systems under service contracts.

        Gross Profit.  The Company's gross profit on product revenue 
increased 28% to $96.4 million from $75.3 million for the nine months 
ended April 30, 1998 and 1997, respectively.  The increase results from 
an increase in product revenue and the higher gross margin on product 
revenue, which increased to 56% for the nine months ended April 30, 1998 
from 53% for the nine months ended April 30, 1997.  The increase in 
product gross margin is primarily attributable to changes in product mix 
and generally higher average selling prices for the Company's newer 
products.  There can be no assurance that the Company will be able to 
maintain or  increase the present level of gross margin on product 
revenue in future periods.

        The Company's gross profit on service revenue increased 20% to 
$6.6 million from $5.5 million for the nine months ended April 30, 1998 
and 1997, respectively.  Gross margin on service revenue was 24% and 22% 
for the nine months ended April 30, 1998 and 1997, respectively.  The 
increases in gross profit and gross margin reflect increased revenues 
from an increase in the number of systems under service contracts and 
increased productivity. There can be no assurance that the Company will 
be able to maintain or increase the present level of gross margin on 
service revenue in future periods.

        Research, Development and Engineering.  The Company's research, 
development and engineering expenses continue to reflect its commitment 
to increased levels of product development.  These expenses, net of 
third-party funding under cooperative development agreements, increased 
to $37.4 million, representing 19% of revenue, from $24.1 million, 
representing 14% of revenue, for the nine months ended April 30, 1998 
and 1997, respectively. The Company expects future increases in net 
spending due to its commitment to product development.   Funding 
received under cooperative development contracts was  $ 5.1 million and 
$0.5 million, respectively, during  the first nine months of fiscal 1998 
and  fiscal 1997.  The increase  is attributable to the achievement of 
milestones under a multimillion dollar cost reimbursement and 
development agreement with a private consortium. 

        Selling, General and Administrative.  Selling, general and 
administrative expenses increased 21% to $24.7 million, representing 12% 
of revenue, from $20.5 million, representing 12% of revenue, for the 
nine months ended April 30, 1998 and 1997, respectively. Selling, 
general and administrative expenses increased primarily due to increased 
headcount, market development fees and sales commissions associated with 
increased product sales.

        Income Tax Provision.  The Company recorded provisions for income 
taxes for the nine months ended April 30, 1998 and 1997 of $15.0 million 
and $12.2 million, respectively. The Company's provision for income 
taxes for the nine months ended April 30, 1998 reflects the utilization 
of research and development tax credits and tax benefits from the use of 
a foreign sales corporation, partially offset by foreign earnings taxed 
at higher rates.  Beginning with the second quarter of 1998, the Company 
reduced its fiscal 1998 effective tax rate from 35.5% used in the first 
quarter to 34.5% in order to reflect estimates of certain tax credits. 
The Company's provision for income taxes for the nine months ended April 
30, 1997 includes a $1.2 million benefit which reflects the first 
quarter release of valuation allowances previously recorded against the 
Company's deferred tax assets.  Management's evaluation of the 
recoverability of the Company's deferred tax assets is based in part 
upon the current product backlog and the Company's presumed ability to 
increase manufacturing capacity.  Management will continue to evaluate 
the recoverability of the deferred tax assets in future periods.



B.  Liquidity and Capital Resources

        In addition to its operational cash flows, in fiscal 1997 and 
fiscal 1996, the Company raised approximately $108.0 million from its 
initial public offering, two additional public offerings, and a private 
placement.  In fiscal 1997, the Company received $5.0 million from the 
sale and leaseback of its headquarters campus.  In fiscal 1998, the 
Company received commitments of up to $121.0 million for the 
construction of additional manufacturing facilities during fiscal 1998 
and fiscal 1999 under operating lease arrangements.  The Company 
believes that approximately $53.0 million of the $121.0 million total 
will be used in fiscal 1998 and approximately $68.0 million will be used 
in fiscal 1999 under these commitments.

        The Company's capital budget for fiscal 1998 of $80.0 million 
included the $53.0 million in facility construction which was 
subsequently converted to a construction allowance under an operating 
lease.  The remaining $27.0 million is planned for other capital 
expenditures.  The Company spent approximately $8.8 million for net 
capital expenditures in the first nine months of fiscal 1998 primarily 
to purchase testing and process equipment. 

        In October 1997, the Company purchased approximately 4.2 acres of 
land in Hayward, California for $0.9 million.  This site provides the 
Company flexibility for future expansion of its Hayward-based 
operations.  In addition, in November 1997, the Company completed the 
purchase of approximately 15.2 acres of land in Hillsboro, Oregon for 
approximately $2.4 million.   The Company is having a new facility 
constructed on this site to meet development and manufacturing 
requirements for its laser mask pattern generation products and to back 
up its electron-beam manufacturing capabilities in Hayward, California.  
The new facilities in Hayward and Hillsboro are expected to be completed 
in the middle of calendar year 1999.

