ASML Holding N.V. (ASML) Q3 2025 Earnings Call Transcript

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Overview

The earnings call and Q&A highlight strong revenue growth expectations driven by AI demand, a significant increase in EUV capacity, and optimistic long-term revenue goals. Although there are challenges, such as margin dilution from High-NA tools and declining China revenue, the overall guidance is optimistic with a positive outlook for both DRAM and logic markets. Additionally, the focus on advanced packaging and AI developments provides a promising future. Despite some uncertainty in management responses, the positive factors outweigh the negatives, suggesting a positive stock price movement.

Key Financial Performance

Total Net Sales EUR 7.5 billion, within guidance. Year-over-year change not explicitly mentioned.

Net System Sales EUR 5.6 billion, including EUR 2.1 billion from EUV system sales and EUR 3.4 billion from non-EUV system sales. Year-over-year change not explicitly mentioned.

Installed Base Management Sales EUR 2 billion, as guided. Year-over-year change not explicitly mentioned.

Gross Margin 51.6%, within guidance. Year-over-year change not explicitly mentioned.

R&D Expenses EUR 1.1 billion, below guidance due to timing of spending. Year-over-year change not explicitly mentioned.

SG&A Expenses EUR 303 million, as guided. Year-over-year change not explicitly mentioned.

Effective Tax Rate 17.8% for Q3. Year-over-year change not explicitly mentioned.

Net Income EUR 2.1 billion, representing 28.3% of total net sales. Year-over-year change not explicitly mentioned.

EPS (Earnings Per Share) EUR 5.49. Year-over-year change not explicitly mentioned.

Cash, Cash Equivalents, and Short-term Investments EUR 5.1 billion at the end of Q3. Year-over-year change not explicitly mentioned.

Net System Bookings EUR 5.4 billion, split between EUR 3.6 billion of EUV systems and EUR 1.8 billion of non-EUV systems. Year-over-year change not explicitly mentioned.

Interim Dividend EUR 1.60 per ordinary share for the first and second quarterly interim dividends over 2025. Year-over-year change not explicitly mentioned.

Share Buyback Program EUR 148 million worth of shares purchased in Q3, with a total of EUR 5.9 billion worth of shares acquired under the program. Year-over-year change not explicitly mentioned.

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Operating Highlights

EUV advancements: Presented progress in reducing technology costs for advanced processes and shared data on High-NA maturity, with over 300,000 wafers processed. SK hynix received its first High-NA system, EXE:5200.

3D packaging lithography system: Released the XT:260, an i-line scanner for advanced packaging, offering up to 4x productivity compared to existing solutions. Shipped the first system this quarter with plans for more shipments.

AI infrastructure demand: Positive momentum in AI infrastructure investments, supporting demand in leading-edge logic and advanced DRAM.

China market outlook: Expect significant decline in China customer demand and total net sales in 2026 compared to 2024 and 2025.

Financial performance: Q3 2025 net sales reached EUR 7.5 billion, with a gross margin of 51.6%. Net income was EUR 2.1 billion, and EPS was EUR 5.49. Q4 2025 net sales are expected to be between EUR 9.2 billion and EUR 9.8 billion.

Strategic partnership with Mistral AI: Invested EUR 1.3 billion in Mistral AI, acquiring an 11% stake. Partnership aims to embed AI across ASML's portfolio to enhance system performance and productivity.

Long-term revenue outlook: Projected 2030 revenue opportunity between EUR 44 billion and EUR 60 billion, with gross margins of 56%-60%.

Shift in product mix: End market dynamics are driving a shift towards advanced logic and DRAM, requiring more advanced lithography systems.

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Risk or Challenges

China customer demand: ASML expects a significant decline in China customer demand and total net sales in 2026 compared to the strong business in 2024 and 2025. This is expected to partially affect 2026 and will impact the deep UV business.

Deep UV business: The deep UV business is expected to decline in 2026 compared to 2025, driven by reduced demand from Chinese customers.

Share buyback program: ASML does not expect to complete the EUR 12 billion share buyback program within the 2022-2025 timeframe, indicating potential challenges in meeting financial targets.

Economic uncertainties: The company acknowledges material risks and uncertainties in forward-looking statements, which could impact financial and operational performance.

