ASML Holding N.V. Aktie

Good day, and thank you for standing by. Welcome to the ASML 2026 Third Quarter Financial Results Conference Call on October 14, 2026,

[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.

Thank you, operator. Welcome, everyone. This is Jim Kavanagh, Head 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 2026 Third quarter sales. The length of the 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 statement obtained -- 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.

Thank you, Jim. Welcome, everyone, and thank you for joining us for our third quarter 2026 results conference call. Before we begin the Q&A session, Roger and I would like to provide an overview and some commentary on the third quarter 2026 results as well as provide some additional comments on the current business environment and on our future business outlook. Roger?

Thank you, Christophe, and welcome, everyone. I will first review the third quarter 2026 financial accomplishments and then provide guidance on the fourth quarter and the full year of 2026. Let me start with our third quarter accomplishments. Total net sales in the third quarter of 2026 were a record at EUR 11.7 billion towards the high end of our guidance and reflecting strong execution of our capacity ramp. Net system sales were EUR 8.4 billion, which includes EUR 4.1 billion from EUV system sales including the sale of 1 High-NA EUV system and EUR 4.3 billion from non-EUV system sales.

Net system sales were split between Logic at 54% and Memory at 46%. Installed Base Management sales for the quarter were EUR 3.3 billion, exceeding our guidance by almost EUR 0.4 billion primarily due to the strong demand for our productivity upgrade products in both EUV and DPV. Gross margin for the quarter was above guidance at 57.5% primarily due to the contribution of very high-margin components within our installed base management business.

Our operating expenses were as guided with R&D expenses at around EUR 1.2 billion and SG&A expenses at around EUR 0.4 billion. The effective tax rate for Q3 was 16.1% for the full year 2026, the expected annualized effective tax rate is around 17%. Net income in Q3 was EUR 5 billion, which includes around EUR 0.5 billion as a result of an increase in the valuation of our initial investment in the [indiscernible] AI, representing 42.5% of total net sales and resulting in earnings per share of EUR 12.95.

Turning to the balance sheet. We ended the third quarter with cash, cash equivalents and short-term investments at a level of EUR 12.7 billion. Our fee cash flow in Q3 was EUR 11.4 billion, underpinning the strong order momentum of our customers and related down payments.

Moving to the cash return to our shareholders. In Q3, ASML paid the first interim dividend over 2026 of EUR 1.88 per ordinary share. Further, we purchased in Q3 around EUR 4.1 billion worth of shares under the current 2026-2028 share buyback program. The second quarterly interim dividend over 2026 will be EUR 1.88 per ordinary share and will be made payable on November 4, 2026.

With that, I would like to turn to our expectations for the fourth quarter and the full year 2026. We expect Q4 total net sales to be between EUR 14.2 billion and EUR 15.2 billion with a gross margin of around 57%. We expect our Q4 installed base management sales to be around EUR 3.7 billion. The expected R&D expenses for Q4 are around EUR 1.2 billion and SG&A is expected to be around EUR 0.4 billion. Regarding our full year expectations, we expect our full year 2026 total net sales to be between EUR 44 billion and EUR 45 billion, with a gross margin of around 56%. This

anticipated year-over-year total net sales increase of around 36% reflects our expectation of over 45% growth in EUV, around 20% growth in non-EV related system sales and around 50% growth in installed base management sales.

Turning to end use. This year, we expect Logic net system sales to grow around 10%, and Memory net system sales to grow around 75%. The growth in Memory is driven by the combination of capacity expansion of our customers and the increasing adoption of EUV on advanced DRAM nodes. As previously mentioned, we continue to expect the China region to account for around 20% of our total net sales this year.

In summary, the third quarter was a record for both total net sales and gross margin, and we expect our business to continue to accelerate in the fourth quarter as we execute against a backdrop of very strong customer demand for auto products and services. With that, I would like to turn the call back over to Christophe.

Thank you, Roger. If we take a step back to look at the market environment, we see that the pace of the AI build-out continues to be very robust. Supply shortages across advanced logic and memory nodes continue to increase in size and in time horizon. Against this backdrop, we had very constructive discussions with our customers throughout the quarter and the demand signals we have received have continued to strengthen. Our leading-edge high-volume customers are sharing very good visibility as a result of the increasing number of long-term commitments they are securing with their customers.

This extended visibility has led them to conclude that demand for their product will outpace supply through at least 2028. As a result, customers are accelerating capacity build-out plans and preparing for further expansion beyond 2028 in order to better meet the anticipated level of demand.

For us, their drive to add capacity is translating into not only greater short-term demand across our entire holistic lithography portfolio, but also improved longer-term visibility and demand, especially for our EUV products. As customers shift focus to their needs beyond 2027, our order momentum continues to build. We are increasingly receiving orders for 2028 and customers are also expressing interest in placing orders for 2029 and even 2030.

As our customers are preparing to meet rising demand, we, in turn, continue our focus on adding capacity to support their needs. Roger will now share further details on our latest plans on providing our customers additional capacity. Roger?

Thank you, Christophe. We have been very successful in ramping capacity this year. For low NA EUV, we anticipated output of roughly 65 systems for 2026, which is nearly 50% more than the 44 systems that we shipped last year. For DUV immersion systems, while our initial output target for these systems was well below the prior year, we now expect we will deliver a similar quantity in 2026 as we did in 2025.

Looking further ahead, we shared our intent last quarter to increase our capacity in 2027 by 30% for both low NA EUV and DUV immersion systems as well as to investigate adding a further 30% in 2028. However, given the dynamics of this quarter, we now anticipate that our current plant levels of output in '27 and '28 will not fully meet the demand of our customers. Therefore, we continue to strengthen our efforts to produce more systems, especially beyond '27 and with that goal in mind, are now looking into expanding our 2028 capacity even above the 30% year-on-year growth target that was under investigation last quarter for both low NA EUV and immersion systems.

In addition to shipping new systems, we support customer needs for more wafer capacity through productivity upgrades across our EUV and DUV installed base as well as with the introduction of new products. The ability to enable an increase in capacity through upgrades on the same footprint is very compelling for our customers as the effect is an immediate increase in output capability. We will continue to work on this important value driver, expanding the upgrade portfolio offering, new productivity options to our customers in the coming years.

The introduction of new products is the other lever that we have to support increased wafer capacity. We plan to introduce our next-generation low NA EUV system, the NXE-3800F starting in small quantities at the beginning of 2027. This system is specified at a throughput of 260 wafers per hour compared to the 230 wafers per hour capability of the NXE-3800E system. We also plan to introduce the next-generation critical deep UV immersion running at 330 wafers per hour. These new products will provide incrementally more wafer capacity to the industry as they ramp in the coming years.

With that, I will hand it back over to Christophe for a technology update.

Thank you, Roger. This quarter, we saw meaningful momentum around INA EUV with several industry announcements providing evidence of the technologies progress from development towards production. Intel announced that it has exposed more than 1 million wafers using its INA EUV systems with performance that meets or exceeds comparable layers pattern using low NA EUV. Additionally, Samsung and TSMC announced plans to introduce INA EUV into high-volume manufacturing in 2028 and 2030, respectively. With availability across the existing INA EUV fleet approaching 90%, we now expect to see adoption increase node to node moving forward. To further ensure chip makers can fully leverage the advantage of INA EUV, we also, in collaboration with TSMC, began an industry-wide initiative to develop larger formats EUV photo maps. This collaborative effort aims to establish a 12-inch mass pilot line by 2031 and enter production in 2033. The broad support for this transition reflects customer interest in maximizing the value of INA EUV and investing in the next generation of this technology.

In closing, the combination of very strong demand fundamentals, improved visibility and rising litho intensity reinforce our confidence in the trajectory of our business. Our focus continues to be on supporting our customers as they ramp their logic and memory nodes by continuing to expand our capacity over a multiyear horizon while also delivering enhanced productivity by executing our technology road map. In Q3, we have also shipped the first Yieldstar 550B metrology system. This overlay measurement system is designed with improved accuracy and precision to support a tighter process control requirements of the 14 extra node in logic and the 1 node in [indiscernible]. The system is designed to deliver more than 60% greater productivity over the previous generation Star allowing customers to measure more wafers and therefore more quickly drive yield improvement in their processes.

This latest generation system continue to support major adoption of first customer with a demand that is expected to more than double for the coming years versus 2025. Finally, the transition of INA EUV into high-volume manufacturing creates accompanying opportunity for customers to enhance the economics of their future road map, and we remain fully committed to helping them execute a successful insertion. With that, we would like -- we will be happy to take your questions.

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, could we have your final instructions and then the first question, please.

[Operator Instructions]

And your first question today, of course, from the line of Joseph Quatrochi from Wells Fargo.

I was wondering if you could provide maybe just a little additional color on the capacity expansion that you need beyond the 30% previously talked about. And just what do you think you can do in 2027 relative to that kind of mid-80s that we talked about last quarter.

Well, I think that we are basically working very hard to increase capacity. And I think this is true now, as Roger explained, we've done a lot of that this quarter. That's going to be true next year, and that's going to be true in 2028. And the reason for that, as we explained, is we continue to see customers asking for more tools. Now if we look at some of the opportunity we see, of course, it's a bit easier for us to enable those opportunity later, so mostly in 2028 rather than on the shorter term. So this is what we are focusing on. I won't give a new number for '27 or '28 because it's far too early to give those numbers as we continue to basically do everything we can to get extra capacity.

Okay. And then as a follow-up, you talked about it in the prepared remarks or in the transcript value-based pricing impacting more 2027 and 2028. Can you share any just a few more additional details on that on how to think about just kind of the trajectory of gross margin from here?

Yes. So those are 2 questions, right? So first on the pricing. As we mentioned in July, at that point, we were entering into conversations with customers on price increases. Those conversations have been completed and have indeed led to pricing increase for what we call the most critical products for our customers. So that has been done. As we also -- and you made reference to it, as we said in the prepared remarks, this is not going to have an impact on '26. You will see some impact on '27, but I would say that the full impact of that is really going to start in '28. So from '28 onwards, you're going to see the sustained impact of that, but you will see -- in the course of '27, you will see that starting to manifest itself in a positive way in both our revenue and the ASPs and in the gross margin.

Your second question on gross margin is obviously a much broader question. But let me take that one Dan. So what are the puts and takes on the gross margin. So as you have seen, gross margin this quarter, very, very strong and stronger than we anticipated. I would say primarily as a result of the $400 million more upgrade business that we have. But we should also not forget that if you look at the total year at 56%, it's not just the upgrade business, right? It's also higher volume. It's also the fact that we have a very strong loan EUV business in there, very strong immersion business in there. So those are all things that help.

And then obviously, the question is, how will that develop into the years beyond this year, right? So what's the implication for '27 and beyond. And of course, we're not going to give you a gross margin percentage for that will come in January of 2027. But if you look at the key drivers of the gross margin this year, you have to ask yourself how much of that can be sustained into 2027.

So first off, volume, with everything that Christophe just told you on the 30% increase in 2027, of course, volume should help, right? And volume as long as we're able to control the cost of the increase in capacity, volume should give you better fixed cost coverage. So that should be a positive in that level.

The second element is mix. And there are to, again, key drivers of the volume are the 30% extra in immersion and low INA EUV. Both of them are obviously very positive from a gross margin perspective. Of course, there will be quite some dry business that we continue to increase this year, but also next year. But I would say that also mix with the strength in EUV demand and emerging demand that should help.

Then to your point, we have the price increase, which, as I mentioned, will have some effect in '27, the larger effect you will see in '28, but it will have some effect in '27. So that's going to be helpful. And then finally, in the positive sense, I would probably call out the mix effect within the EUV, right, where the mix effect next year is going to be better than this year because this year, we still have quite some models in the mix that won't materially be the case anymore next year, and we will have a few [indiscernible] in there as well. So that's going to be helpful in the total easing. So those are key elements, and then what are the things that we need to watch out for.

Well, one, as I mentioned, is the ramp cost, right? So how much cost are we incurring to ramp not just for '27 but also for beyond. So that's 1 thing that we simply need to manage those costs well. And then there is the swing factor of the upgrades, right? Because as we mentioned, the upgrades are very, very strong this year. So that really begs the question, how sustainable is the upgrade business. And if you look into that, the sustainability of the upgrade business, there's a few elements to bear in mind there. First off, we still see, as of today, that there is quite some addressable market for us on the upgrade business.

So if you look at the upgrade -- the number of upgrades that we have performed in the field, it's quite a few tools, but there are still quite a few tools out there that have not yet been upgraded. So that gives you good potential for the coming quarter, but also for the years thereafter. Second, as we mentioned on the video, we're also aggressively pushing upgrade products. So we will bring new upgrade products to the market. And of course, that would open an entirely new addressable market for us in the installed base. So that's helpful. And so there is a question, how will the market continue in the current market environment with the demand that is out there, as we just said, there is a lot of appetite for these upgrades. So I would say upgrade is an important swing factor for us in the gross margin development as we see in '27 and beyond, very strong this year. But I think we're at least from our side, doing whatever we can to create as much opportunity for upgrade business on a go-forward basis as we can.

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

Christopher or Roger, my first one, I understand you don't want to give exact capacity numbers. I'm just wondering under the strong demand environment, is there a natural ceiling on your EV output either due to pace at BIC or [indiscernible] capacity? Or in other words, if the demand is there, can you do 140 or 150 units in 2028. And along the same line, do you worry that customers are pulling in orders or giving you bigger forecast just to secure a slot. I had a quick follow-up after that.

