ASML Holding N.V. (NASDAQ:ASML) Q2 2025 Earnings Call Transcript

ASML Holding N.V. (NASDAQ:ASML) Q2 2025 Earnings Call Transcript July 16, 2025

ASML Holding N.V. beats earnings expectations. Reported EPS is $6.84, expectations were $5.94.

Operator: Good day, and thank you for standing by. Welcome to the ASML 2025 Second Quarter Financial Results Conference Call on July 16, 2025. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference call over to Mr. Jim Kavanagh. Please go ahead.

Jim Kavanagh: Thank you, operator. Welcome, everyone. This is Jim Kavanagh, Vice President of Investor Relations at ASML. Joining me today on the call are ASML’s CEO, Christophe Fouquet; and our CFO, Roger Dassen. The subject of today’s call is ASML’s 2025 second quarter results. The length of this call will be 60 minutes, and questions will be taken in the order that they are received. This call is also being broadcast live over the Internet at www.asml.com. A transcript of management’s opening remarks and a replay of the call will be available on our website shortly following the conclusion of this call. Before we begin, I would like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of the federal securities laws.

These forward-looking statements involve material risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statements contained in today’s press release and presentation found on our website at www.asml.com, and in ASML’s annual report on Form 20-F and other documents as filed with the Securities and Exchange Commission. With that, I would like to turn the call over to Christophe Fouquet for a brief introduction.

Christophe D. Fouquet: Thank you, Jim. Welcome, everyone, and thank you for joining us for our second quarter 2025 results conference call. Before we begin the Q&A session, Roger and I would like to provide an overview and some commentary on the second quarter results as well as provide some additional comments on the current business environment and on our future business outlook. Roger?

Roger J. M. Dassen: Thank you, Christophe, and welcome, everyone. Let me start with our second quarter accomplishments. In the second quarter of 2025, total net sales were EUR 7.7 billion, which is at the upper end of our guidance, primarily due to revenue recognition of one High NA system and additional upgrade business. Net system sales were at EUR 5.6 billion, which includes EUR 2.7 billion from EUV sales and EUR 2.9 billion from non-EUV sales. Net system sales was driven by Logic at 69% and the remaining 31% coming from Memory. Installed Base Management sales for the quarter came in above the guidance at EUR 2.1 billion. Gross margin for the quarter was above guidance at 53.7%, driven by an increase in upgrade business, one-off items resulting in lower cost and lower-than-expected impact from tariffs, which was partially offset by the dilutive effect from the High NA system revenue recognition.

Operating expenses came in as guided with R&D expenses at EUR 1.2 billion and SG&A expenses at EUR 299 million. The effective tax rate for Q2 was 18.1%. For the full year 2025, we still expect an annualized effective tax rate of around 17%. Net income in Q2 was EUR 2.3 billion, representing 29.8% of total net sales and resulting in an earnings per share of EUR 5.90. Turning to the balance sheet. We ended the second quarter with cash, cash equivalents and short-term investments at a level of EUR 7.2 billion. Moving to the order book. Q2 net system bookings came in at EUR 5.5 billion, which is made up of EUR 2.3 billion of EUV and EUR 3.2 billion of non-EUV. Net system bookings in the quarter were weighted towards Logic at 84% of the bookings, while Memory accounted for the remaining 16%.

Regarding our backlog, we ended Q2 at around EUR 33 billion. In addition to the regular changes from system sales and bookings, this reflects an adjustment of EUR 1.4 billion in Q2 related to customers’ response to 2024 [indiscernible]. In Q2, ASML paid a final dividend of EUR 1.84 per ordinary share. Together with the interim dividend paid in 2024 and 2025, this resulted in a total dividend for 2024 of EUR 6.40 per ordinary share. The first quarterly interim dividend over 2025 will be EUR 1.60 per ordinary share and will be made payable on August 6, 2025. In Q2 2025, we purchased shares for a total amount of around EUR 1.4 billion, bringing the total share buyback of our [ 2022-2025 ] program to EUR 5.8 billion at the end of Q2 2025. With that, I would like to turn the call back over to Christophe.

Christophe D. Fouquet: Thank you, Roger. As Roger has highlighted, we finished the second quarter with good financial results. Turning to the market. As we have said in recent quarters, artificial intelligence is the key driver of growth in Memory and Logic at this point. For Logic, we expect system revenue to increase in 2025 compared to 2024 as customers add capacity on leading-edge nodes. In Memory, we expect system revenue to remain strong in 2025 as our customers transition to their next nodes in support of the latest generation HBM and DDR5 products. With respect to our China business, revenue is expected to account for over 25% of total revenue this year, as it moderates to more closely represent its proportion of the backlog.

Turning to our EUV business. Customers continue to add capacity on the leading edge to support AI demand, in which EUV plays an increased role. For example, our DRAM customers have recently mentioned an increase in the number of EUV layers on their latest and future nodes. In 2025, we expect our advanced customers to add about 30% more EUV capacity compared to 2024. The higher productivity of the NXE:3800E means that we can address that capacity increase with about the same number of systems as in 2024, but with higher ASP and improved gross margin. This low NA EUV capacity increase together with the planned revenue from High NA system is expected to lead to overall EUV revenue growth of around 30% in 2025 versus 2024. The combined revenue of Deep UV and our metrology and inspection systems in 2025 is expected to be similar to 2024.

