ASML Holding (ASML) Q4 FY2025 Earnings Call Transcript

Date: January 28, 2026 | Source: ASML (asml.com) official investor call transcript

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Christophe Fouquet (CEO): Thank you Jim. Welcome everyone and thank you for joining us for our fourth-quarter and full-year 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 fourth-quarter results and full-year 2025 results as well as provide some additional comments on the current business environment and on our future business outlook. Roger.

Roger Dassen (CFO): Thank you Christophe and welcome everyone. I will first review the fourth-quarter and full-year 2025 financial accomplishments and then provide guidance for the first quarter of 2026.

Let me start with our fourth-quarter accomplishments.

In the fourth quarter of 2025, total net sales were 9.7 billion euros, which is within our guidance.

Net system sales were 7.6 billion euros, which includes 3.6 billion euros from EUV system sales, including two High NA systems, and 4.0 billion euros from non-EUV system sales. Net system sales were driven by Logic at 70 percent, with the remaining 30 percent coming from Memory.

Installed Base Management sales for the quarter came in at 2.1 billion euros as guided.

Gross margin for the quarter was also within guidance at 52.2 percent.

On operating expenses, R&D expenses were slightly higher than expected at rounded 1.3 billion euros, mainly due to higher non-recurring personnel cost and the recognition of a grant that shifted into 2026. SG&A expenses also came in higher than guided at 375 million euros, driven mostly by higher, mainly non-recurring, salary-related costs, the sale of receivables and pull-in of certain IT spending.

The effective tax rate for Q4 was 18.0 percent. For the full year 2025 the annualized effective tax rate came in at 17.7 percent.

Net income in Q4 was 2.8 billion euros, representing 29.2 percent of total net sales and resulting in an earnings per share of 7.35 euros.

Turning to the balance sheet: We ended the fourth quarter with cash, cash equivalents and short-term investments at a level of 13.3 billion euros. Our Q4 free cash flow was 10.9 billion euros, which was significantly higher relative to the previous quarters of this year, with the majority of the cash coming in at the very end of the quarter.

Moving to the order book, Q4 net bookings came in at 13.2 billion euros, split between 7.4 billion euros of EUV systems and 5.8 billion euros of non-EUV systems. Net bookings in the quarter were slightly weighted towards Memory with 56 percent of the bookings and Logic accounting for the remaining 44 percent.

Turning now to the full year, net sales came in at 32.7 billion euros with a gross margin of 52.8 percent.

EUV system sales, realized from 48 systems including High NA, were 11.6 billion euros, which was 39 percent higher than 2024. DUV system sales decreased 6 percent year over year to 12.0 billion euros. Our Metrology & Inspection system sales increased 28 percent from 2024 to 825 million euros.

Looking at the market segments for 2025, logic system revenue was 16.1 billion euros, 22 percent higher than 2024. Memory system revenue was 8.4 billion euros, 2 percent lower than 2024, and Installed Base Management sales were 8.2 billion euros, 26 percent higher than 2024.

We concluded 2025 with a backlog of around 38.8 billion euros.

In 2025, we continued to invest in innovation across our full product portfolio, increasing R&D spending to 4.7 billion euros or about 14 percent of sales. SG&A increased to 1.3 billion euros in 2025, which was about 4 percent of sales.

Net income for the full year was 9.6 billion euros, 29.4 percent of net sales, resulting in an earnings per share of 24.73 euros. In 2025, we generated free cash flow of 11.0 billion euros.

With that I would like to turn to our expectations for the first quarter of 2026.

We expect Q1 total net sales to be between 8.2 billion euros and 8.9 billion euros. We expect our Q1 Installed Base Management sales to be around 2.4 billion euros.

Gross margin for Q1 is expected to be between 51 and 53 percent.

The expected R&D expenses for Q1 are around 1.2 billion euros and SG&A is expected to be around 0.3 billion euros.

For the full year 2026 we expect total net sales to be between 34 billion euros and 39 billion euros, with a gross margin of between 51 and 53 percent.

Regarding our cash return to our shareholders, in Q4 ASML paid the second interim dividend over 2025 of 1.60 euro per ordinary share.

ASML intends to declare a total dividend for the year 2025 of 7.50 euro per ordinary share, which is a 17 percent increase compared to 2024. An interim dividend of 1.60 euro per ordinary share will be made payable on February 18, 2026. Recognizing this interim dividend and the two interim dividends of 1.60 euro per ordinary share paid in 2025, this leads to a final dividend proposal to the Annual General Meeting of 2.70 euros per ordinary share.