Yes. So maybe I may try to answer both questions. So first on maybe what we are doing to increase the capacity. So I think I mentioned that before. This is a task really started several months ago. And I think there are really 3 elements to it. The first one is to optimize the footprint we have here in order to basically build our machines. We have, as you know, a pretty important footprint and we started to make sure that most of that footprint can be used for output. And that's true for low NA EUV. That's also true, by the way, for DUV, including immersion. And this creates already some opportunity that we can use and build up again this year, next year and in 2028.

The second one, which I think is a very big opportunity and still a major parameter is the cycle time, meaning the time we spend in our factory with a certain given machines. And as we gain in maturity, for example, on the NXE-3800E, we are capable to shorten the cycle time for a certain given sequence, but we are also capable to further optimize the sequence, meaning there are things that we needed to initially in order to qualify a tool, which over time in agreement with our customer we believe we don't have to do any more. And I would say that this approach, we can take pretty far moving forward, and this is one of the really key opportunity we see basically moving forward. And as I mentioned before, as we go over time, the opportunity continue to materialize, which give us some more hope and opportunity.

On the supply chain, of course, I mean, indirectly, your question is or your remark is that we have to supply the supply chain. This is something that we take into account, starting with [indiscernible]. So we do not see [indiscernible] today as a bottleneck for the capacity expansion we are discussing even beyond the 30% we mentioned for 2028. And we have done in the recent years, many, many work with all the supply chain to make sure that the supply chain will not be an issue for us.

So we continue, of course, to watch that very carefully. Clearly, you understand that every time you have capacity, of course, we create more challenges there. So we do that. And the last thing I would say is that we have time. I mean if you look at the progress we have done this year, I think they are very significant. We are feeling pretty good about next year. And the time we have, again, for next year for 2028 is still significant for us to continue to be very creative on all those fronts. So that's, I would say, the first -- the answer to your first question.

On the second one, I think I mentioned in the introduction, we have very good conversations with our customers. And the conversation is not only about how many tools they need. It's also about exactly when those tools will be hitting the ground in their factories. And when it comes to the demand we are referring to the increased demand we are referring to, I think we are very much capable to validate the demand with some more detailed plan, our customers are sharing with us in terms of fab construction, release, et cetera, et cetera. So I think that we -- when we talk about demand, when we refer to demand in those discussions, we really referred to demand, we believe, is real and not inflated by any potential buying behavior from our customers.

Got you. That's super helpful, Christophe. And then a quick follow-up for Roger. On the value pricing, is this across the board? Is it for systems, services, spare parts, everything? And I'm guessing, based on your commentary, you're not repricing the backlog. Can you just clarify that?

Yes. Exactly how we do it, Krish, I'm not going to share it. But as I mentioned, we are increasing prices for we call the most critical products, those products that bring most value to our customers. So these are the high-range, high-volume manufacturing projects. Those are the ones that provide most value to customers in the current environment, and those are the ones that we put the pricing increases on it. And you will also understand that upgrade prices are closely associated with the prices of the tools. So that's -- they will also follow upgrade prices will also follow this trned. That's how we do it and exactly how we do it, when we do it, et cetera. I don't want to go into any detail, but the bottom line is that we will start to see the effect on that in the course of 2027, but the full effect you will start to see from '28 and onwards.

Your next question today comes from the line of Sandeep Deshpande from JPMorgan.

My question is back again to the question of your indication that you are looking at adding more capacity than the 30% into 2028. There are multiple components that you need to be able to add capacity. And some of these suppliers of ASML will need to add physical capacity to be able to supply you with this kind of huge volume increases, given that there's already a 30% increase in 2027. Have these discussions started with customers? Does ASML need to make any substantial payments to these suppliers in terms of adding this capacity? And are there any particular impediments. And given that you yourself do not have any additional physical capacity until 2029, how is this whole supply chain being managed to be able to produce more capacity in 2028. I have a quick follow-up after that.

So I will try to add a bit to what I said before. I think that -- the only real challenge we have with the supply chain is to make sure they can ramp. I think that there is no question on their side on the -- say, the strength of the demand on the strength of the ramp. I think that the main challenge with all our suppliers, because in this case, we all the suppliers is make sure that they can go up 30% every year.

Now Roger mentioned it before in the introduction, we went up this year by 50% on EUV, which is designed basically that these are the kind of things we are capable to do with the suppliers. And as you can imagine, that's a discussion that we have with them on a very regular basis. And us mentioning 30% growth in '27, more than 30% growth in '28 is the results of the confidence we have that this entire supply chain can, of course, follow our own demand, both on EUV and DUV. That exercise, I would say, of course, could be extended as far as needed because we are continuing also to add, I will say, suppliers.

So we are continuing to make sure so that we have more and more people who can produce some of our parts, especially in the noncritical one. And when it comes to the very critical one, [indiscernible] comes to mind again, we are absolutely strategically aligned the trajectory of the industry and therefore, the strategic of the demand. So these are very, very detailed intense discussion. But again, every number we share with you is the reserves of us having validated that the supply chain can, of course, follow those numbers.

Quickly, Roger, on the gross margin, your guidance on gross margin in the fourth quarter is down from the current quarter, even though your revenues are going up significantly. And then, I mean, just again, regarding the response you made earlier about the value-based pricing, should we assume that most of the value-based pricing-related increases will go straight to the gross margin line? Or is there a margin number on these increases that you will be putting through?

So on the first one, the gross margin in Q4, a little bit lower from Q3, that is primarily related to the fact that we are seeing some ramp costs, right? So we're ramping up for the increases that Christophe was just talking about. That has a bit of a bearing on the gross margin expectation. And that's why the fixed cost coverage that you would expect to benefit from the higher volume is a little bit compensated and a bit more compensated by the extra cost that we incur in the ramp as we see it now in Q4. So that's the main reason that we have there.

In terms of the price increase and to what extent is the price increase completely precious to the gross margin, of course, they are the same applies, right? I mean, one of the arguments that we've had also in our competitions with our customers, is that we are incurring costs in order to ramp, right? So ramp costs will give you some additional costs. So it will definitely be accretive to the gross margin. But again, you will see some ramp costs that we are incurring in 2027 in order to get to the elevated numbers that Christophe was just talking about and this is both for ourselves, but also into the supply chain for the reasons that, Sandeep, you just mentioned, right? We need to make sure that the supply chain is completely attuned to what we're looking for. And of course, that also means that in some places, there is some help needed to get that done. So there is some portion of the increase -- of the price increase that we need to cover for the extraordinary ramp that we're going through. But I would say that's still a significant part of it is directly accretive to the gross margin.

Our next question today comes from the line of Francois-Xavier Bouvignies from UBS.

So I just wanted to follow up a bit on this shortage situation. Obviously, we are in a very unprecedented time with this capacity constrained for your customers. But also today, you are claiming that on your side as well, the demand will be higher than supply. So I mean, the behavior usually that people order as much as they can, especially if you start seeing someone to make sure they have the tools. And we've seen other industries some long-term agreements, some prepayment, try to get a more true sense of the demand. I was wondering if you were considering any change of the way you want to contract with your customers in those times, for example, increasing the prepayments or also adding like more the firm orders earlier to make sure you know that your customers are committed?

Yes, Francois. So if we take that and we said it before, if you put an order with ASML, that's not a frivolous piece of paper that you put your name under. It comes with 2 serious commitments. One serious commitment is a commitment to make a down payment. And as I qualified it before, it's a down payment that is enough to hurt, right? So that's one element. And secondly, a PO is a real commitment on both sides of the equation, and it also means that it's -- if you want to get rid of that commitment, that's not going to be easy, right? It's -- that comes at a price, not just the down payment, but more than that.

So therefore, before customers sign a PO with ASML, they've made up their mind, they're not doing this previously. In terms of will you accept orders early on, as Christophe mentioned, we are getting the request of customers to to accept for us to accept their orders, their POs already for 2029 and 2030. And the only reason why Christophe words in that way that customers are requesting us and therefore, we have not yet accepted those is that we want to make sure that we have a good picture of what the overall demand in '29 and 2030 looks like that customers are currently signaling and mirror that against the capacity expansion as we see it at that point in time.

And we want to do that because we don't want now to accept orders from customer A, B and C. And then to tell customer Don't given orders yet for '29 and 2030, sorry, we're sold out. I mean, that would be totally inappropriate for customers that have been business partners with us for a very long period of time. So we're now really using this period of time to mirror -- to get a good understanding what is the total demand that our customers are sickening for the '29-2030 time frame. What does it look like? What is for us a reasonable expectation of capacity as we see it in the '29-2030 time frame. And once we have that picture ready, then we are ready to accept orders and also accept the commitments from our side to execute on those orders. So we -- the only hesitation we have at this stage is that we really want to do our homework, we're very diligent on the acceptance of the orders that customers are offering us. to make sure that no single customer feels left out.

The second one is on the high NA news flow. I mean Christophe, you mentioned this high-volume manufacturing in '28 with the memory [indiscernible] and also TSMC in 2030. And if I look at the parcel low NA when we started this high-volume manufacturing, I mean, we saw a significant step-up in shipments during those years. So I was wondering if we should think about high NA shipments in '28 to increase significantly on the back of it and potentially a double-digit number of high-end shipments to -- as we go forward?

Well, I think it's -- we're still looking at the very initial ramp. I think that you are going and to see that every year, our customers are going to need more tools as they validate in manufacturing that they like INA and that most probably, the plan over time, more layers. I think the announcement and the drive of TSMC first on the 12-inch particle is very interesting there because the first signal it gives is that in the mind of the customer, they would be more and more use of INA because if it was not the case, I mean, no one were really bother to go to 12-inch mask on INA. So the 12 inch match drive and very wide adoption by customer and the consumption is just a sign that everyone has in mind over time to develop basically more and more adoption of INA.

So with that, it's always difficult to say exactly how this will basically manifest itself. We also have, of course, a very big ramp. So there's a lot of focus on building up capacity, which sometimes can have a positive or negative impact on the INA rollout, depending if customer see INA as additional capacity or potentially a bit of a slowdown. But the number will grow for sure year after year. And again, the message, I think all our customers have given this quarter with their participation into the 12-inch consortium is that they believe over time, this will become a very important technology and the number of players will grow over time, for sure.

Your next question today comes from the line of Lee Simpson from Morgan Stanley.

And maybe just a follow-up to the last answer set. I thought it was quite interesting that if you look at the noncurrent liabilities, there's quite a material jump Q-on-Q, were of the order of about $5 billion. And typically, the bulk of that is down payment. So can we make a read through to a relative size of big order intake in Q3? That's question number one. And I think maybe alongside that, it did seem to infer, Christophe, in your answer to last question that it's perhaps new customers that are bringing you to, sort of, thinking about the '29 and '30, sort of, framework. And as you say, you still want to keep your marginal buyers still in the mix here. Are we right in saying that most of this is coming from new customers as a result.

Yes. On the first one, the noncurrent liabilities, does that include down payments Yes, it does, right? So in that way, it is an interesting gauge of how order intake is developing. I should say it's a bit of a lagging indicator because typically, the down payment and the receipt of the money lags a little bit the actual signing of the PO. So it is a bit of a lagging indicator. But for lack of any PO numbers that you get from ASML, it's a nice project. Yes.

Yes. I'm not sure I fully understood the second question. So I think the second question, I think, was on the customers in '29, '30, that's express an interest to do that. I think your question is, Lee, is that a totally new customer that might potentially start with the [indiscernible]. And might this be that this customer is in that way, sort of locking out existing customers.

[indiscernible] than I would.

And I guess the answer is that the interest of this is being expressed is much broader, much broader. This is not linked to one specific customer. There is a far broader interesting customers to have [indiscernible] for that time period.

Yes. And maybe to add to that because you mentioned a new customer indirectly. I think what's interesting on low NA EUV, we've talked about increased adoption of EUV. We continue to see in fact new customer on low NA EUV, especially when it comes to DRAM. And I would say this go a bit beyond the key customers. So that's another interesting dynamic that we have to indeed take into account for 2028, '29, 2030. That's another, of course, a challenge when it comes to the capacity discussion we're having, but I think it's a great news when it comes to the validation of our EUV will be used moving forward. And the last thing I would say is that we see a similar trend on INA. So that's, I think, also a very good set of news we get from our potentially new customers.

Our next question today comes from the line of Alexander Duval from Goldman Sachs.

Yes. Many thanks for the question. Just wanted to pivot a bit and talk about immersion DUV. You talked today about how you'll reach the throughput of 330 wafers powers. So I wondered what that could directionally mean for pricing in '28 and whether we should be thinking about the kind of ASP step-ups we saw historically on EUV tools when we think about the innovation you're delivering on immersion.

And then I would like to think also secondarily as a follow-up on logic versus memory. I wondered if it's fair to say that in the prior quarter, the incremental demand seemed to be very much related to memory, but now you seem to be seeing quite a strong balance across both Logic and Memory. So curious to what extent you'd agree with that statement and what is driving this, whether it might be across drivers like agenetic AI or it could be progressed either with existing customers or new customers?

Yes, I can start. So I appreciate the question on the 330 with pros because this is 1 of the I would say, the very short-term action we have taken to increase capacity. We're going to bring the different emerging product to 330 with the [indiscernible] . You know that we have a slightly different version of our emergent tool, depending on the overlay requirement of our customer. But all of them at the beginning of next year will go to 330 with per hours. And when it comes to value and therefore, to pricing, as we discussed many times for the price, the value of scale basically with the throughput. And I think what's true for EUV will be true also for DPV. So this is both an opportunity on value, margin, pricing. It's also, of course, very helpful when it comes to capacity because you look at, of course, providing the same capacity with potentially less, too. Doesn't mean that we need less, too. It means that we get more capacity for our customers, of course.