With respect to installed base management, the upgrade business has been strong in the first half of the year as we completed most of the productivity upgrades on the NXE:3800E systems in the field to bring them to full specification. We expect continued strength in installed base management for the second half of the year, driven by increasing service revenue as our installed base grows with a growing contribution from EUV services. With this, we expect installed base management revenue to grow more than 20% over last year. We now guide the full 2025 revenue to increase by around 15% with gross margin of around 52%. We expect demand to be more skewed towards the second half of the year. As we look ahead to 2026, we continue to see strong demand related to AI for both Logic and Memory, and we see the positive impact of a growing number of EUV layers.

On the other hand, as we said before, customers are facing increasing uncertainties based on macroeconomic and geopolitical developments. Further, some customers are navigating specific challenges that might affect the timing of their capital expenditure. Against this backdrop, while we are still paying for growth in 2026, we cannot confirm it at this stage. We will continue monitoring developments over the coming months. With that, I ask Roger to provide an update about how we are currently looking at tariffs and their potential effects. Roger?

Roger J. M. Dassen: Thank you, Christophe. As Christophe highlighted, we are currently facing an increasing level of uncertainty surrounding macroeconomic and geopolitical developments, which may have both direct and indirect implications for our business. With regard to tariffs, the direct impact results from tariffs related to system sales to our customers in the United States, the import of materials for our U.S. manufacturing facilities, the import of parts and tools for our U.S. field operations and the export of parts from the U.S. into other countries to the extent tariffs were to apply to those parts. We continue working with our customers and suppliers to try to achieve that any direct impact of tariffs on our results will be limited.

The indirect impact is more complex and very difficult to determine as it is related to the potential impact of tariffs on GDP and the resulting overall market demand. With that, I would like to turn to our expectations for the third quarter of 2025. We expect Q3 total net sales to be between EUR 7.4 billion and EUR 7.9 billion. We expect our Q3 installed base management sales to be around EUR 2 billion. Gross margin for Q3 is expected to be between 50% and 52%. The expected R&D expenses for Q3 are around EUR 1.2 billion and SG&A is expected to be around EUR 310 million. The gross margin in the second half of the year is expected to be lower than the first half, primarily due to margin dilutive effect of the revenue recognition of a greater number of high NA systems in the second half of the year.

Lower upgrade revenue and a number of one-offs that contributed positively to the gross margin in the first half that we do not expect in the second half of this year. For full year, we continue to expect a gross margin of around 52%, of course, with the caveat of the uncertainties around tariffs as we just discussed. With that, I would like to again turn it back over to Christophe.

Christophe D. Fouquet: Thank you, Roger. Turning to technology. We continue to make good progress on both our low NA and high NA EUV products, and we are building a comprehensive EUV portfolio that gives customers the flexibility to meet their advanced technology road map goals and optimize their cost of technology. On the NXE:3800E, we made strong progress this quarter, completing a large number of field upgrades to the final 220 wafers per hour configuration. We are on track to finish holding out these upgrades across the installed base through 2025. New NXE:3800E systems are now all shipping at full specification. As mentioned earlier, the NXE:3800E is helping customers expand their use of EUV. On the latest DRAM nodes, they can now replace more complex multi-patterning Deep UV steps with single EUV exposures, which brings benefits like lower cost, faster cycle time and better yield.

On High NA, we continue to work with our customer teams to mature the technology using our EXE:5000. This quarter, we also shipped and commenced the install of the first EXE:5200B system, which is intended to support the High NA technology insertion into high-volume manufacturing. As a reminder, the system is capable of achieving at least 175 wafers per hour, which is approximately a 60% productivity improvement compared to the EXE:5000. As we shared during our 2024 Capital Market Day, the High NA platform will enable customer road map and lower their cost of technology by moving from multi-patterning Low-NA EUV to single-exposed High-NA EUV. For Deep UV, the transition of customers to the advanced nodes also requires more advanced system. This is due to the increasing critical litho requirements driving the adoption of both the NXT:2100 and the NXT:2150 systems as well as the latest generation carrier system, the NXT:870.

So overall, continued good momentum as our customers work closely with us to further adopt our EUV and Deep UV technology. As mentioned earlier, there is increasing uncertainty in the short term, driven by geopolitical developments impacting macroeconomic condition. However, looking long term, we expect the semiconductor market to remain strong with artificial intelligence continuing to drive growth. As discussed in our Capital Market Day, we expect that the end market dynamics will lead to a product mix shift more towards advanced logic and DRAM and require a more intensive use of advanced lithography system. The combination of the strong productivity road map on Low NA EUV and the introduction of High NA will support the cost of technology reduction and the conversion of more multi-patterning layers to single EUV exposure increasing the number of EUV layers.

In line with our 2024 Capital Market Day, we expect a 2030 revenue opportunity between EUR 44 billion and EUR 60 billion with gross margin expected between 56% and 60%. With that, we will be happy to take your questions.