        As of April 30, 1998, the Company had cash and cash equivalents 
and marketable securities of $97.2 million.  The Company believes that 
existing cash balances (including cash equivalents and marketable 
securities),  together with existing sources of liquidity, including 
cash flows from operating activities and amounts available under the 
existing $50.0 million revolving line of credit, will provide adequate 
cash to fund its operations for at least the next twelve months.  The 
Company also believes that success in its industry requires substantial 
capital in order to maintain the flexibility to take advantage of 
opportunities as they arise.  As such, the Company may effect additional 
equity or debt financings in the future to fund such activities.


Operating Activities

        Net cash used in operating activities for the nine months ended 
April 30, 1998 was $10.3 million.  Net cash provided by operating 
activities for the nine months ended April 30, 1997 was $15.0 million.

        Cash flows from operating activities for the nine months ended 
April 30, 1998 primarily reflected net income of $28.6 million; 
increases in depreciation and amortization of $5.5 million; increases in 
accounts receivable of $38.3 million; factoring of accounts receivable 
of $6.2 million; increases in inventory of $18.0 million; increases in 
other current assets of $14.1 million (including  $11.0 million in 
respect of the sale and leaseback of building improvements); and 
increases in accrued and other liabilities of $19.7 million (primarily 
due to increases in advances from customers of approximately $11.5 
million).

         Cash flows from operating activities for the nine months ended 
April 30, 1997 primarily reflected net income of $22.2 million; 
increases in noncash items of $5.7 million (which include depreciation 
and amortization of $3.0 million, partly offset by $1.2 million of 
deferred taxes); and increases in accounts receivable of $12.0 million, 
inventory of $22.0 million, accounts payable of $2.7 million, and 
accrued and other liabilities of $18.6 million. 

        Fluctuations in accounts receivable, inventory, and current 
liabilities for the above periods were caused primarily by the timing of 
system orders, the timing of revenue recognition, the increase in unit 
shipments, the factoring of accounts receivable and the timing of 
payments to vendors.  The increase in accounts receivable is due to a 
higher sales volume in comparison to the prior period, a higher ratio of 
sales in Asia, which usually take longer to settle than domestic sales, 
and shipments of newer technology machines which often extend customer 
acceptance.  The increase in inventory is due to the purchase of raw 
materials in anticipation of a higher order level than was actually 
achieved and to an increased level of service parts.  Prior to the 
shipment of a system, the Company receives payment for a portion of the 
system sales price.  Such payments are generally received when the 
Company accepts an order and at various points when the system is being 
installed and thereafter.  Therefore, the amount of customer advances at 
each reporting period fluctuates based on the number of systems that are 
on order, the timing of when orders are accepted, and each system's 
status within the manufacturing cycle.  Advances from customers 
increased to $23.0 million at April 30, 1998 from $11.5 million at July 
31, 1997. 


Investing Activities

        Net cash used in investing activities for the nine months ended 
April 30, 1998 was $19.8 million compared to $44.3 million for the nine 
months ended April 30, 1997.  Cash flows from investing activities for 
the nine months ended April 30, 1998 reflected net purchases of 
marketable securities of $22.0 million and net capital expenditures of 
$8.8 million, less the sale of $11.0 million of building improvements 
which were leased back.  Cash flows from investing activities for the 
nine months ended April 30, 1997 primarily reflected net purchases of 
marketable securities of $21.9 million and net capital expenditures of 
$18.2 million.

Financing Activities

         Net cash provided by financing activities for the nine months 
ended April 30, 1998 was $16.4 million compared to the nine months ended 
April 30, 1997 of $21.1 million.  Cash flows from financing activities 
for the nine months ended April 30, 1998 primarily reflected receipts of 
$12.1 million from a third-party financing intermediary.  Cash flows 
from financing activities for the nine months ended April 30, 1997 
primarily reflected proceeds from issuance of Common Stock of $40.5 
million.  The decrease in net cash provided by financing activities is 
primarily attributable to the fact that there was no public offering of 
the Company's Common Stock during the first nine months of fiscal 1998 
as there was during the first nine months of fiscal 1997.


C.  Certain Factors that May Affect Future Results

        Statements in this report which are prefaced with words such as 
"expects," "anticipates," "believes" and similar words and other 
statements of similar sense, are forward-looking statements.  These 
statements are based on the Company's current expectations and estimates 
as to prospective events and circumstances which may or may not be 
within the Company's control and as to which there can be no firm 
assurances given.  These forward-looking statements, like any other 
forward-looking statements, involve risks and uncertainties that could 
cause actual results to differ materially from those projected or 
anticipated.