So that's another, I would say, creative move we have made on our portfolio to get more capacity out and we expect, again, the value to come to us in the same way to is comes productivity.

That's for Deep UV. And the second question, I think that Roger gave some number, if you look at the increase compared to last year, Memory has gone up very much. We're still on a train where memory become more and more important, 75% increase, which is, of course, significant. So you start to see the results of this huge memory investment that, by the way, is mostly DRAM to be clear. And we continue to see that moving forward. And I think we have said in the past that the ratio between logic and memory will mostly increase towards memory. Still, I will say that logic is also very strong. So to be able to predict exactly where deciding to land is difficult because I'd like to stress that we see also a very strong demand on the noting side because, of course, as you know, the 2 are very much coupled when it comes to delivering AI capacity to the market.

Yes. And just to give you 1 more data point there. So indeed, as I mentioned, logic went up 10%, around 10%. But the advanced logic piece included in there is patent. So that grew over 25% is expected to grow over 25% in this year. So you're right, memory is getting closer to logic, but logic remains very, very important. And when we look memory comes close. But I still believe that logic will outweigh memory in the total book of business for next year.

The next question today comes from the line of Chris Caso from Wolfe Research.

My question is with regard to your customer clean room constraints. And perhaps you could discuss that with respect to your decisions to expand capacity into '28, do you expect that, that clean room is still a constraint on your customers' ability to add tools and add capacity? And then what does that mean as you go into potentially 2029.

Well, I think there's still some, what I would call, tactical constraints. So it could be that 1 system will move from the end of the quarter to the beginning of another one. We don't see too much of that, to be honest, but that's still possible because our customers have been ramping their clean room facility extremely fast. If we look at the longer term, as I said before, beyond those little move or the tactical move, we have confirmed that the number our customers are giving us are really lined up with their plan. In fact, in many cases, when the supply is tight, we make sure before we fully allocate the tool to a customer that space will be there. The facility also will be there so that we don't ship a tool that we'll be waiting for weeks for a customer to use it because, of course, other customers will be very disappointed with that. So we do a lot of work to make sure that in all the plans we have at ASML, we don't have a delay of more than a few days or weeks, I will say, in shipping our products. So Short answer is, I think, no. We don't see our customer [indiscernible] constraint being a major factor on our demand.

But to your point, Christophe, it's very clear that with everything that is being built today, it is such a massive scale. So on the one hand, that opens significant opportunities. But it also means that our customers have to manage the execution of all that construction in '27, '28 very diligently, right? So they're looking at a huge expansion of the footprint. But of course, that requires very diligent execution. And that's obviously something that we need to monitor very, very carefully. So in that way, conceptually, a lot of opportunity and not a constraint, but in reality, we need to make sure that they execute well, such as it hasn't become constrained.

As a follow-up, follow-up question is with regard to China. And you talked about that at 20% of your systems revenue this year. What should we expect going forward with respect to China, you expect it to maintain those levels as you go into next year?

I think the intrinsic demand in China is strong, right? If you look at what China needs in terms of mainstream logic, in terms of memory, there is very strong demand in China for their domestic for the domestic consumption. If you look at the fabs that are being built in China that is -- there is a lot coming online there. And therefore, we would expect that the demand in China to be strong, this year 20%. And I would argue that also for 2027 and beyond based on the intrinsic drivers, it seems that the demand situation in China remains very strong.

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

So firstly, it's on your value-based pricing. So make sure you have your increasing pricing. Going forward, let's say, this tightness in the industry continues. Do you think you'll be to negotiate price increase every single year.

Well, I mean, that wasn't the plan, to be honest.

It was [indiscernible] smiling.

We were smiling. Customer are listening.

Yes, exactly.

Exactly. That was in the past. So we've had these conversations with customers that given everything that the ecosystem is going through. And given the efforts that we're all going through to meet the rate requirements, we thought that we were in to a higher percentage and we were able to get there with customers. And we would see that as something that is possible within our value-based pricing model, but we would not be looking at repeating this every year or so. That is not the plan.

I would have to, Roger, I think most notice is mostly 1 of the very first time we have this discussion with customers. If you go back many, many years back, this is something we never did. And Roger mentioned in the introduction, the construction -- the discussions were constructive. I think they were more than constructive, meaning there was a clear acceptance that maybe the overall value in the ecosystem is shifting and that's triggered by, of course, AI to some extent. And I would say we will see what the future brings, but at least we have been able to have a very good, very mature discussion, which I think is very important.

So something we never did before. We don't want to do that every year because that's not the purpose. But I think that it's very good that in principle, at least we have the ability and mostly once a while to discuss again what's the real value of lithography in the entire ecosystem.

Absolutely. And Tammy, you know, one of the key objectives for us in the pricing conversation is to make sure that we never depart from the concept of value-based pricing because we don't want to be in a position that if the market goes down, that we're actually having discussions with customers and price decreases. I mean -- and that is very well understood in the conversations with our customers as we've had it. So to Christophe's point, these have been conversations on fairness. But the premise that we are able to capture value of the next generation of tools. And that as a result of that, we're able to continue to increase the price in commensurate with the value that it brings. That is a principle that we want to sustain even if the market goes to go back a little bit. So that's the reason why we're not opportunistically pricing while we're not opportunistically seizing the opportunity and why we're executing along the lines of what Christophe just described.

Okay. That's really clear. And secondly, regarding your exposure in China, so [indiscernible] than that, China will never be able to compete with you from a technology perspective. But going to, let's say, 2029 ish, went to work out, let's say, a low-end version of immersion tool. Do you think that will decrease your potential to price at a premium versus the Chinese local players or your potential margin in Chinese market may need to come lower?

Well, I think there's a lot of, of course, speculation in the equation. But where we are today, I think, with our Chinese customer is that they all want to work with us. I think this is very clear. I won't give any market share number, but you can imagine, it's extremely high, especially on immersion. And therefore, as long as we have a good market access as one of our customers can trust, they can work with us.

I think that the likelihood of a major competition in China is still pretty low. That's the first thing I will say. The second is, of course, if they were to not have access to some of our tools, then you get a lot more motivation, but it's still a very, very long way to go. And I think that -- we have been having this discussion about China having a tool to compete with us for the last 25 years.

And every other year, we get the news that this is coming. If you stick to fact, I think the fact this year are not different from the fact a year ago or even 5 years ago. So I think that the progress is not very strong. The motivation is not strong at all. And I think that as long, again, as we preserve market access in reasonable means, we should be fine.

Okay. I just wanted to remind we've got time for one last question. So Sharon, can I ask you to ask the final question, please. And then if there are follow-on questions, please contact ASML Investor Relations and we'll do our best to follow up. So operator, can we have that last question, please?

Your final question today comes from the line of Stephane Houri from ODDO BHF.

Yes. Actually, my question was on China initially, but just to understand the discussions that you have on 2029 and 2030, if it is more -- because you seem to be very positive at the moment on memory if it's very balanced between memory and logic or if it's still memory manufacturer, we are giving you some visibility on -- 2029 -- sorry, in 2030.

Well, I think you need both memory and logic to get some AI chips. I think we have, I think, discussion with both customers because they get the same message from their whole customer. I think today, DRAM is a bit more aggressive on the buildup of those capacity. But yes, we have discussion with both. So I think we see equal interest in call, I would say, demand trajectory for both DRAM and Logic because we need both basically to get the product out.

And run it at the same time, the U.S., Korea and even China or is it more concentrated from a geographic standpoint?

I think that we're mostly talking about EUV in this case. So this excludes China.

Okay. Thank you, everyone. On behalf of ASML, I'd like to thank you for joining the call today. Operator, if you could formally conclude the call, I'd be very much appreciated. Thank you.

Thank you. This concludes the ASML 2026 Third Quarter Financial Results Conference Call. Thank you for participating. You may now disconnect.

Hello, and welcome to ASML's Q3 2026 Results with Christophe Fouquet and Roger Dassen. Welcome, Roger, Christophe.

Roger, if I can start and ask you to give us a summary of Q3, a very strong quarter, and also share a little bit some of the dynamics that got us to that result.

Yes, indeed, a very strong quarter. So net sales came in at EUR 11.7 billion for the quarter. Included in there EUR 3.3 billion for installed base revenue. So that's EUR 11.7 billion that was within guidance towards the higher end of the guidance. The EUR 3.3 billion was EUR 400 million more than we guided, which I think is a very strong reflection of the desire of our customers to provide upgrades on their installed base. That was the primary driver for that higher number.

The gross margin for the quarter, 57.5%, again, largely driven, I would say, by installed base revenue and the upgrades business as a result of that higher than what we guided. Net income for the quarter, EUR 5 billion, included in there EUR 500 million for the revaluation, if you like, of the first tranche that we bought from Mistral.

So yes, all in all, I would say a very, very strong quarter, a record quarter, I think, it's fair to say, both at the sales level and also at the gross margin level. And I think it's a clear indication of the very strong execution that we have against the backdrop of a very, very strong market demand.

So then with that strong quarter behind us, how are you looking at Q4 and the full year then for '26?

For Q4, we expect revenue between EUR 14.2 billion and EUR 15.2 billion. So again, a very good step-up, and that is also what we expected, right? We said that we expect the second half to be stronger than the first half. And you see that momentum really very, very strongly building up. So EUR 14.2 billion to EUR 15.2 billion there.

In terms of installed base business, again, we expect an increase there. We expect EUR 3.7 billion installed base business for the quarter, again, largely driven, I would say, by upgrades. A gross margin, we expect around 57% for the quarter. If we translate all of that into what does it mean for the full year? So for the full year '26, we therefore now expect our sales to be between EUR 44 billion and EUR 45 billion for the year, and we expect a gross margin of around 56%.

So what does that mean then for the different parts of the business in 2026?

So against the backdrop of an overall 36% increase for '26 in comparison to '25, you see that, that is largely driven by EUV. So the EUV business grows over 45% this year. We expect the non-EUV business to be around 20% growth for -- in comparison to last year and the installed base business around 50%. The China part of the total business, we expect to be around 20%.

So then maybe just going a bit deeper on the gross margin. I think at the beginning of the year, we had a guide of between 51% and 53%. Certainly, things have gotten stronger since then. Can you share a little bit maybe on the dynamics that have led to that improved outlook?

Absolutely. So what are the key drivers? Of course, volume helps, right? Clearly, we have increased our expectation in terms of total sales and higher volume obviously leads to better fixed cost coverage. So that is a positive for the gross margin. Also, mix is important. If you look at EUV and immersion as key drivers for the gross margin, both of them are pretty strong.

And also, obviously, as I mentioned before, the installed base business and the upgrade business included in there is a very, very strong driver of the gross margin. So as a result of that, indeed, as you say, 56% is the expectation for the full year, which is a very, very nice step-up from the expectations at the beginning of the year.

But I think we also talked last quarter about higher value-based pricing and the contribution that might play on the gross margin. How is that showing up as part of the outlook?

Yes. So we completed those conversations. So that's been done with the key customers. The effect of that is not really visible in '26. It will start to become visible partly in the course of 2027. I think the full impact of that you will start to see in '28 and beyond.

So then maybe, Christophe, with that very strong outlook on '26. I think you've spent a lot of time with our customers this quarter. And what are the conversations you're having with them in terms of the investment plans that they have? And how is that feeding into the demand outlook that you're seeing for ourselves?

Well, we did indeed spend a lot of time with our customers. And I think all of them are commenting that they see their demand increasing in the short term, but also extending in time. I think that their visibility is very good at this point of time. Today, they expect that their supply will not meet the demand at least until 2028. So this is a very, very strong demand on their side. And of course, this means that they want to build up more capacity faster. So they are accelerating their plan. They are announcing new fabs.

And for us, this translates on the short term into more demand, as Roger mentioned, overall basically for our holistic product portfolio. And on the long term, increased visibility for our demand, especially with EUV. So a lot of our discussion with our customers now are shifting, in fact, beyond 2027, a lot of order intake for 2028, but also some strong interest to already place order for 2029 and sometime even 2030.

So then with that demand outlook, how is that shaping your thinking in terms of our own capacity expansion planning?

Well, I think it's a very clear picture. I think Roger mentioned it. So first, we are very happy of the execution of the team at ASML on the ramp this year. We expect to ship about 65 systems, which is more than 50% increase compared to last year. So this is already quite an exceptional step-up. Deep UV immersion at this time last year, we are planning to ship quite a few less tools.

We moved back to a very strong year, and we are planning to ship about the same amount of tools as last year. So this is clear that we've done some good work to be able to start the ramp very aggressively.

Last quarter, we talked about 30% more capacity next year and also the aspiration to have another 30% increase in 2028. A lot of focus was there. But to be honest, it's becoming very clear that 30% in '27, 30% in '28 will not allow us to meet our customer demand. So we have to do more. And we are looking basically at ways, especially in 2028 and beyond to further extend our capacity. And this is very important, of course, to be able to fulfill our customer demand as much as we can.

And maybe one of the other levers -- or we do have other levers in terms of how we can offer capacity increases to our customers. I think, Roger, can you maybe talk a little bit more about some of those and how they help?

Absolutely. So in addition to increase in unit shipments that Christophe talked about, one important driver, obviously, is the installed base business that we've talked about quite a bit. So of course, that is a major driver. And it's something that customers really like, right? Because what it does is it gives you within your existing footprint, you get pretty fast incremental capacity there. So that's been very successful so far, and we expect that to continue to be quite successful on a go-forward basis.