Jim Kavanagh: Thank you, Roger, and thank you, Christophe. The operator will instruct you momentarily on the protocol for the Q&A session. [Operator Instructions] Now operator, can we have your final instructions and then the first question, please.

Operator: [Operator Instructions] And your first question comes from the line of Francois Bouvignies from UBS.

Q&A Session

Francois-Xavier Bouvignies: So my first question would be for the mix of this year. It seems that China is a bit a stronger than expected and even though you said that EUV capacity is up 30% and your revenues is up 30%. It seems consensus was at 49% and flat units still like much lower units than maybe we expected in the beginning of the year when we said below 50%. So we thought it would be closer to 50% rather than 40%. So I was just wondering if you had any change in EUV underlying, although still strong, but is there any change? Why is it coming a bit lower than maybe people expected? That’s my first question.

Roger J. M. Dassen: Thank you, Francois. So let’s start with — let’s start indeed with EUV and then I’ll go to Deep UV. But in the EUV mix, I think what you see indeed is that we expect growth on EUV this year to be about 30%. At the beginning of the year, that percentage was a little bit higher. And there was a bit of confusion maybe on our side, so I apologize for that, but the big delta is actually with installed base business. And what you have there is, as you probably know, we shipped quite some tools last year, but also this year to customers at a lower configuration. So they did not have the full 220 wafers per hour configuration. And the revenue that is associated with bringing those tools to the 220 wafers per hour level is not in system sales, but is in the upgrade business and therefore, is in the installed base business.

So the delta that you would see, so this 10% delta, if you like, so 30% growth rather than 40% growth, the delta of that number sits in the installed base business. So the installed base business is actually growing faster than we anticipated and you might have in your models at the beginning of the year. So it’s a wash. It’s a wash between the EUV business and the upgrade business associated with bringing the 3,800 up to the 220 level. So that’s really what it is. In terms of unit numbers for EUV. This is just by virtue of the configuration that customers have chosen. As you would have seen this year is particularly rich in terms of the ratio between 3800 and 3600. You also would have seen that in the very high ASP for EUV that you see this year.

And that is because the lion’s share of the tools this year and actually all of the tools in the second half of this year, all the Low NA tools are 3800. So as a result of that, the capacity needs that our customers have can be fulfilled with a lower number of tools. Revenue-wise, it doesn’t matter because of the higher ASP of the 3800 and gross margin-wise, it’s actually a positive, I would argue. But they can get the same capacity that they were looking for at a lower number of units. So finally on Deep UV. So Deep UV in our current model ends where we expect the Deep UV to be at the beginning of this year. But you are right, there is a bit of a shift there where actually China is a bit higher than we expected. You might recall that last year, we said we expected to be a little over 20%.

Right now, we’re looking at over 25%. So there is a bit of a shift in the Deep UV business from the non-China business to the China business. That’s the only moving part I would say that is [indiscernible] in Deep UV.

Francois-Xavier Bouvignies: Makes sense. And the second question is, I believe you said in the past that you price your tools in terms of value to the customers. So the litho spend increase as the value to the customer is increasing. So for example, this year, the throughput is increasing. So ISP is increasing for the 3800. And I guess it’s the same dynamic if you think about the overlay or metal pitch improvement. If you manage to improve that, you can price higher, I would imagine. Now there is an argument that if a customer does not adopt High NA, it’s neutral for you because you have multi-patterning Low NA. But I was thinking that the value to your customer would be much higher with High NA versus multi-patterning Low NA.

I mean, especially on the metal pitch side, they can be much more aggressive with High NA, I would imagine, and obviously saving a lot of non-litho spend. So the value to the customer is much higher. Therefore, you can price higher. So is it truly neutral for ASML, the multi-patterning Low NA versus single High NA? Just I’ve been talking a lot to investors on that, and I wanted to ask you.

Christophe D. Fouquet: Well, Francois, this is Christophe. So you have a lot of questions in your question. But on the first part, I think you summarize what we are doing very well. So I’d just like to confirm what you said about the ability we have to increase the value, therefore, the price of our product, if we get more productivity, if we get more overlay and imaging performance. So that’s still correct. That’s also correct, of course, for High NA. And I think what you have to add with High NA when you simplified basically the process of the customer, reduce the lead time. I think what you see then is the ability also for our customer to keep going to the next node. And I think one of the reasons we have been driving those tools historically is because as customer goes to the next node, then practically they will shrink further and the litho intensity will increase.

And High NA fits exactly that, I would say, strategy like EUV did in the past or immersion did in the past. So the benefit of a tool like High NA is also being captured by an increase in litho intensity basically moving to the next node. And I think we have seen that happening strongly with EUV in the past. And as High NA mature, as the customer validates the value you have described, I think we will see the exact same dynamic.

Operator: Your next question comes from the line of Didier Scemama from Bank of America.

Didier Scemama: Just have a couple of quick ones. Maybe it’s a question for Roger from I think the press conference this morning. I was a bit surprised to hear or read that you would see the removal of the export ban on AI chips to China as a positive. Maybe can you elaborate a little bit on that? I would have thought that the litho revenues associated with those AI chips in China would not be that material? Or are you suggesting or hoping that there would be some form of relaxation of restrictions on immersion for China as well?