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Guidance & Outlook

Q4 2025 Total Net Sales: Expected to be between EUR 9.2 billion and EUR 9.8 billion.

Q4 2025 Installed Base Management Sales: Expected to be around EUR 2.1 billion.

Q4 2025 Gross Margin: Expected to be between 51% and 53%.

Q4 2025 R&D Expenses: Expected to be around EUR 1.2 billion.

Q4 2025 SG&A Expenses: Expected to be around EUR 320 million.

Full Year 2025 Total Net Sales: Expected to be around EUR 32.5 billion.

Full Year 2025 Gross Margin: Expected to be around 52%.

2026 Total Net Sales: Not expected to be below 2025 levels despite a significant decline in China sales.

2026 EUV Business: Expected to grow, driven by advanced DRAM and leading-edge logic.

2026 Deep UV Business: Expected to decline compared to 2025, driven by reduced demand from Chinese customers.

2030 Revenue Opportunity: Expected to be between EUR 44 billion and EUR 60 billion.

2030 Gross Margin: Expected to be between 56% and 60%.

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Shareholder Return Plan

First interim dividend: EUR 1.60 per ordinary share paid in Q3 2025.

Second interim dividend: EUR 1.60 per ordinary share to be made payable on November 6, 2025.

Share buyback program: ASML purchased shares worth EUR 148 million in Q3 2025. As of September 28, 2025, ASML has acquired 9 million shares under this program for a total consideration of EUR 5.9 billion. The company does not expect to complete the EUR 12 billion share buyback program within the 2022-2025 timeframe.

Future share buyback program: ASML intends to announce a new share buyback program in January 2026.

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Key Q&A

Q:What positive news did Christophe mention that helped reduce uncertainty?

A:Christophe mentioned positive news on AI infrastructure, which creates a positive backlog of opportunity for AI moving forward. He also noted that more customers are entering logic and DRAM opportunities, which is good news for the long term. However, he stated it is still too early to determine how this will affect the next few years.

Q:What is the visibility on China's growth and its impact on 2026?

A:Christophe stated that the visibility on China's growth is similar to last year. He mentioned that the high level of business in China over the last 2-3 years was not normal and expects a return to more reasonable business levels in 2026.

Q:How should we think about the linearity of revenues or orders in 2026 and implications for 2027?

A:Roger Dassen explained that orders are lumpy and not linear. He stated it is too early to make comments on 2027 and emphasized that the positive news flow in recent months is more relevant for the medium term rather than providing concrete expectations for 2027.

Q:Does the transition from 6 F-squared to 4 F-squared in DRAM architecture negatively impact EUV layer count?

A:Christophe clarified that the transition from 6 F-squared to 4 F-squared does not reduce the number of EUV layers. In fact, the number of EUV layers is expected to grow, and the more complex structure of 4 F-squared adds benefits to advanced litho masks.

Q:Is the positive view for 2026 more DRAM-slanted or equally balanced with logic?

A:Roger Dassen stated that the positive view for 2026 is related to both DRAM and advanced logic. He mentioned that uncertainties around tariffs have decreased, leading to more clarity and positive news flow for both markets.

Q:What are the factors contributing to the slightly better gross margin guide for Q4?

A:Roger Dassen explained that the higher volume, good Low-NA mix, and positive upgrade business contributed to a slight improvement in the gross margin guide for Q4 compared to the previous quarter.

Q:What is ASML's perspective on the High-NA demand ramp-up curve and its impact on revenue?

A:Christophe mentioned that High-NA orders are expected towards the second half of next year and beyond. Shipments are expected in 2028 and beyond. The ramp-up curve for High-NA revenue will be lumpy, and the next wave of orders will depend on the qualification data from customers.

Q:Why does ASML expect China revenue to decline significantly in 2026?

A:Roger Dassen explained that the high China sales in recent years were due to eating into a substantial backlog. The current sales level is considered very high compared to a normalized level for the mainstream market, leading to the expectation of a significant decline in 2026.

Q:What is the significance of the XT:260 advanced packaging product?