We're also very aggressively developing upgrades. So we will get more and more upgrades on our installed base available to our customers. So in that way, we try to help customers in getting instantaneous access to more capacity. So that's one driver. The second driver is the execution of our road map and productivity, again, there is an important driver. So with new releases of new products, you will see more and more productivity.

We talked in the past about a 3800F, which gets you from the 230 wafers per hour that we have today to 260 wafers per hour. That will be introduced in 2027. That will be in small quantities. But obviously, for '28 and beyond, you will see that obviously really helping to increase the capacity of our customers. But also on the immersion front, you will see that we're going to increase the specifications of the key immersion tools that we ship in 2027, and they will actually show 330 wafers per hour. So in that combination, installed base business and improvement of the throughput of the tools that we ship to customers, that will be a significant enhancement to our customers' capacity.

Christophe, I can swap now maybe to a little bit on the technology front. We had a number of important, I would say, press releases through the quarter. Can you share a little bit what the importance of those announcements were and the milestones in terms of the adoption plans of High NA?

Well, I think that there's been indeed a lot of news around High NA, and we are very happy with that. As you know, the program, the High NA program started more than 10 years ago. And we are all very happy to see that our customers are now about to start using the tool in high-volume manufacturing. I'd like to start with TSMC and ASML announcements.

So TSMC has asked us to lead with them a consortium basically to bring 12-inch reticle to the industry. This will happen sometime in the first half of the next decade.

But it's also the sign of how important High NA has become in their plan. And that's also why they have basically confirmed that they will also introduce High NA around 2030 in high-volume manufacturing. So this is a very important announcement because it shows basically that over time, customers are looking at using High NA more. This is why they want to use 12-inch reticle.

Now you have noticed that all other major customers also joined that consortium. And at the same time, Samsung has also announced that they will be using High NA in high-volume manufacturing starting in 2028. And Intel, I think we talked about that before, they continue to run the system in high-volume manufacturing, increasing the number of layers. And of course, we look now at a significant amount of wafers being run there. So great news on High NA. I think this is the set of milestones we have been working on very hard for quite a few years.

And then maybe along with that, on the technology side, we saw the introduction of the next-generation YieldStar. What's so important about that new technology in terms of how it meets our customers requirements?

Yes. So there also, I think we talked in the last few quarters as Roger mentioned it a few times. We have a huge momentum on metrology. We have seen major, major growth. This is true for our overlay metrology system, YieldStar. So the 550 is the latest generation of this tool. It's going to improve once again accuracy, and we are now ready for 14 angstrom node in logic, 1D for DRAM.

So very, very accurate tool. And it's going to increase the productivity by 60%, which is very important because customers in order to get performance needs more and more metrology, and if we are not to improve productivity a bit like with our scanner, capacity will also be an issue. So 60% productivity improvement, of course, will boost both the performance of the tool, but also our capacity moving forward.

Then maybe one final question. So I think both you and Roger have talked about strong business momentum, the demand outlook that we're getting from our customers and the visibility that they're giving us. So what then would you say are the key things that you want to focus on for the rest of the year, but also maybe a little bit in preparation for into next year, for example?

Well, I think it's very clear. It's more capacity as we discussed today. Our customers are asking us every single day to get more tools. And the reason for that is because they have very high visibility on what is needed in the future. And as a result, we also have this very high visibility. So there is no doubt in our mind that we need to continue to get more output. It's a lot of work, but this is, for sure, one of the key focus of everyday life at ASML today.

The other one is technology. High NA, YieldStar, we talked about that. We talked in the past also about boosting the productivity of Low NA. Those things also help our customers first to transition to the next technology, but they also help with capacity. So these are the 2 things we have to do in parallel. And I think as we discussed today, I think we are very happy to see progress on both counts.

Very helpful. Thank you, Christophe, and thank you, Roger.

Thank you.

Good day, and thank you for standing by. Welcome to the ASML 2026 Second Quarter Financial Results Conference Call on July 15, 2026.

[Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Jim Kavanagh. Please go ahead.

Thank you, operator. Welcome, everyone. This is Jim Kavanagh, Head 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 2026 second quarter results. The length of the call will be 60 minutes, and questions will be taken in the order they are received.

This call is also being broadcast live over the Internet on 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 statement contained in today's press release and presentation found on our website at www.asml.com and on ASML's annual report on the 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.

Thank you, Jim. Welcome, everyone, and thank you for joining us for our second quarter 2026 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 2026 results as well as provide some additional comments on the current business environment and on our future business outlook. Roger?

Thank you, Christophe, and welcome, everyone. I will first review the second quarter 2026 financial accomplishments and then provide guidance on the third quarter and the full year of 2026. Let me start with our second quarter accomplishments. In the second quarter of 2026, total net sales were EUR 9.3 billion, which is above the high end of our guidance as a result of higher-than-expected installed base management sales. Net system sales were EUR 6.6 billion, which included EUR 3.8 billion from EUV system sales, including sales of 1 High NA system and EUR 2.8 billion from non-EUV system sales.

Net system sales were almost equally split between logic at 51% and memory at 49%. Installed Base Management sales for the quarter came in at EUR 2.8 billion, almost EUR 300 million above our guidance, a result driven primarily by additional upgrade business. Gross margin for the quarter was above our guidance at 54%, primarily due to the contribution of very high-margin components within our installed base management business.

Our operating expenses were higher than guided due to the recognition of estimated costs related to the technology and IT transformation in Q2, primarily in R&D. R&D expenses came in at EUR 1.3 billion, and SG&A expenses came in at around EUR 0.3 billion. The effective tax rate for Q2 was 17.5%. For the full year 2026, we expected annualized effective tax rate is around 17%. Net income in Q2 was EUR 2.9 billion, representing 31.3% of total net sales, resulting in earnings per share of EUR 7.59.

Turning to the balance sheet. We ended the second quarter with cash, cash equivalents and short-term investments at a level of EUR 7.6 billion. Our free cash flow in Q2 was EUR 1.3 billion. Moving to our cash return to our shareholders. In Q2, ASML paid the final dividend over 2025 of EUR 2.70 per ordinary share. Together with the 300 dividends paid in 2025 and 2026, this resulted in a total dividend for 2025 of EUR 7.50 per ordinary share.

In the second quarter, we purchased around EUR 1.1 billion worth of shares under the current 2026-2028 share buyback program. The first quarterly interim dividend over 2026 will be EUR 1.88 per ordinary share and will be made payable on August 5, 2026.

With that, I would like to turn to our expectations for the third quarter of 2026. We expect Q3 total net sales to be between EUR 11 billion and EUR 12 billion. We expect our Q3 installed base management sales to be around EUR 2.9 billion. Gross margin for Q3 is expected to be between 55% and 57%. The expected R&D expenses for Q3 are around EUR 1.2 billion, and SG&A is expected to be around EUR 0.4 billion. Driven by continued strong demand, we are updating our full year 2026 guidance. We now expect total net sales between EUR 43 billion and EUR 45 billion, with a gross margin between 54% and 56% [ billion numbers in euros ]. With that, I would like to turn the call back over to Christophe.

Thank you, Roger. I will now provide some additional details on the dynamics that prompted us to raise our guidance for the full year. The combination of continued strong momentum in customer demand and our ability to respond to that by driving higher output to strength in our supply chain, our manufacturing and our installed teams in the field are the primary drivers of our improved guidance. Strong end market demand this year has motivated our customers to aggressively add capacity on their leading-edge nodes. A number of our customers have revised their capital expenditure plans report for the year, and our ability to increase output has allowed us to meet their requests for additional lithography system. The dynamics are very similar in both advanced logic and DRAM and the plans to build up capacity are equally aggressive.

Our customers in both segments are entering into long-term agreements with their customers, providing them with longer-term visibility and the confidence to add significant capacity to support demand. In logic, there is a continued investment not only to enable the expansion of 3-nanometer capacity in support of the latest generation of AI accelerators, but also at both the 5-nanometer and the 4-nanometer nodes to support the diverse set of chips required by AI product.

At the same time, the 2-nanometer node continues to ramp rapidly to support next-generation HPC and mobile applications. And our customers are already planning investment to support the development of the 1.4 nanometer nodes. These dynamics in the logic segments are driving both an increase in litho intensity and greater demand for advanced lithography. We now expect advanced logic/foundry related net system sales to grow over 25% this year. In DRAM, the supply challenges driving up both DDR and HBM prices have prompted significant investments in fab expansion. Our customers are adding meaningful capacity this year while at the same time, they plan further capacity expansion as indicated by the plans to build multiple mega fabs.

These additions will come online in phases over the coming years. In addition, DRAM lithography intensity is raising as customers migrate to advanced nodes. This includes both EUV and DUV immersion, with EUV low NA growth driven by the increased replacement of multi-patterning with more cost-effective single exposed EUV.

As a result, we anticipate our memory-related net system sales to grow by over 75% this year. I will now turn it back over to Roger to provide details on what that means for the different parts of our business and our plans to support this growing demand.

Thanks, Christophe. Starting first with our EUV business. We now expect to ship around 65 low NA EUV systems this year resulting on year-on -- year-over-year EUV net system sales growth of over 45%. This demand is being fueled by very strong momentum in both DRAM and advanced logic. Moving to the DPV business. For immersion DPV, we expect about 130 shipments this year, which is similar to the output level of these systems in 2025. This year, we have worked closely together with our supply chain partners to reaccelerate our output of these systems. Shipments of dry DPV systems have also increased markedly this year. Further, greater process control intensity at advanced nodes has led to major traction when it comes to adoption of our optical and [indiscernible] metrology products across all key customers. Given these trends in our DPV and metrology and inspection business, we expect growth in non-EUV net system sales of around 25% this year.

Installed base management sales are expected to grow over 30% this year, driven by service revenue from our expanding EUV installed base and customer demand for performance and productivity upgrades to support their increasing capacity requirements. Turning to our China-related business. We continue to expect this to make up around 20% of our total net sales for the full year as it increases in line with the overall business, mainly related to an increased demand in mainstream logic. With regard to our capacity plans, we are continuing to have very constructive conversations with our customers to better understand the demand for our systems beyond 2026. With increasing visibility into their customer plans -- their customer plans, our customers have been able to share forecast with us that extend out multiple years. We see this heightened visibility reflected in auto momentum that has remained extremely strong through the first half of the year. As a result, our backlog continues to increase with a broad mix of customers.

For 2027, we are now close to being fully covered with orders for low NA EUV, and we are planning to increase our low NA EUV capacity by around 30%.

Looking ahead to 2028, we have already received a significant number of low NA EUV orders. Strong demand forecasts from our customers have led us to investigate a further 30% capacity increase for that year. Similarly, for our immersion systems, we intend to increase capacity by 30% in 2027 and are investigating a potential further 30% expansion for 2028.

With that, I would like to turn it back over to Christophe.

Thank you, Roger. Turning to our technology road map. We see High NA EUV continue to make good progress. We are continuing to work very closely with our customers to prove the value of High NA technology for their process technology road maps. In parallel, the maturity of the platform is improving towards the level required for insertion into high-volume manufacturing. We were also very pleased to announce in a press release earlier today that Intel foundry is using ASML High NA EUV technology on the Intel 18A process node to produce a subset of its Intel core Ultra-series reprocessors.

These milestones marks an important step in demonstrating High NA EUV readiness in a production environment. To conclude, customer demand remains very strong with visibility now extending several years into the future. We have responded effectively to the increasing demand, and we'll continue investing to ensure our capacity and capability remains aligned with our customer needs. We also see that the rapid growth of AI-related demand in advanced logic and DRAM is accelerating the move towards more advanced lithography solution and increasing lithography intensity. At our next Capital Market Day, which will be held on June 10, 2027, we will update our longer-term views to reflect the market and technology dynamics since our last Capital Market Day. I look forward to seeing many of our investors there. With that, we will be happy to take your questions.

Thank you, Roger, and thank you, Christophe.

[Operator Instructions]

[Operator Instructions]

And your first question today comes from the line of Francois Bouvignies from UBS.

My first question maybe is on ASML has often described its pricing approach as being based on the value delivered to customers, although, of course, by definition that requires assumptions about the economic benefits, the customers can extract from your tools. So with that in mind, I just wanted to revisit TSMC recent comments on High NA systems being too expensive. One interpretation could be that customers are finding more value in the low end than maybe we previously expected, particularly if they can do some triple patterning at competitive cost versus high NA. So my question is, is there any scope for pricing adjustments for low NA over time to ensure that the system pricing remains aligned with the incremental value customers I mean, the incremental value you give to customers. Does that make sense?

Well, I think, Francois, I understand maybe the question, the connection between High NA and Low NA. So let me start with High NA. I think we discussed that in the past. And every new generation of lithography system ASML ever brought to market was with a strong intention to reduce the cost of patterning. So when you look at High NA single expose, the design of the tool, the performance of the tool will be such that it provides a cost benefit to our customer. Now of course, to reach that point, you need to have the right maturity of the platform. I just mentioned that we are still basically working in bringing the High NA platform to the level of maturity of low NA and when you achieve that, this is practically the time where the cost of High NA is going basically to provide an advantage versus the existing technology.

So I think that logic is still true and again, get implemented when the platform reached the right maturity. Therefore, I think there's no we need to maybe look at 1 cool price versus the other because that logic, I think, was also true for low NA, if you remember our discussion back in 2018, '19. I think the key, again, for High NA to be cost effective to beat the cost of low NA plus emergent multi-patterning is to bring High NA to the right maturity. And in that sense, we are very happy with the press release this morning about Intel because this is, I would say, maybe the strongest signs so far that we're getting there.