Roger J. M. Dassen: Well, I think it is a positive because I think it is a positive for the entire ecosystem. Now are we going to sell 20 more tools as a result of that? Probably not. But I think it is still a positive development that the wider ecosystem is being deployed, and that restrictions are being lifted, I think in and by itself is a positive. This is not the only lifting of restrictions that has happened in the past couple of weeks. As you also know, there was a lifting of restrictions when it comes to chip design software. In and by itself, I think that’s happening, I think, strengthens the global reach of the ecosystem, which I think is a positive. So it’s based on that, that I think this is a positive development for the entire ecosystem and hopefully also for us.

Didier Scemama: Okay. Got it. The second question is on just going back to the DUV sort of outlook for the second half. I know you had said at the time of Q1 that China group revenues would be a bit better than 25% versus 20% prior. But it does feel like it’s further strengthened. How much of that do you think is potentially related to pulling ahead of further restrictions on certain of your Foundry, Logic or Memory customers into next year?

Roger J. M. Dassen: I don’t think that dynamic has materially changed, right? So the 25% that we have been talking about now for the second quarter in a row is what we expect for the year. I think that’s still the — over 25% is still what we expect for the year. I don’t think that dynamic has necessarily changed in the past quarters. That’s still there. And exactly what is driven by considerations by customers, it’s very hard to tell. I think there is a customer need that customer need continues to be strong as we see it. I mean there have been discussions in the past is China falling off the cliff? Well, it is not. And it’s also not what we see. We still see China demand strong and China demand more and more being brought in line with the percentage that it represents at our backlog, which is, again, at the level that we were just talking about, this slightly around 25%.

Didier Scemama: Can I have a quick follow-up, a tiny one, just on High NA. I’m surprised you don’t talk so much about the booking you had in the quarter. So just wondering maybe Christophe, whether that strengthened your view that High NA could be inserted at the 1.4 nanometer node?

Christophe D. Fouquet: Well, our view, I think, has been very consistent. And the question come back every time and I always give the same answer, which is the phase we are in today is a phase where the customers are just qualifying the tool, and they qualify the tool having in mind to insert it in high-volume manufacturing in 2026, ’27. And the exact format they will use for the insertion is depending basically on the progress we are making with them in the next few months. But the progress has been good. I think we talked a lot about the initial data back at the end of last year, early this year. The data are still good. The more customers use the tool, I would say, the more they like it. And this means also that the opportunity for insertion is, of course, growing over time because there’s more and more data confirming that.

But there, at the same time, we still need a few more months. As I mentioned in my introduction, there’s still a lot of work happening with our customer with the 5000. The shipment of the 5200 is important milestone because that’s the tool for high-volume manufacturing. So this also means that this tool will be available on time. But there also we need to qualify it. So I think the progress is good. We feel good about the way the customer look at the system and I think we’ll continue to share with you the progress in the coming months. But we are happy with the progress, and I think so are our customers.

Roger J. M. Dassen: Didier, indeed confirming that the EUV order intake was a mix of Low NA and High NA but we also mentioned before that customers have asked us to not be specific about the High NA order intake. That’s the reason why we might not make as much music around that as some people might like.

Operator: Your next question comes from the line of Joe Quatrochi from Wells Fargo. .

Joseph Michael Quatrochi: I wanted to ask one on 2026, your commentary. I guess I wanted to try to better understand what has changed over the last 90 days just in your customer conversations. It sounds like you kind of mentioned customers navigating specific challenges that might impact their CapEx. But can you just help us understand what’s changed since 90 days ago?

Christophe D. Fouquet: I will start and I think Roger can add. But I think when we talked 90 days ago, I think this was a couple of weeks after both Liberation Day, but also the announcement that the tariff we have put on hold for 90 days. And I think we said back then that we are not at the end of discussion, we are most probably at the beginning of it. And I think today, we are still not at the end of it, 3 months have passed. And I think those discussions are in all our customer minds and they are trying basically to understand what it means for them in the short term. So I think what has happened in the last 90 days is, I would say, the impact of the announcement is there. There’s a lot of discussion. No one knows even today, what’s the end state.

Some people are getting more optimistic. Some people are getting more pessimistic. And I think when we talk about uncertainties, we mean both basically. So I think our visibility because of discussion has a bit reduced, and therefore, we are being more cautious. I think Roger was mentioning the H20 chips, in the course of the last 3 months, they were both restricted and then allowed again yesterday. So a lot of this is still happening. And as you know, this type of uncertainty usually invites people who make investment to be more cautious. And I think what we report is the results of the discussion we are having basically with those people. Roger?

Roger J. M. Dassen: Yes. I think, Christophe, that’s the story, right? So there is the direct impact, if you’re considering expanding in the United States, you still don’t know today exactly what tariffs are going to apply to you because on the one hand, you have the tariffs, the generic tariffs. But on the other hand, there is also the 232 review that at this stage, we don’t know what the outcome of that is going to be. So if you have investment plans in the United States, and obviously, this — the uncertainty around the tariff discussion is a pretty significant component in your business case. And how much are you going to invest in the United States and in what time frame? But that’s a direct implication. And then to Christophe’s point, there is the indirect impact.