        In addition to other risks and uncertainties that may be described 
elsewhere in this document, certain risks and uncertainties that could 
affect the Company's financial results include, but are not limited to, 
the following: reduced orders or backlog due to changes in capital 
spending decisions of customers or potential customers; the timely 
development, market acceptance and successful production of new products 
and enhancements in an environment of rapid technological change; 
limitations on the Company's ability to carry out a rapid expansion of 
its manufacturing capabilities; significant variations in quarterly or 
annual results due to factors affecting even a small number of systems, 
such as a delay in completion of manufacturing or testing of a single 
system to a future fiscal period; and risks associated with foreign 
operations, such as foreign exchange risk, general market conditions, 
import-export controls, and political risks.  


Year 2000 Issue

          The Company has formed a project team to review its existing 
products, services, processes, systems, facilities and key business 
partners to ensure they are able to adequately address the issues 
expected to arise in connection with the upcoming change in the century. 
The Company's project to achieve this is based on the Government 
Accounting Office model.  Using this model, the Company is developing an 
action plan to implement the system and programming changes necessary to 
address, on an enterprise-wide basis, year 2000 issues, and is in the 
process of assessing the schedule for and cost of implementing this 
plan.  

          The Company believes that its Year 2000 project will be completed 
on a timely basis; however, there can be no assurance that unexpected 
delays or increased costs associated with implementation will not have 
an adverse effect on the Company's operations.

        In addition, the Company has not yet fully determined the extent 
to which its business may be impacted by third parties whose products 
and services may not be ready for the year 2000.  There can be no 
assurance that the systems of other companies which the Company deals 
with, or on which the Company's systems rely, will be able to adequately 
address the year 2000 issue, or that the failure to do so will not have 
an adverse effect on the Company's operations.

Part II - Other Information

Item 6.  Exhibits and Reports on Form 8-K

(a)     The following exhibits are filed herewith:

Exhibit
  No.    Description
------- --------------------------------------------------------- 

10.1    Second Amended and Restated Lease Agreement by and between  ET LLC,
        a Delaware limited liability company d/b/a ET QRS  LLC as Landlord
        and Etec Systems, Inc., a Nevada  corporation, as Tenant of the
        Hayward, California premises  dated February 2, 1998


10.2    1995 Omnibus Incentive Plan of Etec Systems, Inc. (As  Amended and
        Restated Effective December 2, 1997)

10.3    First Amendment to Second Amended and Restated Lease  Agreement by
        and between ET LLC, a Delaware limited  liability company d/b/a ET
        QRS LLC as Landlord and Etec  Systems, Inc., a Nevada corporation,
        as Tenant of the  Hayward, California premises dated March 31, 1998

10.4    Second Amendment to Second Amended and Restated Lease  Agreement by
        and between ET LLC, a Delaware limited  liability company d/b/a ET
        QRS LLC as Landlord and Etec  Systems, Inc., a Nevada corporation,
        as Tenant of the Hayward, California premises dated May 8, 1998

10.5    Second Amendment to Credit Agreement between Etec Systems,  Inc.,
        each of the financial institutions currently a party  to the Credit
        Agreement, and ABN Amro Bank N.V.

27      Financial Data Schedule.


See Exhibit Index on page 18. 

(b)     Reports on Form 8-K.


        None.


                              ETEC SYSTEMS, INC.

                                  SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the 
Registrant has duly caused this report to be signed on its behalf by the 
undersigned, thereunto duly authorized, on June 12, 1998.

                             ETEC SYSTEMS, INC.
                             (Registrant)


                             By  /s/  William D. Snyder                   


                             William D. Snyder
                             Vice President and Chief Financial Officer
                             (Principal Financial Officer and Principal
                             Accounting  Officer)


<PAGE>

                               ETEC SYSTEMS, INC.

                               INDEX OF EXHIBITS


Exhibit
  No.    Description
------- --------------------------------------------------------- 

10.1    Second Amended and Restated Lease Agreement by and between  ET LLC,
        a Delaware limited liability company d/b/a ET QRS  LLC as Landlord
        and Etec Systems, Inc., a Nevada  corporation, as Tenant of the
        Hayward, California premises  dated February 2, 1998


10.2    1995 Omnibus Incentive Plan of Etec Systems, Inc. (As  Amended and
        Restated Effective December 2, 1997)

10.3    First Amendment to Second Amended and Restated Lease  Agreement by
        and between ET LLC, a Delaware limited  liability company d/b/a ET
        QRS LLC as Landlord and Etec  Systems, Inc., a Nevada corporation,
        as Tenant of the  Hayward, California premises dated March 31, 1998

10.4    Second Amendment to Second Amended and Restated Lease  Agreement by
        and between ET LLC, a Delaware limited  liability company d/b/a ET
        QRS LLC as Landlord and Etec  Systems, Inc., a Nevada corporation,
        as Tenant of the Hayward, California premises dated May 8, 1998

10.5    Second Amendment to Credit Agreement between Etec Systems,  Inc.,
        each of the financial institutions currently a party  to the Credit
        Agreement, and ABN Amro Bank N.V.

27      Financial Data Schedule.



<PAGE>