So there is no section of low NA pricing -- yes, sorry, go ahead, Roger.

So I would say, Francois, in addition to that, when it comes to Low NA pricing, of course, you know that we keep on increasing the productivity of the low NA tool. So that, of course, that gives us a pretty strong runway for potential price improvements going forward. And you're right. I mean, value-based pricing is the concept that we that we follow within ASML. And you're also right that in the current environment, of course, the value for customers is higher than in other circumstances.

So I would agree with you that the current environment provides more flexibility for pricing what you would have had in different days. Of course, you will also appreciate given the long order lead times that we have that doesn't translate into pricing effects tomorrow. But clearly, the environment that we live in today with the value that our products bring to customer is substantial, of course, gives us flexibility on pricing more so than what you would have seen in the past. And of course, we're executing on that as well.

When could that happen, Roger, I mean, to your point, if not tomorrow after tomorrow. So when he did...

So that really depends on the order situation that you have with customers. as I said, it's obviously linked to other lead times. So -- and of course, that varies from 1 to the other. But the dynamic is clearly there, Francois.

Okay. And maybe just the follow-up quick one is on the -- I mean, the 30% increase in '28, which implies 110 tools and I mean, Christophe, you mentioned investigating the world is precise. Do you need the new clean room for that? Or are you contemplating maybe to add clean room to ASML capabilities.

I think all the capacity increase either plan or investigated, we're talking about or based on our existing footprint. So we have been working extremely hard, as you may have noticed in the last 6, 9 months to increase our output. We'll continue to work very hard in the next few months to do the same. And the number we are mentioning, we can achieve basically by optimizing the existing clean room space in the right way. So this is also why we can create basically that improvement on the short term.

Our next question today comes from the line of Joe Quatrochi from Wells Fargo.

You noted that you're close to receiving all the orders you need for 2027 to be covered on low NA. And your increase in capacity, obviously, by 30%. So I guess the question is, is the implied kind of 85 tools for next year? Is that the ceiling of what you can think you can support in your supply chain can support next year? Or it sounds like maybe the existing footprint can support more. Is there a possibility that, that can move higher as we move closer to 2027?

Joe, it's the balance as we see it today. The balance between demand and supplies we see it today gets us to the 30%, right? So that's the way we do it. If customers are going to come to ASML and say, ASML, we need considerably more than just as we've been doing it in the past couple of months, we need to look ourselves in the eye, we need to look at all the supply chain and just see what can further be -- what can further be done.

But at this stage, given the conversations we have, we think the 85 is a nice representation of the balance between what customers are asking of us and what, at this stage, we've been asking ourselves in the supply chain to do. But if more is needed, just as we've done it in the past couple of quarters, we're going to roll up our sleeves and see if more can be done.

And maybe, Joe, to add that back to Francois question. So I explained that the 2x 30% is based on our existing footprint. So the question basically is really the speed at which we need to execute to support the customer demand and potentially at some point we can execute. But on that part, as you have noticed in the last few months, we have been very successful. So we have the space. We have, I will say, the recipe to get to those numbers. And as I said, we will continue to both stay in sync with our customer, ask them what they need and continue to work very hard on output. And the first mission of ASML is to provide their customers what they need, basically.

And Joe, a bit to further build on that, we should also remind ourselves that shouldn't just be looking at unit percent increases, right? So we're looking at 30%, which is boxes, if you like, so 30% more tools. But you should also recognize that the 2 mix that we're going to ship next year is a different tool mix from the tool mix that we shipped this year. So when it comes to EUV in particular, right, the tool mix that we're going to ship next year will be [ these ] and us. While this year, it's a combination of these and these and if you recognize the difference and output in essence, what you're looking at is not 30% improvement of wafer capacity that we're adding that approximately 45%.

And in addition to that, as you also know, we're offering a whole slew of upgrade packages to the install base to customers, which gives them another significant uptick. So it's in a combination of improving the number of -- the capacity that we have internally to crank out unit numbers and the productivity of the tools and the upgrades of the installed base. And in that combination, as Christophe said, we think that we're very successful in meeting the objectives and the amount of our customers.

That's really helpful color. I appreciate all the detail. Maybe just as a follow-up, you talked about like optimizing the existing clean room space for capacity. Does that change at all what you think you could do from a capacity standpoint for High NA? Can you remind us what the High NA capacity is we're looking into '27, '28?

Well, I think for NA, we follow the exact same principle, which is to match our supply with our customer demand. So I think we optimize across all the products. And there's also, of course, some discussion around High NA, as we mentioned. There is some discussion about insertion. So we keep also, of course, the flexibility to be able to respond to that when the time comes. So the optimization I was referring to before is really basically across all products.

Now I think everyone understand that, of course, a lot more is being done to the low NA and immersion, for example, than High NA. But we are not sacrificing, I would say, any of our high NA supply by doing the rest of the optimization.

Our next question today comes from the line of Krish Sankar from TD Cowen.

I [indiscernible] the capacity increased to 85 and 110 units, you are meeting the demand, not under-shipping. Is that correct? And if so, for you to increase, are you waiting for purchase orders from customers before you start adding more capacity? And then I have a follow-up.

Well, I think on the first question, I think that, as you have noticed in the last few months, I don't think we have reached yet a stable state on what the demand will be for '27, certainly not for '28. So we keep on revising basically with our customer what that demand is and again, the whole goal of our supply is to follow that demand. So I would not say that we have done with this discussion. I think you see the dynamic on the market. This is still pretty strong. So this is also bringing some, of course, I would say, always tension to make sure that the 2 numbers match, but that's again something we'll continue to do. So short answer is yes, the capacity is there to meet the demand. but the demand is still fluctuating. We get nice visibility for sure for '27, even '28, but we also mostly are not at the end of the discussion with our customer.

And clearly, Krish, we're not waiting until we get the orders, right? Because we said we're investigating the 110 scenario for EUV in low NA by 2028. Of course, we don't have orders for 110 EUV low at this stage. So we're not waiting, We're preempting, but we are doing this because the demand signals that we're getting from customers that have not yet translated into full [indiscernible] the demand signals we're getting from customers are quite strong. So that's why we're investigating this and preparing as best as we can at this stage.

Very helpful. And then a quick follow-up. It seems like the 3-nanometer node is actually being more of a longer and stronger node than people thought. So I would assume that you would still be shipping 3,600 Ds. But Roger, you mentioned that next year, there won't be any D in in the mix. So I just want to clarify, is that true? And if so, is it fair to assume that gross margin next year should grow versus this year because if your mix is shifting to more volumes of E and eventually S?

Krish, at a certain point in time, we're simply sold out when it comes to D models, right? So D use a specific QB from Xian at a certain point in time, we're just done. And we expect to be done or maybe virtually done, but done this year, it might be 1 or 2 sitting into next year. But essentially, we're done with it this year. And then from that moment onwards, there is no left anymore, and therefore, we'll build even half next year. And of course, that mix will come with a better ASP than the mix that we have this year because it also will come with higher productivity as we just laid out and other and also comes with a better gross margin profile.

Of course, I'm not going to guide you the gross margin for next year, Krish, but it is true that the mix effect on EUV next year will be more positive than it is this year.

Your next question today from the line of Stephane Houri from ODDO BHF.

Yes. So my question is for where you say you have already large order volumes, but not fully booked yet. Can you help us understand where you in terms of visibility out of the 110, you need targeted? Is it -- how is it covered today? And can you talk about the lead times as we speak? And I have a follow-up.

Well, the fact that we say that we investigate 110, we wouldn't investigate 110 if of customers were telling us that, that would be a ridiculous number, right? So we're investigating this simply because customers are signaling to us that the demand is very, very strong. But the fact that we now start talking about having significant order intake for '28 already like 2 years in advance is pretty strong, right? So that is something that we haven't -- that situation we haven't enjoyed in many, many years.

So I think that is a very good underpinning of the strong market dynamics that are currently going on. We're not sharing order intakes. I'm not going to give you the coverage number, but I will tell you that the demand signals that we're getting from customers also when it comes to '28 are sufficiently strong for us to seriously investigate this 110 number and the related number on immersion that we signaled to you.

Okay. And about the 75% memory growth in 2026. Can you share with us how much is coming from HBM-driven lithography intensity versus volume addition, i.e., what I'm trying to know if with these investments, the memory manufacturer, your clients are kind of closing the gap between offer and demand or just investing in new technologies like HBM.

Well, I think the demand is really a combination of a lot more volume both for HBM and DDR. I think we have seen some shift between 1 product to the other recently because the price point of DDR, I think, is extremely strong right now. So there's some optimization at our customers. It's hard to know the exact, I would say, a ratio between the two. It doesn't matter that much in terms of technology for us because the DRAM, DRA itself is the same. HBM will require more wafers, so there there's a volume effect again. So that's 1 element.

The second element is, of course, the number of EUV and immersion layer, which has increased basically on the the nodes that are ramping very, very strongly right now. So the 1C node, for example, which is going to be an enormous node or even 1B are using more EUV layers. So this is really this combination, which creates a bit of perfect storm for ASML on DRAM this year and most probably the next few years to come.

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

So my first question is on '26. When I look at your guidance on unit for merger and EUV as well as the guidance for IDM. I struggled a little bit to get even to the midpoint. So -- sorry, I'm struggling to not get above the upper end. I apologize. So I'm trying to understand if your ASPs are going higher in Q3, Q4, because of your holistic [indiscernible] attach rate on software? Or is there any mix impact that is particularly meaningful and associated with it, when I look at your full year guide gross margin, you're essentially saying that your gross margin exit rate Q4 is around 56% to 58%, which again, would suggest that your mix, your volumes, your software upgrades, et cetera, are very strong. So just trying to understand what's going on in those business systems in particular in Q3, Q4.

It's very hard to validate your number on the phone. But let me tell you that -- if you look at the guidance that we have provided that, of course, there is a little bit of a mix effect in there. I would say, for EUV, we had quite some demodels in the first half, and the mix effect will be a bit more positive in the second half. We'll also have in the second half we'll have all the 230 configurations in there. So that's going to help a little bit on the ASP side for sure. Of course, the immersion number in the second half will be substantially higher than in the first half. As you know, in the first half, immersion was low because we were -- we had decided in 2025 that we were having [indiscernible] for a substantially lower immersion number than what we're currently facing. So we started the year rather weak. We will make up for that quite substantially in the second half of the year.

So I would say the guidance to get to the guidance is there around 65 EUV tools with a slightly better ASP mix because of what I just mentioned. And of course, immersion will be quite strong in there. And of course, the installed base business, as I also indicated, will grow over 30%. I think if you take all those elements into the mix, you should be able to get to the midpoint that I just talked about. In terms of the gross margin, if you do the analysis and if you take midpoint by midpoint, then I think you're looking for the second half at a gross margin of 56% approximately.

So we guided 55% to 57% for Q3. So you should be looking midpoint at approximately the same number there for Q4. And why is that? Again, it's the mix because we have quite a bit more immersion and low in AUV in there. One, too, because we have better priced EUV in there for the second half, the because of the installed base business, which remains quite strong. for, of course, we have volume effect and the fact that we have so much more volume in the second half than in the first half, obviously, gives you a positive fixed cost coverage. So it's the combination of those 4 as a result of which you see an improvement of the gross margin in the second half versus the first half.

Got it. Very clear. And if I take the things that you mentioned in previous question, the mix of EUV tools, et cetera, et cetera. Is there any reason why your gross margin should not go higher, in fact, in '27 than the exit rate of '26. And I guess related to that, any color you can give us on the mix of low NA tools next year, whether you have prominently the E tool or is the F tool capturing more than 50% of the value.

So you would appreciate, I'm not going to give you guidance on the '27 gross margin. But if you look at the main drivers that I just gave you for why the second half is better than the first half on the mix effect within EUV, of course, that should only be better because, as I mentioned, next year, we're going to get a mix of Es and Fs. I think it will primarily be [indiscernible]. There will be a number of Fs in there, but the lion's share of the tools next year are going to be Es. Nonetheless, the mix next year will be better than the mix this year and will be better than the mix even in the second half of the year.

If you look at immersion and EUV, well, given that we're talking about planning for 30% more, emerging 30% EUV, then I would argue that, that shouldn't disappoint, right, if indeed we're able to get those done. Then clearly, our high-margin scanner products with the 30% increase that we just talked about should be positive in there. The volume effect, of course, the fixed cost coverage, you should get that effect, right, if indeed we're going up 30% in those 2 businesses. And then the swing factor, of course, is the installed base business, which, of course, the service component of the installed base business could be strong, right, because that simply grows with the -- that grows with the installed base, almost by definition.

So that part should be strong. And then the question is how strong will the upgrade business be, which in the current climate is very, very strong because customers are looking for productivity. So in the current market dynamics, you could realistically assume that. So that's a quantitative description of the different components.

Again, we're not going to guide gross margin. But if your perspective on '27 is that yet that will be a bullish market where customers are looking for a lot of -- for capacity expansion, then you could argue that the drivers of the gross margin that I just gave you should also be strong in next year.

Your next question today comes from the line of Nigel [indiscernible] from Morgan Stanley.

Got a follow-up question on the difference between boxes and productivity. Super helpful that you laid that out, 30% unit growth, about 45% on the actually productivity that you are shipping to customers. Now beyond productivity, I think 3,800 is also providing overlay improvements. I think in the past, those were a little bit more difficult in discussions with customers. But I'm assuming that if you look at the outlook today and given your previous comments that maybe 45% productivity is really the lower end of what we should model for revenue in terms of EUV over that period. That's my first question.