We still don’t know today, the noise levels are pretty high on tariffs. The potential implications that could have for GDP growth are pretty significant. So therefore, our customers are cautious and are waiting with their investment decisions up until the point and they’re maximizing the waiting time they have for their investment decisions. And that’s what Christophe is signaling. The clarity from the customers, the uncertainty that they have to navigate is quite substantial, and that leads to them holding the cards a little bit closer to the chest than they typically would do in this time frame. And that could be a positive. Christophe just gave you one example, but there is also risk involved there. As a result of that, we have become — we have made the statement that we made.

Joseph Michael Quatrochi: I appreciate it. And as a follow-up, on the gross margin side, I think if you kind of look at the implied December quarter guide, any sort of help on just like what’s kind of driving the — I think gross margin will take a bit of a step down sequentially. Is that just mix as you look to — it looks like you’re implying maybe 3 High NA tools being rev rec in that quarter. Is that the right way to think about it? Is there anything else we should be thinking about?

Roger J. M. Dassen: Yes, Joe, that is an important one, right? So the High NA one is an important one. So that will have an impact because the second half, we will have more High NA tools rev rec than in the first half. So that’s the driver. The second driver is that we — as I mentioned before, we had quite some upgrade business in the first half. I would expect that upgrade business to be a little lower in the second half. And so that’s the driver. And then we also had some one-off cost benefits in the first half that we cannot count on in the second half. So it’s a bit of a mix of those as a result of which we do believe that the second half is going to be slightly weaker.

Operator: Your next question comes from the line of Krish Sankar from TD Cowen.

Krish Sankar: I have two of them. Roger, first one on calendar ’26. I understand that it’s hard for you to confirm at this stage. But I’m just curious, when you look at the bookings you had in Q2, what kind of bookings run rate should we assume you need to get in Q3 to get some conviction on calendar ’26 as a growth year or not?

Roger J. M. Dassen: Yes, Krish, very nice try. I think some tried this before. We’re not going there, right? So we’ve made a comment that we’ve made on bookings. We believe bookings are lumpy, because we believe bookings are not necessarily a good reflection of the business momentum. So I don’t think it would be wise to entertain that. So we move away from giving guidance on ’26 and I don’t think it would be appropriate to indirectly give guidance on ’26. So I’m going to pass on this one.

Krish Sankar: Got you. No worries. I have a 2-part question again on bookings. So sorry to be annoying. On the Q2 bookings, can you tell us a little bit of how much of the EUR 2.3 billion in EUV, how was it split between Logic and DRAM for EUV bookings? And on the $3 billion or so in Deep UV bookings, how much will ship this year versus next year on Deep UV?

Roger J. M. Dassen: On the first question on EUV, it’s multiple customers and it’s also — it’s both Logic and Memory, although I would say it is skewed towards Logic. So Logic is the better half of the number. On Deep UV, it’s a bit of a mixed bag. All I would say is last time we told you that we were getting closer and closer to being fully booked for this year also on Deep UV. I think by now, we can say that we’re virtually covered for the full year. And that means that some of the orders that came in on Deep UV help bridge the gap that we still needed to be fully covered or virtually fully covered for this year. And then the balance is there to — for ’26.

Operator: Your next question comes from the line of C.J. Muse from Cantor Fitzgerald. .

Christopher James Muse: I wanted to revisit the first question, Roger, where you guys have kind of reduced your outlook for EUV revenues from 50% to 30%. That’s roughly EUR 1.7 billion. I don’t think you’re suggesting that your service business grew by that much. So curious what changed on the tool front? And was it simply further derisking of Logic to much more kind of de minimis type unit levels? Or is there something else going on there?

Roger J. M. Dassen: I’m a bit confused, C.J., where you got the 50% from because I think what we’ve been talking about was 40% at the start of the year. That’s the number that we’ve given. And if you add it all up, right, at the midpoint, at the current levels of installed base business and keeping the Deep UV/application business constant, then we were looking at 40% increase at the beginning of the year. So — and this delta from 40% growth to 30% growth, that delta is explained by what I just gave you in terms of a shift from the system business to the upgrade business that’s included in the installed base. So the 50% is a number that I honestly don’t recognize, the 50% growth.

Christophe D. Fouquet: Well, it’s tied to roughly 50 tools.

Roger J. M. Dassen: Okay. Now to the 50 tools. So 50 tools. Well, an important explanation of the 50 tools versus the lower number of tools, the low 40- ish tools that we were just talking about. That is explained by the mix of tools in this year. So this year is completely dominated by the 3800, only a handful of 3600 tools. And that’s the reason why the tool number is lower simply because people get a much higher productivity on a per tool basis and that still gives them the 30% capacity increase that they were looking for, albeit with a lower number of tools. So it’s the tool mix that has led to a lower number of unit numbers.