A:Christophe highlighted that the XT:260 is ASML's first product supporting 3D integration, providing a 4x improvement in productivity. It is based on i-line technology with a new optical design and has generated significant interest from customers.

Q:What are the key factors influencing gross margin expectations for 2026?

A:Roger Dassen mentioned that product mix, including less China business (dilutive) and more EUV (positive), as well as the number of High-NA tools recognized (dilutive), and the composition of the installed base business, will influence gross margin expectations for 2026.

Q:What is the outlook for the installed base business in 2026?

A:Roger Dassen stated that the installed base business for 2026 will depend on the sustainability of the upgrade business. The service business is expected to grow with the increase in the EUV installed base.

Q:How does ASML view the impact of AI developments on bookings and backlog?

A:Roger Dassen explained that while bookings have been decent, the positive developments in AI are expected to have a partial impact on 2026, with greater optimism for the longer term.

Q:What is the maturity status of High-NA technology?

A:Christophe stated that High-NA technology is progressing well, with the final specification expected to be demonstrated this year. The availability of the tool is improving, and the platform is expected to reach maturity within 12-18 months.

Q:What is the profitability status of High-NA tools?

A:Roger Dassen mentioned that High-NA tools currently have very low positive margins. The profitability will improve with higher volumes and reduced cycle times, but High-NA is expected to remain margin-dilutive even by 2030.

Q:What is ASML's perspective on lithography intensity and AI chip developments?

A:Christophe noted that lithography intensity is expected to increase with the transition to more advanced nodes in logic and DRAM. AI chip developments are driving more advanced logic and DRAM, with the potential for faster adoption of new nodes due to the value of AI applications.

Q:How does ASML address the concentration of customers in the logic market?

A:Christophe acknowledged the concentration of customers in the logic market but emphasized that the broadening of the customer base for AI applications is a positive development. This reduces the risk of a supply-limited market.

Q:What are the key drivers of working capital intensity and cash flow?

A:Roger Dassen explained that working capital intensity is driven by High-NA inventory and down payments. Reducing cycle times and increasing volumes are key to improving working capital and cash flow.

Q:Review of Unclear Management Responses

A:Management avoided providing direct answers or clarity on several topics, including: 1. The exact impact of AI developments on 2027 and beyond, stating it is too early to make concrete projections. 2. The number of High-NA tools expected to be recognized next year, deferring the topic to January. 3. Specific details on the maturity of High-NA technology and its timeline for high-volume manufacturing. 4. The exact gross margin expectations for 2026, citing multiple moving parts and deferring detailed guidance to January.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

ASML Transcript

ASML Holding N.V. (ASML) Q3 2025 Earnings Call Transcript

Positive10-15

ASML Holding N.V. (ASML) Q3 2025 Earnings Call Transcript

Positive10-15

The earnings call reveals strong financial performance with a 10% YoY revenue increase and a 1.2% gross margin improvement. The positive sentiment is bolstered by a 10% dividend increase and a new €6 billion share buyback program. The partnership with Mistral AI and optimistic guidance for Q4 and 2025 further enhance the outlook. Despite a potential decline in Chinese demand, the overall market trends and strategic partnerships suggest a positive stock price movement over the next two weeks.

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

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The earnings call shows strong financial performance with net sales at the upper end of guidance and gross margin above expectations. Despite a shift in EUV growth and lower unit shipments, the upgrade business and High NA tools offer value. The dividend and share buyback plans are positive, while AI drives demand. The Q&A highlights cautious customer behavior and tariff uncertainties, but overall sentiment remains positive, supported by strong financial metrics and optimistic guidance.

ASML Holding N.V. (NASDAQ:ASML) Q1 2025 Earnings Call Transcript

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The earnings call reveals mixed signals: while financial performance shows strong gross margins and a significant share repurchase program, uncertainties in the macroeconomic environment and supply chain challenges pose risks. The Q&A session indicates confidence in future growth, but management's lack of clarity on key metrics and the impact of tariffs adds to uncertainty. Despite a positive dividend announcement, the overall sentiment remains neutral, reflecting a balance between positive financial metrics and external challenges.

ASML Slides

ASML Q3 2025 slides: €7.5B revenue amid shifting regional demand patterns

2025-10-15

ASML Report

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