Yes. I'm not going to guide in any way the business for next year. I think we've said what we wanted to say about what we plan for in next year. And we're not going to translate that into euro months yet. I think you're very well capable of putting that into your model.

Percent is great. I think you're implying 3,800 apps pretty much only in 2028, which makes sense. I mean, high productivity -- it's just that given the commentary, I think in the past, it was sort of a straightforward as almost that productivity gains are shared. I'm just trying to get a better sense of -- there's more than just productivity in dental throughput, there's overlay improvements, et cetera. And just thinking if that is what we should think about when you say there's more flexibility in pricing.

No, the only thing is -- of course, we've always been able to show customers not just productivity upgrades, but also the value from better imaging, the better the value of better overlay, et cetera. And then, as you know, we've always shared the value with the customer in an equitable way and in a certain way. And the way that resulted was that you got this very strong correlation between throughput improvement and ASP. I mean that's just the way things pan out, which put in another way, customers were paying for the productivity upgrades and the value that we give them for free was the value associated with, let's say, overlay improvement imaging quality and what have you. That's sort of the way things historically panned out. And there's no reason to believe that that's going to be dramatically different other than what I -- what we said earlier on, which -- that in the current environment with the value that we bring obviously are also having conversations with customers on how we get rewarded for the additional value.

Very clear. Maybe a quick follow-up on installed base. Thank you for quantifying the outlook for the year. It certainly feels like another upgrade. And this business, I think, has been trending better for a while now also last year. So I mean, we know the productivity increase of the tool, very helpful the data you provide, but what I kind of is lacking is in terms of some which maybe help us with this in terms of the current configurations that you see as you sort of look at current fleet configurations at customers, how big is that opportunity in terms of upgrading and given there's a strong need from customers to increase capacity of the tools, given limited clean room. I guess there perhaps a plan in place to make this more of a agreement of sorts in terms of getting better planned installed base upgrades and some more visibility also for you guys to be able to service that demand.

Well, I think that you see it. So the key element today is that customer wants to get more capacity on their existing fab as quickly as possible. So this creates really strong condition for system upgrade. That's true this year. I think we see that in our number. This will be still true next year and mostly beyond that. So the need for capacity on a very successful advanced node is there. The upgrade product we are developing are covering all the dividend version of our EUV low NA or immersion systems. So we are really capable basically to provide product to our customers that can be implemented to every single version of our EUV or emergent tool. And today, we see a very strong acceptance of those products to the point that we have many discussion where we are being requested to try to accelerate that and create new product which we plan to do in '27 and even '28. So I will say as long as we continue to experience this huge demand existing nodes on the constraints of their existing fab, I think we would expect that the demand for those products will be very strong.

We will now take the next question, and the question comes from the line of Tammy Qiu from Berenberg.

So the first one is based on our feedback, investments usually compare your growth to the [indiscernible] equipment spending growth. And based on our understanding, this year, you have a lot of upgrade because some customers we lack of clean room, et cetera. And in 2027 and '28, in theory, we are having more plenum coming out of the space. So therefore, there will be more greenfield investment. Do you think you'll be therefore in a better position to grow comparing to AAC comparing to what we have seen in 2026?

Yes. Tammy, the sound is not very good. I don't think we understood your question. I apologize. Can you try again, maybe make it a bit shorter or so.

Yes, sure, sorry. So basically, 2026 has a lot of clean room constraints. And 2027 and '28 will be more clean rooms space than greenfield expansion. And in my view, that puts you in a better position to outgrow WFE these grow in line with table. Do you think coming into '27 and '28, you'll be able to outgrow or grow more than double free for your business comparing to 2026?

I mean we -- as you know, we never comment on WFE. We comment on our own plans on the demand as we see it. And I think we give you all the parameters on our end, what we're working towards. And I'm sure you have your own expectation where WFE is going and just compare that. But we think that with the 30% number that we just indicated, we think we're contributing to the demand that our customers are having.

Yes. The only little detail, I will stress again maybe to help you is when it comes to advanced DRAM when it comes to advanced logic, we see our litho intensity increase. So the demand for more EUV or more immersion and so maybe that helps you a bit to answer the question. Every time you convert multi-patterning to single-exposed EV, for example, there is a shift, of course, from nonlist litho. So I think that's maybe one element to help you in your calculations.

Okay. And the second question is on High-NA. So for the time being, Intel seems to be the main high customer for logic. And we've been hearing more from DRAM customers. Do you think there is a chance that DRAM group will be a bigger customer for earlier than logic?

Well, I don't know if there will be bigger or not. I think what we see is, of course, that both technologies are qualifying equally INA today. So we talked about Intel today. I think that Intel was first to get the technology, so they are first implemented in production. As we speak, there is a lot of work down to qualify the technology on product wafer. So the opportunity for DRAM is significant also because the volume is also significant. But there's no real change there. I think we still see both logic and DRAM being a good candidate for High NA. The reason for that is both DRAM and advanced logic will be shifting more and more towards multi-patterning, low NA over time. So that's applied to both basically.

Next question today comes from the line of Chris Caso from Wolfe Research.

First question is about the capacity additions. And basically, how long does it take to affect the capacity additions, if you were to take a decision now to add more capacity when would that capacity be effective for shipment. And if you can go through some of the steps that you would need to take, I suppose that -- I would suppose that supply chain would be a big part of any decisions to add capacity.

Yes. It's -- Chris, it's a combination, right? So we have -- as Christophe said, obviously, we're doing work here. So we're freeing up cabin, so making sure that cabins are fully dedicated to output. Right now, we will also have prototypes and R&D tools in cabin. So finding another home for those tools such that all the cabins that we have here are fully dedicated to output. We're looking at reducing cycle time. So those are the key things that we're doing here within ASML. And of course, we're working with our supply chain to in essence, and make sure that they do the same things. Christophe said, they've made -- as we did, they've made big investments in the past on what we call the long lead time items. So now it's just leveraging those investments from the past and making sure that we get the maximum out of that capacity. And in terms of how long does it take? Well, I think the 30% that we talked about gives you a good proxy for that, you will -- in essence, as we've said before, every year, you will see us and with a move rate that is higher than the move rate that we entered the year-end. So we're continuously building up move rate quarter-on-quarter. And the end result of the plans as we currently have it, is the 30% that we mentioned for next year and the 30% that we're investigating for 2028. So that's the answer, I think, to the timing question that you just [indiscernible].

As a follow-up, I have a question on pricing and a clarification from some of your prior comments. And I think you were very clear about the mix effect of low NA EUV on the higher throughput tools where you get higher proportionately higher ASPs. Is there also any potential for higher ASPs on a like-for-like basis. And the reason why I ask is because you are taking steps to add capacity, you're rolling up your sleeves, as you say, would that potentially result in higher like-for-like ASPs as you increase your cost to do what the customers are asking.

Well, as I mentioned before, in the current environment where there is a lot of value for customers for what we bring them we believe the potential to capture a larger share of that value or at least to capture our share of that larger value. It gives you better pricing power. So those are the conversations that we're currently having with customers. So as I mentioned, not tomorrow, but over time, you should be able to see the improvement -- the improvement there.

Your next question today comes from the line of Mehdi Hosseini from Susquehanna.

Yes. I have 2 follow-up questions, and this is for the team, Christophe and Roger. As we think about this migration from E to F, which seems to be accelerating in the second half of '27, how your customers are deciding between upgrading an existing platform versus purchasing an F system. And I'm asking this question because both of these have a similar configuration. The base system is very much similar. And I just want to understand how customers would prefer upgrade or just go for a complete new system purchase? And I have a follow-up.

I think the answer to the question today is very simple. It's really end. So I think that our customer wants to buy the fastest possible tool. This is why we had a pretty fast migration towards the 3,800. I think this has become today the 2 customer really wants and they also want to upgrade the existing system because typically, they sit on different technologies. So the new tool moving forward are going to 2-nanometer and and then we'll go to 1.4, while a lot of the upgrade will be for the notes that come before that. So we are really in the end situation today. And the appetite for both upgrade but also for faster tool is high. So what will define the transition from E to F is going to be, again, the maturity of the platform and then our ability to ramp going from E to F. But that's very, I would say, very normal. That's what we have done with the E. But today, our customers, I think short answer, they want both and they want as much as both as possible.

Let me rephrase the question. Would it be fair to say that F is more geared towards 1.4 or below 2-nanometer and assuming that the 2-nanometer remain strong, your customers don't want to bring the line down and would prefer to actually purchase a new tool, especially for below 2-nanometer.

Well, I think the F will certainly be used for 1.4 nanometer because the timing is matching basically the timing of the F. For 2 nanometer, I think what we also allow between the E and F is to what we call mix and match the product. So when it comes to imaging overlay, the customer wants to see a difference. They will just see a faster tool. So that also means that when the tool is ready, if there's need for more capacity for 2-nanometer than the F would definitely be an option as well.

Okay. And what's the updated assumption for High-NA EUV system and recognized this year, 2026?

You mean the number of tools that we referenced is this year? We've said 4 to 5. Yes, 4 to 5 is still for this year.

Our next question today comes from the line of C.J. Muse from Cantor Fitzgerald.

Operating leverage has been, I think, an increasing focus in terms of how you've been talking to The Street, and we're clearly seeing in the numbers here with top line, 35% growth and OpEx implicitly grown only about 6% -- and so I'm curious, as you think about looking into '27 and beyond, should we be kind of thinking that this 60% incremental op margin is kind of the target that you're going after? And I would love to hear your thoughts on that.

Yes, C.J., we not -- we're not going to quantify that guidance. But you are right that we have been managing our OpEx quite nicely, so SG&A and R&D. You also know that we said that we believe that if we look at the R&D team that we have today, we believe that also with the reorganization that we talked about before, that we can get even more value out of the team than what we enjoyed so far. So we believe that with the current team that we have in R&D, there is a lot of value and a lot of innovation road map that we can still pursue.

So if you contrast the way we've done it in the past, in the past, we increased the head count of R&D quite substantially. I would say that today, we believe that with the team that we have today, we can really entertain a very aggressive road map going forward. So Well, no, I think you will continue to see us manage both R&D and SG&A quite nicely. And as a result of that, the operating leverage that you imply, I think the operating leverage will indeed become better in the quarters and the years to come.

Very helpful. And then I guess on your manufacturing footprint, I guess a couple of quick questions. Number one, what would it take for you to actually look to add there? And then, I guess, number two, what's the fungibility around mirrors and other optics between low NA and high NA. And just curious, if you are kind of sold out on low NA, does that create the situation where customers really desperate for supply might adopt High NA sooner.

Well, I think maybe starting with the second question. I think that as the maturity of the High NA platform improve, then, of course, in become a potential option also for capacity. And I think that's an option that will become more and more value over time because the tool at some point of time will cross this maturity threshold. And if it does, it can do the job. And as I explained before, can even provide some benefit. So I think that's, I would say, potentially another opportunity moving forward, assuming that we continue the good progress we have seen on maturity. It's one of the reasons also our customers are testing the tool on product, as you have seen with the press release about Intel today. So that's maybe for the second question.

For the first question, so in terms of our own footprint, as Christophe said, the way we try to increase our capacity is primarily within the current parameter. So we are building, we are breaking ground in this year. We expect to break ground this year on a new campus that many of you are aware of, but that really is, I would say, beyond 2028, right? So that is not what we're doing in order to get to the [indiscernible] numbers that we shared. So in essence, the capability improvement that we were talking about, we want to achieve that within the current parameter. In terms of the fungibility of equipment for High NA and low NA, particularly when it comes to ZIA because that's the way a CGI I interpret your question, that really isn't there. It's totally different tools that you need that SIS needs to produce a high NA optic versus low NA optics. So it's not that there is fungibility that you can use tools to get more low NA output. That's not going to work.

Okay. Then thank you, Christophe. Thank you, Roger. Thank you for everybody participating and asking the questions. If you are unable to get through on the call and still have questions, please feel free to contact ASML Investor Relations with your questions. So again, thank you all for joining us. And if I could ask the operator to formally conclude the call, I would appreciate it. Thank you very much.

Thank you. This concludes the ASML 2026 Second Quarter Financial Results Conference Call. Thank you for participating. You may now disconnect.

Hello, and welcome to ASML's Q2 2026 Results video. Welcome Christophe. Welcome, Roger.

Roger, can I start with you and ask you to give us a summary of our Q2 results, please.

Sure. Total net sales for the quarter came in at EUR 9.3 billion, and we had a gross margin of 54%. Both of them, both the top line and also the gross margin above guidance. Main reason why it was above guidance is the installed base business. The installed base business came in at EUR 2.8 billion. That is EUR 300 million more than we expected as a result of the fact that customers are really looking for productivity enhancements and therefore, the upgrade business was quite high.

Net income came in at EUR 2.9 billion. And the EUR 2.9 billion is also an estimate of the cost associated with the tech and IT transformation. So that's included in that number. So all in all, I would say, a very strong quarter, both from a market dynamic perspective and from an execution perspective.

And then looking further ahead, can you also provide us with a guide for Q3 and then the full year '26?

So the way we look at Q3, we guide total net sales between EUR 11 billion and EUR 12 billion for Q3 with a gross margin between 55% and 57%. We are looking at an installed base business of approximately EUR 2.9 billion for Q3. If we look at the total year, we're looking at total net sales guided between EUR 43 billion and EUR 45 billion and a gross margin between 54% and 56% for the full year.