Christopher James Muse: Prefect. And then to follow up on your ’26 outlook, where 90 days ago, you talked about growth and now greater uncertainty. I would think on the tariff front, there would be more certainty. And so curious why that has gotten worse, I guess, in your minds? And then from a bottoms-up perspective, has anything changed in terms of the build plans that you’re seeing from your customers whether it’s domestic China, immersion, High NA ramp or Low NA demand, that is causing you to kind of retract that outlook? Or is it simply just a top-down kind of macro view that’s driving that?

Roger J. M. Dassen: I would say on your first question, C.J., it’s interesting that we have such a different perspective on what the world looked like 3 months ago versus today. I would say 3 months ago, I think versus today, I can tell you that our customers are more concerned about the tariffs discussion today than they were 3 months ago. 3 months ago, there was the indication of a pause in the tariffs. Right now, I think we’re — it seems like the countries are in full battle mode again when it comes to tariffs. Every single day, there is a new percentage. The 232 review, which, of course, is very meaningful in our industry, there is no line of sight there. So when we have conversations with our customers, we do sense that they’re uncertain as to what the tariff discussion where it might land and what the implications are for GDP growth.

And as a result of that, what that means for the demand of their customers. So we sense in all conversations with customers a higher level of uncertainty than 3 months ago. And that’s the reason why, as I mentioned before, they keep the cards closer to the chest and wait with confirming their demand up to the point in time that they can do that. That’s what we observe. Christophe, anything on customer dynamics as you see it.

Christophe D. Fouquet: Yes. No, I think you summarized it well, again. And as I said before, we also appreciate that there is a different view and different level of optimism or pessimism. I think what we tried to do is to reflect basically the nature of the discussion we are having. And of course, to your question, is it top-down, bottoms-up, it’s first top-down, but the interrogation on the business is, of course, also a more detailed discussion we’re having. So that’s a bit where we are. Well, we will continue to have those discussions, by the way, because every day bring new news. Yesterday was a good news, as we discussed, and we’ll see what’s happened in the next few months. But that’s really where our customers are today.

Operator: Your next question comes from the line of Tammy Qiu from Berenberg.

Tammy Qiu: So the first one is regarding your comment on that 30% efficiency helped addressing customers’ requirement of expanding capacity by 30%. So is it right to say going forward, you need customers to expand capacity aggressively for you to sell more tools to your customers versus previously that the demand for litho tool is actually a function of how much capacity the customer will be willing to add?

Christophe D. Fouquet: Well, I think we usually define the EUV capacity need by the total need for wafer output. So I think this is the number we monitor. I think you have seen that in the Capital Market Day also where we look at the total wafer start per month and how this evolve over time. So I think this defines our market. And we try always to serve that market by shipping the most effective tool, the most productive tool. The reason for that is that a tool with higher productivity will allow us to deliver the highest value to our customer with a lower cost on our side and therefore a better gross margin. So I think we are more sensitive to the total capacity need of our customer than to how many tools we are going to need to fulfill it.

And I will say the less number of tools we need to fulfill it, usually the better our margin and profitability will be. And for our customers, also the value is better because they have more space basically to run more capacity. So if you — to give you an idea, when we ship the first EUV system and the 3400B, we were at about half the productivity of the tool we are shipping today. So of course, this has an effect on the total number of tools. So if we are still shipping the 3400B today, the number of units will be at least twice as much. But what we look at, what’s really important, what you should look at is really the total capacity added by our customer on EUV year-on-year.

Tammy Qiu: Okay. And a follow-up would be on 2026. So you mentioned that you can’t really confirm 2026 to be a growth year, but also at the same time, you are preparing for a growth year for 2026, I guess, from your capacity perspective. So is it right to say that it’s just uncertainty for the time being, but based on your conversation with your customers, they are still leaning towards adding just that they’re not sure about what is the discussion of tariffs. So we’re probably still leaning towards positive side [ in sort of ] a cloudy picture that we may actually see the whole industry pulling back from investment?

Christophe D. Fouquet: Well, I think we also say that today, I think that the fundamentals of our customers are still strong. I think AI is still very strong. I think you also get a sign of that in many news in the last few months. So the fundamentals are strong. And I think that the discussion around tariff, around geopolitics is just inviting some time customer to be a bit more careful. So if this discussion was not there, I think the fundamentals are there, and we would be pretty much on the line we had a few months ago. So I think the way this will get solved in the next few months is very, very important to bring back both stability, confidence, et cetera, et cetera, to our customers. So hopefully, this is a short-term discussion.

Tammy Qiu: Just to confirm, is it right to say potentially is the delay of decision instead of a change of decision? Of course, I know it’s depending on what’s the result of the tariff discussion.

Christophe D. Fouquet: I think we are looking more at, I would say, some question on the decision. So it doesn’t have to be either a delay or a change, but there’s more interrogation about the decisions that have to be made.

Operator: Your next question comes from the line of Alexander Duval from Goldman Sachs.

Alexander Duval: You talked about how lithography intensity can benefit from leading-edge memory specifically. I wondered if you could elaborate this and how that’s helping litho intensity? And to what extent do you see that as a sustainable trend into next year? And then as a quick follow-up, you talked in the past about the focus at ASML on moving towards leveraging common platforms. I wondered if you could give the latest update on progress there and how you’re thinking about the time line to that helping customers and helping ASML.