In Q4 2025 we purchased shares for a total amount of around 1.7 billion euros. This program finished in December 2025, with a total of 7.6 billion euros repurchased out of the up to 12 billion euro program.

We returned 8.5 billion euros to shareholders through a combination of dividends and share buybacks in 2025.

ASML announced a new share buyback program, effective today and to be executed by December 31, 2028. We intend to repurchase shares of an amount up to 12 billion euros, of which we expect a total of up to 2 million shares will be used to cover employee share plans. We intend to cancel the remainder of the shares repurchased.

With that I would like to turn the call back over to Christophe.

Christophe Fouquet (CEO): Thank you Roger.

As Roger has highlighted, we finished the year with a very strong quarter with good financial results.

The market outlook has improved notably over the last months specifically as related to the continued build-out of data centers and AI-related infrastructure. This buildup is now translating into additional capacity needs at our advanced logic and DRAM customers, and, in turn, an increased demand across our product portfolio, especially in our EUV business.

Over the past quarter, we have seen a notable increase and acceleration of capacity expansion planning across the large majority of our customer base.

In advanced Logic, our foundry customers have become more positive on the long-term sustainability of demand on a number of fronts. AI accelerators are migrating from the 4nm node to the more litho intensive 3nm node. At the same time, customers continue to ramp the 2nm node in support of next-generation HPC and mobile applications.

In Memory, our customers are reporting very strong demand for both HBM and DDR products with supply remaining very tight through at least 2026 as they ramp both their 1b and 1c nodes in support of the demand. In addition, DRAM customers continue to adopt more EUV layers on these nodes. This is expected to continue on their future nodes as they migrate more multi-patterning DUV to single-exposure EUV, resulting in an increase in litho intensity.

As a result of these dynamics, we see our customers in both segments increasing and accelerating capacity expansion plans to support the very strong demand they are seeing.

We expect these investments to generate business for ASML in 2026 and beyond. Starting first with EUV, we expect revenues to be up significantly this year as a result of the dynamics in both advanced Logic and DRAM.

In non-EUV, we expect revenues for 2026 to be similar to last year's as our advanced Logic and Memory customers expand capacity. As part of the outlook for non-EUV, we expect the China region's share in our total net sales in 2026 to be in line with our current system backlog, which is around 20 percent. We also expect our Metrology & Inspection businesses to grow significantly as customers increasingly invest in enhancing their process control strategies.

For Installed Base Management we expect another year of revenue growth. This is primarily the result of increasing service revenue from our growing installed base of EUV systems and of our customers' plans for performance upgrades to support their rapidly increasing capacity requirements.

Turning to technology, in EUV we continue to make progress driving down the cost of technology on our customers' most advanced processes. We ramped our NXE:3800E through 2025, and its productivity gains support further replacement of complex multi-patterning with single-expose EUV for multiple layers on current and future DRAM nodes. We also expect both immersion and EUV litho intensity to increase as customers migrate from 6F² technology to 4F² architectures.

With regard to High NA, our customers are reporting good progress on their qualification of the technology for Logic and DRAM applications in their R&D facilities.

Intel announced last month the qualification and acceptance of their EXE:5200B system, which will be used in high-volume manufacturing for their leading-edge nodes. We expect more systems to be released to our customers in 2026 supporting their preparations for the insertion of High NA in high-volume manufacturing.

With the continuing increase of 3D structures in advanced Logic and Memory, we see more adoption of our multi e-beam inspection system to detect optically non-visible yield-limiting defects. Our progress on system maturity and productivity supports further use of these multibeam systems in high-volume manufacturing on the most advanced nodes.

In summary, our product portfolio roadmap remains focused on supporting the roadmap requirements of our customers and driving our overall competitiveness. We look forward to sharing more performance data at the SPIE Advanced Lithography conference in February.

Looking longer term, the last few months have confirmed the positive impact of AI on customer demand for our advanced products, and especially for our EUV systems. As we shared during our Capital Markets Day in November 2024, we see the end-market dynamics supporting a shift in product mix towards more demand for our advanced lithography products and an increase in litho intensity. The combination of our strong productivity roadmap on Low NA and the introduction of High NA supports further cost of technology reduction. It also supports the conversion of more multi-patterning DUV to single EUV exposure, especially on advanced DRAM nodes. In line with what we shared at the 2024 Capital Markets Day, we expect a 2030 revenue opportunity between 44 billion euros and 60 billion euros with an expected gross margin of between 56 percent and 60 percent.

With that we would be happy to take your questions.