So then maybe, Christophe, if I can turn to you and ask you to give us maybe a sense of the market dynamics that have led to the upgrade in the guidance that Roger just talked about.

Well, I think it's really a combination of a continuous very strong demand from our customer, but also that's very important, our ability to respond to that demand, thanks to the strength of our supply chain, manufacturing and the installed team in the field.

So if we look at the market demand, the end market demand, this has motivated our customers to increase their CapEx, but also accelerate all their plans, and this really creates a need for more system basically starting this year.

We are doing the same on our side, expanding output, expanding basically our team, so that we can support them moving forward. So that dynamic, we see both with Logic and DRAM. And what we also see for both Logic and DRAM is that our customers are getting long-term agreement with their own customer, which really invite them to commit for the long term because they have what I will call a quite unprecedented visibility on what will happen to the market.

And if we start maybe take a slightly deeper look then on Logic first maybe and what you're seeing there specifically?

Well, quite a bit happening with Logic. So first, if we look at the existing advanced node, 5, 4, 3-nanometer, we see that our customers are trying to add a lot of capacity there now. And this is because there is a huge demand on those technology coming from AI.

At the same time, the 2-nanometer ramp is done as aggressively as possible. We see customers adding capacity, accelerating their plan and they even start basically to look at the 1.4 nanometer ramp. So all of that together means that our revenue for advanced foundry Logic this year should increase by about 25%.

And if we also look at memory in the same -- in that regard, what are you seeing there?

Well, I think if we look at the price of memory today, either for DDR or for HBM, there is a clear need for more supply. And this is translating into, again, acceleration of capacity plan from our customer. So this is happening with all customers. And on top of that, as we discussed previously, the latest nodes are calling for more litho for higher litho intensity, both on EUV, but also advanced immersion. So all of that together means that our revenue on memory this year will increase by 75%.

Very good. So having said that then, what does that translate to in terms of our own business, EUV, non-EUV -- and what are you seeing there, for example?

Well, let me start with EUV. So quantifying a bit some of the statements I've made before. We will be able this year to ship about 65 low-NA EUV machines. So this is the result basically of a lot of work done on our output. And this means that our EUV business will grow by about 45%.

When it comes to deep UV immersion first, we had to reaccelerate our output, and we are now happy that we'll be able to ship about 130 systems, which is about the level of last year after a strong reacceleration of all our plans there.

Finally, when we look at deep UV dry, a lot of traction there, also capturing some customer with our dry products and the number of shipments is also going to increase quite a bit in 2026.

And touching maybe a little bit then on our metrology and inspection business.

Yes. So there also a very strong growth this year. Two reasons for that. The first one is our customers are using more and more process control. This is because, of course, of more advanced, more complicated nodes. So this is, I would say, one of the trend.

The second trend, to be honest, is a very strong adoption, increased adoption of our product being either optical metrology or e-beam inspection, which basically altogether drive very strong growth on inspection and metrology at ASML. So if you look at deep UV, metrology inspection together, we are looking at about 25% growth also in revenue in 2026.

And then, Roger, maybe turning quickly, could you also give us an update on what we're seeing in terms of regionally, maybe with China, how we're seeing things play there?

Yes. we said China, we still look at China as approximately 20% of our total net sales. So that percentage hasn't changed. Obviously, it's off a higher base, right, because the total net sales for the companies we see today is higher than we anticipated at the beginning of the year. So in that sense, you could say that the Chinese market is moving in sync with the overall behavior that we see globally. If you really want to pinpoint as to where is that extra demand in China, it is primarily in the Logic business and then primarily catering to domestic demand.

The other piece maybe is on Installed Base Management. I think we've had some very good momentum over recent quarters. Can you also -- and you've given a good guide, I think, for next year. Can you talk a little bit about the dynamics we're seeing there?

Yes. I think I already mentioned a little bit, right? So the Installed Base business, 2 main buckets, obviously, the upgrade business that we talked about. And as I said, customers in the current environment, whatever they can do to increase productivity, they will take it, particularly if it's instant upgrade of productivity. And we're increasingly in a position to give that to customers because a lot of the upgrade business is software-led. So it doesn't take a lot of machine time. So customers have an instant improvement of productivity.

So we already have quite a few of those products, but we're really driving that with quite some force to make sure that we have as many upgrade products available to customers as possible. And then obviously, on the -- particularly on the EUV side, with the Installed Base increasing the way it does, that also obviously means that the total service business is going up. So if you take those 2 buckets combined, we're looking at over 30% growth for the Installed Base business this year.

And so maybe, Roger, then following on from that, can you also give us some color on what -- on the gross margin and what your -- what are some of the drivers there?

Yes. So gross margin influenced, of course, by what I just mentioned on the Installed Base business, right? So the increase in upgrade business obviously also leads to an increase in the gross margin. So that's an important driver for the gross margin this year.

And the other one is the -- if you look at the system sales, it's a combination both of the volume. So with higher volume, we get better fixed cost coverage. And that, of course, is helpful for the gross margin. But also, there is a positive mix effect this year with strong performance both on the EUV side and also on the immersion side.

And Christophe, maybe then looking a little bit longer term and beyond '26, what are the conversations and dynamics you're having in terms of discussions with customers, for example?

Well, I think based on everything we have said so far, you can imagine that we're having very constructive discussion with our customer on the long term. Their own visibility to their business allow them to share with us also longer than, I would say, usual visibility on their business. And we are talking, of course, about next year, but also beyond that.

Now this has also translated practically into very strong order booking through the first half of 2026. Now if we look into more detail, starting with 2027, there, we are pretty much already close to receive all the orders we need for 2027. And this is with us adding about 30% capacity for EUV in 2027 versus 2026.

When we look at 2028, we have received already a large number of orders from our customer for EUV. And this has also invited us very strongly to investigate another 30% increase in our EUV capacity for 2028. Now of course, when EUV grows, deep UV grows as well, Immersion is going to be important. And there also for 2027 and for 2028, we are going to look at a 30% increase of our capacity for both here.

And then maybe if we can switch gears a little bit and if you can provide us with a little bit of an update on the technology front and maybe High-NA, how are things going there?

Well, maybe on High-NA, I'd like to start with the press release we had this morning about Intel. So as you may have read it, Intel is basically now using High-NA in production on their most advanced products. So it means that some of the products you buy today from Intel have been created with an High-NA machine. So this is, of course, a very important milestone. This is a proof of the maturity of the tool.

We've talked a lot about that in the last quarter. We are seeing that happening with all customers, and therefore, expect to enter that discussion with all our customers on how exactly and when exactly the tool will be inserted in high-volume manufacturing.

Can I ask you to share a little bit on our -- the timing of our next Capital Markets Day?

Well, I think we will all agree that a lot has happened in our market in the last few quarters. So I think we believe it's time to revisit our assumption, revisit a bit the analysis we have in the market. And we would like to welcome all our investors on June 10 next year, 2027, for our next Capital Market Day, which will be for us the opportunity to look again at the context of the market and define basically what it means a bit for the long term of ASML business.

With that, thank you, Roger. Thank you, Christophe.

You're welcome. Thank you.

Good day, and thank you for standing by. Welcome to the ASML 2026 First Quarter Financial Results Conference Call on April 15, 2026. [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.

Thank you, operator. Welcome, everyone. This is Jim Kavanagh, Head 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 2026 1st quarter results. The length of the call will be 60 minutes, and questions will be taken in the order in which 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 statement contained in today's press release and the 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'd like to turn the call over to Christophe Fouquet for a brief introduction.

Thank you, Jim. Welcome, everyone, and thank you for joining us for our first quarter 2026 results conference call. Before we begin the Q&A session, Roger and I would like to provide an overview and some commentaries on the first quarter 2026 results as well as provide some additional comments on the current business environment and on our future business outlook. Roger?

Thank you, Christophe, and welcome, everyone. I will first review the first quarter 2026 financial accomplishments and then provide guidance on the second quarter of 2026. Let me start with our first quarter accomplishments. In the first quarter of 2026, total net sales were EUR 8.8 billion, which is within our guidance. Net system sales were EUR 6.3 billion, which includes over EUR 4.1 billion from EUV system sales, including sales from 2 High NA systems and over EUR 2.1 billion from non-EUV system sales. Net system sales were almost equally split between Logic at 49% and Memory at 51%.

Installed Base Management sales for the quarter came in at EUR 2.5 billion, slightly above our guidance. Gross margin for the quarter was at the high end of our guidance at 53%, primarily due to the contribution of very high-margin components within our installed base business. On operating expenses, we came in as guidance. R&D expenses were around at EUR 1.2 billion and SG&A expenses came in at EUR 0.3 billion. The effective tax rate for Q1 was 17.1%. For the full year 2026, the expected annualized effective tax rate is around 17%.

Net income in Q1 was EUR 2.8 billion, representing 31.4% of total net sales, resulting in earnings per share of EUR 7.15.

Turning to the balance sheet. We ended the first quarter with cash, cash equivalents and short-term investments at a level of EUR 8.4 billion. Our Q1 free cash flow was negative EUR 2.6 billion, largely driven by the timing of down payments.

With that, I would like to turn to our expectations for the second quarter of 2026. We expect Q2 total net sales to be between EUR 8.4 billion and EUR 9 billion. We expect our Q2 installed base management sales to be around EUR 2.5 billion. Gross margin for Q2 is expected to be between 51% and 52% (sic) [ 53%]. The expected R&D expenses for Q2 are around EUR 1.2 billion, and SG&A is expected to be around EUR 0.3 billion.

Moving to our cash return to our shareholders. In Q1, ASML paid the third interim dividend over 2025 of EUR 1.60 per ordinary share. ASML intends to declare a total dividend for the year 2025 of EUR 7.50 per ordinary share, which is a 17% increase compared to 2024. Recognizing the 3 interim dividends of EUR 1.60 per ordinary share paid in '25 and '26, this leads to a final dividend proposal to the Annual General Meeting of EUR 2.70 per ordinary share. In Q1 2026, we purchased shares for a total amount of around EUR 1.1 billion.

And with that, I would like to turn the call back over to Christophe.

Thank you, Roger. As Roger highlighted, we finished the first quarter with good financial results. Looking ahead with respect to the market, the growth outlook for the semiconductor industry continues to solidify, driven primarily by AI-related infrastructure investment. These investments are increasing demand for advanced Logic and Memory chips in many areas. And for the foreseeable future, demand will continue to outpace supply. This creates constraints across end markets from AI to mobile and PCs, which is driving our customers to aggressively add capacity.

In the Memory business, many customers have commented that they are sold out for the remainder of the year and that they expect the supply limitation to persist beyond 2026, despite their plans to add significant capacity. In the Logic business, our customers are adding capacity across multiple advanced nodes to support demand while continuing to ramp the 2-nanometer node in support of next-generation HPC and mobile application. We also expect supply limitation across those advanced nodes beyond 2026. Both our Memory and Logic customers are responding to this unprecedented demand by increasing capital expenditures and accelerating capacity expansion plans this year and beyond. Those investments are supported by long-term agreements with their own customers.

In addition to expanding capacity, both advanced DRAM and Logic customers continue to further adopt EUV and Immersion deep UV on new process nodes, which further increases their demand for lithography. As a result, ASML's order intake continues to be very strong, and we stay closely aligned with our customers to support their needs. At the same time, we offer customers productivity upgrade for their installed base to increase their short-term output requirements.

Turning to our capacity expansion plan for 2026, we are executing on an output plan of at least 60 low-NA EUV system. And despite a slow start, as discussed last quarter, driving output of our emergent system close to that in 2025. Based on these developments in demand and order intake, we are quarter-by-quarter increasing the move rates for our HBM products, raising low-NA EUV capacity to at least 80 systems next year and scaling deep UV and application products in alignment.

We continue to see a strong year ahead and expect ASML to grow in 2026. We are, therefore, updating our 2026 guidance, both narrowing and increasing the expected revenue range to between EUR 36 billion and EUR 40 billion while maintaining our expectation of a gross margin between 51% and 53%, with revenue weighted to the second half of the year. As we said last quarter, EUV revenue is expected to raise significantly this year, driven by the dynamics in advanced Logic and DRAM markets mentioned earlier.

For non-EUV revenue, we previously expected this to be similar to last year, but given continued demand momentum, we now expect growth as a result of customers adding more deep UV lithography to support their expansion plans. We also expect installed base management revenue to grow significantly this year, driven by service revenue from our expanding EUV installed base and customer demand for performance upgrades to support their increasing capacity requirements. We expect that the bandwidth in our 2026 guidance accommodates potential outcomes of ongoing discussions around export control.

Turning to technology, we continue to make very good progress on this front with several developments recently highlighted at the SPIE Advanced Lithography and Patterning Conference this February in San Jose. At the conference, we presented an updated Low NA EUV product road map that reflects improvement to both our short-term and long-term plans for these products. This includes the ability to reach at least 330 wafer per hours on low NA EUV at the start of the next decade, enabled in large part by our continued source power improvement as evidenced by our recent 1,000 watt source demonstration.

In the short term, all NXE:3800E System can benefit from an upgrade that provides an increase of 10 wafers per hour with 230 wafer per hours available immediately to all customers. For NXE:3800F System, we have raised the wafer per hour specification from 250 wafers to 260 wafers per hours. We plan to start shipping that system in 2027 with full volume slated for 2028. We also shared that the High-NA platform has now processed over 0.5 million wafers and achieved over 80% availability. Also at the conference, we saw customers presenting several strong papers highlighting their progress with High-NA. These presentations demonstrated use cases in both Logic and in DRAM in which a single High-NA exposure can replace complex multi-patterning processes that today require 3 or 4 Low-NA exposures.