Christophe D. Fouquet: Yes. So on the first question, I think we talked quite a bit about litho intensity at the Capital Market Day. I think what is very positive about the last few months is we see basically this increased adoption of EUV happening, I think, especially with DRAM customer. The trend, I think, will be sustained. That’s what our customers tell us. So we see on the latest node quite a jump on EUV layer for some of the customer. And the DRAM road map, the technology road map is so complex that EUV more and more is seen basically as a way to simplify a bit the process flow and to get to the performance needed faster. So if we look at, I would say, the next 3, 4, 5 nodes, and that includes for [ Square ] by the way, we see a very positive trend with our DRAM customer.

And I think we were foreseeing that last year, and we now have many confirmation points of that. So that’s a bit where we are on this. On the next platform. So I think what we explained last year is that we want to continue to improve the performance of EUV. We want to continue to scale productivity. We’re going to do that as far as we can on this platform, most probably all the way to the end of this decade, we can continue to improve the performance of the tool on the current platform basically in terms of productivity and overlay. And when we see that this become more difficult, then the next platform, which is pretty much the same as the High NA platform will also become available for Low NA so that we can continue this journey for another 10, 15 years.

So this will happen most probably, I would say, at the beginning of the next decade. That’s at least our current estimation.

Operator: Your next question comes from the line of Chris Caso from Wolfe Research.

Christopher Caso: I guess the first question is with regard to Memory. And it looks like the revenue and bookings were down a bit in the quarter. Could you talk a little bit about the trends that you’re seeing in Memory. And then earlier in the call, you talked about some of the trends with regard to HBM driven by AI. What and when do you expect to see some of those benefits coming into the order book for memory?

Christophe D. Fouquet: Well, I think what we say today is, if we look at the Memory revenue, so this is still strong in 2025. So basically about the same level as ’24. So the demand on advanced memory is still strong. That’s driven, as you mentioned it, by HBM. So what really happened this year is, I would say, Logic has increased again. So this is, I would say, the biggest change. But if we look forward, AI is both about Logic and HBM. So capacity has to be built on both. I talked about AI fundamentals before that cover both Logic and Memory. So I think logic was behind last year because the investments were not happening. That’s now happening. And I think if we look at the next mostly a couple of years, we should still see strong demand on both basically.

Roger J. M. Dassen: And I guess what you saw in the material was that the bookings from Memory were rather low in the quarter, I think at 16%. But to be honest, that was on the back of a few quarters where actually the order intake for Memory was very high. So last quarter, so in Q1, it was 40%. So there, I think for a number of quarters, Memory order intake was very, very strong. This quarter, it was lower. But you know what we say about order intake. And I think that also pertains to the composition of the order intake for Memory versus Logic. It’s lumpy.

Christopher Caso: Yes. Understood. As a follow-up question with regard to China, given that China, it does seem to be above what you had expected at the start of the year, do you feel that has any implications for China revenue as you’re going into next year? There’s always concerns about pull forwards with regard to China. Obviously, the restrictions there are changing. What — because of the upside you’re seeing to China this year, does that have any effect on your expectations for China going into next year?

Roger J. M. Dassen: Of course, not going to give any projection on 2026, and that would include China. But frankly, for quite a while now, we’re seeing there is healthy demand in China. The demand is not falling off a cliff. And I think we see that confirmed year after year, right, that the demand in China remains quite strong. So we don’t see a pattern of extreme pulling in and as a result of that demand falling off a cliff. That’s not a dynamic that we see. We believe there is a healthy business in China, in mainstream logic and in memory, and we’re ready to serve that continued development of that market.

Operator: You next question comes from the line of Adithya Metuku from HSBC.

Adithya Satyanarayana Metuku: So Roger, just a clarification first. I think you said at the beginning of the call that you had order adjustments in the backlog. Can you explain a bit around what proportion of this order adjustment was EUV-related. And what proportion was DUV and whether this was across multiple customers or whether this was just 1 or 2 customers? Any color around that adjustment would be helpful. And I’ve got a follow-up.

Roger J. M. Dassen: No, the adjustment I specifically talked about was related to China. So there is a EUR 1.4 billion adjustment in the backlog that you need to understand, and that is related to customers now in light of the export restrictions of last year. Customers have now made up their mind what they want to do and that has led to the debooking or the cancellation of orders for about EUR 1.4 billion. That’s the comment that I made. And that’s a data point you need in order to understand the EUR 33 billion backlog that we ended the quarter with. So this is all Deep UV and a bit of application business, but in essence, most of this is Deep UV.

Adithya Satyanarayana Metuku: Understood. And just following on from that. Look, I get the uncertainty around tariffs, but putting that aside, my calculation suggested if you get another EUR 6 billion in orders in the second half of this year, that should be enough for you to give — to deliver flattish growth in 2026? And anything on top of this will drive revenue growth in 2026. Now when I look at the EUR 6 billion number, it doesn’t seem demanding given you’ve had almost EUR 5 billion in average quarterly order intake over the last 4 quarters. So if tariffs were to turn out to be benign, would you agree with my math that roughly EUR 6 billion in order intake cumulatively over the next 2 quarters will set you up for flattish growth and anything on top of this will help drive revenue growth in ’26?

Roger J. M. Dassen: I’m not going to give you a grade on your math, Adithya. So I’m not going to do that for obvious reasons, as I just shared with Krish. We’re not going to go into that. There are heavy assumptions in your math on exactly the composition of the order book, what pertains to which year. And in light of what we said at the beginning, we’re not going.

Adithya Satyanarayana Metuku: Okay. No worries. Can I just ask another question then, if that’s okay?

Unidentified Company Representative: So your interpretation, if I get a lousy answer, I’m entitled to another question. That’s okay. Go ahead.

Adithya Satyanarayana Metuku: Okay. Just a slightly different topic. But recently, there’s been this thesis going around that within the Logic end market, there won’t be a rise in litho intensity now until 2030 when your largest customer is expected to adopt High NA EUV. I just — this seems a bit pessimistic to me, but I just wondered how you see if you would agree with the statement? Or do you think there will be logic node transitions before 2030 that will lead to a rise in litho intensity potentially at the 14-angstrom node. Any color you can give around this would be helpful.

Christophe D. Fouquet: I think this statement should we start with the fact that 2 nanometer, we discussed that many times, is a node basically where we don’t see an increase of EUV layers. Now of course, what’s happened after that is that gate-all-around is the new architecture and customers are going to go back to drive more density. Many ways to do that. One way is to use, of course, more litho intensity. So I think that after the 1.4 nanometer node, we will see again some litho intensity increase some more EUV layers. If you look at the long term also there, the Logic customers are extremely bullish about the need for more EUV layers. So yes, there is one node as it happened before with FinFET, where there’s a bit of a pause.

But I always explain the only reason for that pause is to enable more shrink moving forward. So for every node where you pause basically to change your transistor architecture, usually, you will see 3, 4, 5 nodes where you continue basically to shrink and there drive more litho intensity. Timing detail, this is still a very competitive market. AI is driving innovation. So our customers are not standing still. And I think we will see more opportunity in the next few years for sure.

Jim Kavanagh: Okay. We have time for one very last, very quick question. If you were unable to get through on this call and still have questions, please feel free to contact ASML Investor Relations with your question. And operator, can we have that last quick question, please?

Operator: Your last quick question comes from the line of Timm Schulze-Melander from Rothschild & Co, Redburn today.

Timm Nikolaus Schulze-Melander: Maybe I’ll ask them both right at the get-go. So the first one was just some clarification, please, from Roger, about installed base management. If I look at the 3Q guide, the full year guide, looks like there’s about a EUR 400 million decline sequentially in the fourth quarter. Is that the scale of the sort of the 3800E contribution to installed base management because I was thinking we’d have quite a lot of argon fluoride shipments from ’23 and ’24 starting to contribute. So just maybe some color about sequentially what’s happening in the fourth quarter in your guide? And then a question for Christophe just on High NA adoption, 175 wafers an hour, an impressive achievement. Clearly, you’re shipping qualifying a lot.

Maybe just in sort of layman’s terms, could you share what are the milestones that are still needed for your customers to cross before we can be more confident about when volume manufacturing begins and just the dilution on High NA. Is it — is the program already above breakeven?

Roger J. M. Dassen: On the first one, very quickly, what I gave, the 20%, obviously, is a rounded number, right? And then if 20% were 23% or 24%, I think you would already have made up for the big delta that you have there. I think the installed base, particularly the upgrade business, as we mentioned before, was particularly high in the first half. So we do expect that to decline a little bit. But we also do expect a continued increase in the service revenue, not necessarily from ArFi, but definitely from EUV, right? So on EUV, you see more and more tools getting out of warranty. So that contributes to an increase in the service business. So upgrade business going down a bit, service business continuing to grow up. And I don’t think you should expect a draconian movement between the third quarter and the fourth quarter. There’s a bit of rounding there that might confuse the analysis.

Christophe D. Fouquet: Yes. On High NA, so I think we talked about the 3 phases in the past. So I think we’re still in what I call Phase I, which is basically R&D customer really qualifying the technology with the 5000. There, I think, the good news is the imaging is doing great, overlay is good. So performance of High NA has been validated — some of the data shared a few months ago. The shipment of the first 5200 means that we are heading towards Phase II, which will be the qualification of the tool for high-volume manufacturing insertion. And there, the key word is maturity, right? Can the tool run without major interruptions so that the customer not only like the performance, but can trust the performance to basically be repeatable in high-volume manufacturing.

So I think the next key milestone is about the maturity of the tool. And this will be a lot of work this year, next year. And when this is validated, this is where customers start to really count on the system to do some good work in manufacturing. So that’s a bit the sequence of the milestone.

Jim Kavanagh: So now on behalf of ASML, I’d like to thank you all for joining us today. And I’ll ask the operator, if you could formally conclude the call, I would really appreciate it. Thank you.

Operator: Thank you. This concludes the ASML 2025 Second Quarter Financial Results Conference Call. Thank you for participating. You may now disconnect.