For some critical layers, High NA can reduce the number of process steps by a factor of 10. The progress being made throughout the ecosystem, especially with resist, allow us to target line and pitches of 18-nanometer for Logic and contact pitches below 28-nanometer for DRAM. This means that High NA can support single expose for at least 3 nodes in Logic and DRAM. We continue to work to further mature the platform alongside our customers as they start to test the technology on product wafers and move closer to bringing High NA into high-volume manufacturing.

Looking more broadly, what we have seen over the past few months has further confirmed our view on the positive impact of AI on customer demand for our advanced product and especially for our EUV system in both advanced Memory and Logic. We see the end market dynamics supporting a shift in product mix towards more demand for our advanced lithography product and an increase in litho intensity. Our strong productivity road map on Low NA in combination with the introduction of High NA supports further cost of technology reduction for our customers. In summary, demand remains strong for the entire product portfolio.

With that, we will be happy to take your questions.

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, could we have your final instructions and then the first question, please?

[Operator Instructions] And your first question today comes from the line of Joe Quatrochi from Wells Fargo.

Maybe I'll just start with the updated 2026 revenue guide. You talked about taking up your immersion outlook and your deep UV outlook. How much of that is coming from China versus non-China? And did the EUV outlook change at all?

Joe, it's Roger. This is primarily non-China when it comes to immersion. China remains at the midpoint around 20%. That's the expectation that we have for the China business. So that view has not changed. What has changed here is, as we mentioned last -- on the last call, we were looking at immersion and said, given the supply chain situation in immersion, we said we doubt whether we can get immersion to the level that we had last year. We've been working extremely hard. And right now, we're at the point where we believe we can get immersion close to the levels that we had last year. And that would primarily flow to the non-Chinese customers. So that's where it's at.

So that's a major driver of the uptick. And also in EUV, we believe there is a bit more that can be done. So it's in that combination. And as you can see from our achievements and also our expectation for the installed base business, that one is strong as well. So I would say it's actually a combination, but clearly, immersion is an important part of the uptick of the guidance.

That's helpful. And then just as a follow-up, on the gross margin, just the range not changing, but clearly, immersion increasing. I know that's a bit higher gross margin. Just any puts and takes there of why the gross margin guide stays the same for '26?

Yes, you're right. I mean, for the entire year, the gross margin remains in spite of a bit more immersion. But it's also clear that we're increasing the move rate quite a bit. Of course, increasing the move rate means that you're hiring people, hiring people, training people that also costs a bit of money. So every ramp, you always have a little bit of cost before you have the benefit of that. So that's the other side of the equation. So that's why we believe that the guidance range as we have it, taking into consideration all the puts and takes, we believe keeping it as we articulated a quarter ago is the right way to go.

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

I have 2 of them. First one, Roger or Christophe, I'm kind of curious, what is the visibility you're getting from your customers? Does that extend into 2028? And based on that, how to think about ASML's growth profile in '27 and '28, either qualitatively or quantitatively?

Well, I think 2028 is still quite far away. And I think a lot of the discussion we have with our customers today are still a bit about 2026. As Roger mentioned, we're still working hard even for 2026 with our customer to make sure we deliver what they need. And of course, a lot of discussion now moving to 2027, which is also why we are also there working very hard to increase the capacity. But 2028 is a bit too far away.

Is that a way to think about '27 at this moment, Christophe or?

Well, I think you -- we mentioned already that we are growing our move rate every quarter. So I think we are still in a dynamic where we believe that we have to create more space for our customer. I think we've explained in our introduction that we are preparing to build at least 80 Low NA EUV system next year. So I think these are the signs if you need any that, of course, the discussion we have about 2027 are currently around making sure that we have enough capacity for our customers.

Got it. And then as a quick follow-up, I think you mentioned how you are undershipping demand today. If you start looking at '27 at 80 unit capacity for Low NA, are you meeting demand? Are you still undershipping demand at 80 units next year?

Well, I think all those discussions, and I think the number we shared today are, I will say, the results of very close discussion with our customers. We talked about at least 80 because those discussions are still ongoing. I think you have seen, of course, the dynamic in the last couple of quarters. So I think we said that also last quarter, we were working every day very closely with our customer to make sure basically that we stay in line with what they need. I think we have, of course, a very strong mission to meet their demand. So that's what those number reflects. I think that's the result of where our discussions are today.

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

I guess first question going back to gross margins. And if we isolate March versus June, March, you revenue to High NA, 0, I think, embedded in June. And so I get kind of the upgrades as a real positive for March, but I would have thought the higher Low NA EUV and immersion would have led to higher gross margins. I understand you're adding headcount, but that still seems pretty severe. So wondering if there's anything else in that mix that's driving that change.

No, there's nothing in the mix really, C.J. It really is down to the elements that you just referred to. So a few puts and takes, but the primary ones being the very high-margin elements in the upgrade business that we had in Q1. We're not counting on such a strong pattern in the upgrade business in Q2. So that's an important element. And then indeed, to the point that I made earlier on, the increase in headcount that we're going through to prepare for upticks in -- for upgrades in the move rate. So it's really those elements as a result of which we're now narrowing the bandwidth for this particular quarter to 51% and 52%.

Of course, you would see that the second half of the year, that volume is more skewed towards the second half of the year, right, if you take -- if you look at our guidance. So it's also appropriate to see more of the benefits of the increase of the ramp that we're doing in that -- in the second half of the year. As a result of that, we maintain the guidance for the full year at 51% to 53%.

Perfect. Makes sense. And I guess as a follow-up, Christophe, to try to talk about the supply side, obviously, undershipping end demand today. Curious how you're working internally at ASML outside of headcount? What kind of things are you doing to help drive productivity and extra supply? And also with your supply chain, particularly around the optics and mirror fronts, what is necessary there? And if you are considering 80-plus EUV, what does that mean from an immersion unit perspective in '27?

Yes. So I think we are working on many, many fronts, I would say. And you mentioned the supply chain. I think we have been mostly explaining in the last few years that we were preparing the supply chain basically to be able to go to a capability of 90 on Low NA and to a capability of 600 for deep UV, total deep UV. And I think what we see in these ramps is that a lot of the preparation is paying off. So I think that, of course, you always have challenge with the supply chain. But I will say, so far, our supply chain has been able to support our move rate increase quarter-by-quarter. And that includes, by the way, ZEISS to name them, that include the optic, where I think we had major challenges a few years ago in the previous ramps. I think we are in a much better shape there. I think that's also true with what we have prepared in terms of capacity here in ASML.

So I'm talking about the space we need to build the tools, both EUV and deep UV. And this allow us, Roger mentioned that to basically now add the people we will need to meet the move rate that is required. The other element I'd like to stress, we also talked a lot about the 3800E in the last few years. As you have noticed, the maturity of the tool is in a much better place than it was a year ago, which also allow us to make great progress on cycle time in our factory and of course, shorter cycle time give us opportunity for more tools.

So we have many, many parameters that we drive, I will say, all at the same time, very aggressively basically to get more outputs. That's true for EUV. That's true for deep UV. '27 is a bit far for deep UV. So I think that the expectation, as I mentioned before, is that the number of deep UV tool, the number of immersion tools, the demand there will scale pretty much with what we see on the EUV.

I think, C.J. it's also important to recognize, C.J., that -- and Christophe said it, we are working with customers to understand what the capacity requirements are that they have. And you're very much focusing on unit numbers. I would say there's a lot more that we're doing to give customers their productivity. First off, and Christophe said it, the maturity of the tool is going up, but also the productivity of the tool is going up, right? So the fact that we're now looking at a tool from 220 to 230 wafers per hour. As you know, in 2027, we're going to introduce the F model that gets you to 160 wafers per hour. So you have the unit numbers that everyone is very much focused on, but then you should also look at the progress that we're making in terms of productivity.

And if you take that into consideration, last year, we had 44 tools. if you are just looking at 80 tools, we say at least 80, but if you just look at 80 tools, those 80 tools give you double the wafer per hour capacity that we would have shipped in 2025. And on top of that, we're helping customers upgrade their installed base. So as Christophe said, we're really working hand in glove with the customers to look at what is your capacity need, what's the easiest way and also the most economical way for you to get to the productivity that you need. And we're executing on all fronts on availability, on productivity, on unit numbers, capacity and then upgrading the installed base.

Yes. And the last point I would make because Roger make a very good point also on those productivity upgrades, which you heard in the introduction, we have accelerated. I think our customers are extremely happy with that because this allow them to get capacity right away. When you buy a new system, you have to wait a bit. In this case, and I think this is reflected in the strength of the installed base sales. This is something we can provide immediately most of the time, by the way, with the software switch and some qualification. So I think Roger is right. I think in our case, capacity is a lot more than one pony trick. And we feel quite blessed that we have all of this because we have many, many tools we can use to basically make sure we deliver what our customer needs.

Your next question comes from the line of Sandeep Deshpande from JPMorgan.

My first question is regarding your deep UV capacity. I mean when you look at it, Christophe, I mean, in the last up cycle, you sold a lot more deep UV outside China than you are selling in the last few years. As you go into the next build cycle, don't you think that you will need to add more deep UV capacity if China remains at these sort of levels that you're seeing?

I'm not sure, Sandeep, what you mean by the next build cycle. What are you referring to?

So what I mean is into '27, when you look into '27, where you're seeing these 80 EUV tools at the minimum that you're going to ship, if you see the number of deep UV tools you sold for the whatever number of EUV tools you sold between -- in the last big capacity build cycle because there's not been a lot of massive capacity building that you're now going to see in the industry over the next 2, 3 years. Would you say that you would need more deep UV capacity? Because you have about 600 tool capacity at this point. Is that enough for you in terms of deep UV?

Well, I think 600 is for total deep UV. And I think that when we look at the total, I think we still feel pretty good about that. And a bit like EUV, we have other means to play with that number if needed. When it comes to immersion, I think -- well, we believe that for non-Chinese customer, the demand on immersion will scale with the demand for EUV because, as you know, there is a pretty clear relationship between the 2. And if you had EUV capacity, you would be also adding some immersion capacity. So I would say we pay for sure, the same amount of attention to our deep UV ramp, our immersion ramp that we do on EUV because the 2 are, of course, extremely linked, especially when it comes to non-China.

And I mean maybe, Roger, I would like to go back to this question of mix and ASP. I mean you have indicated for this year that you've got more 3,600, there are some 3,600 shipping this year versus next year, there should not be any 3600. There should also be this next generation of E and then the F, which starts shipping next year. How should we be looking at the mix on the -- mix of EUV tools that you ship next year and how that will drive your revenue growth into EUV next year?

So this year, as you say, the lion's share is still Es, right? So there is a bit of these in there, but the lion's share is clearly still Es. And I would say about 20% maybe is Ds and the rest is E. For next year, I think hardly, if any, Ds. And I would say the lion's share of it is Es. There will, of course, be Fs. We will introduce the F, but just the way customers are planning to ramp their nodes, I believe that the lion's share of the tools by for 2027 will still be Es. So there will be Es at that point with the high throughput that we just talked about, the 230, that will go ex-factory at that level. And there will be a number of apps, but that will be a [ PMI ].

So would you say that your ASPs will grow next year because of how the mix is shifting from this year to next year?

Yes. Yes, yes, clearly. So the mix next year is more favorable than this year. No Ds and a bunch of Fs. So clearly, the ASP next year will improve over this year.

Your next question comes from the line of Francois Bouvignies from UBS.

My first question is on High NA. I mean, a bit beyond '27, there is obviously a very high demand in advanced Logic and Memory. And I was wondering if High NA could play a role in that tight market as High NA could save Low NA capacity. I mean, Christophe, you referred 3 mask, I mean, 1 instead of 3 mask with High NA. So if we go into '27, '28, '29, 2030, could that tightness help adoption of High NA saying I'm not going to build 90, 100 tools of Low NA necessarily if High NA can actually replace with the mask. So I was just wondering if it could help adoption in other words, High NA with the tightness of the market.

Yes. I think, Francois, I think it's a bit too early to answer the question. I think what we see today is that several of our customers are going to test High NA on real product wafer. So it means basically they demonstrate for themselves the ability to use this tool on real product. We see that with some Logic customer. We see that with some DRAM customers. That's a discussion that is ongoing pretty strongly right now. So they continue to make step basically to have this option if they want.

And of course, if the maturity of the tool allow that to use the tool, I would say, whenever they want. And especially when it comes to DRAM, I will say the threshold to start using High NA on existing product is pretty low. So I think that's a possibility. I think that as things evolve in the next few months, a combination of, again, capacity requirement that continue to be strong plus progress on High NA. I will not exclude that. I think it's just a bit too early to respond to the question by the affirmative today.

And maybe, Roger, it's a follow-up on this F model and maybe the ISP. So actually, Christophe, you talked about 260 wafer per hour, which is a nice increase from the 250 originally, which is roughly 15% higher, 1-5 higher than the E model. So is it the right ASP increase we should expect 15% higher throughput and 15% higher ASP? Or it could be more because you also increase or improve availability and overlay like you suggested. So how should we think about the ASP of the F versus the E?

Yes. All of that is true, but you also know that we typically share the benefits between the customers and ourselves. But you're right that historically, the correlation between throughput and ASP is very, very strong. So we're not negotiating in this call with our customers, but I think the proxy approach that you just followed doesn't lead you to a very bad outcome.

Your next question today comes from the line of Didier Scemama, Bank of America.

I just wanted to sort of get your thoughts maybe on the numbers you've given at the CMD November '24. You said 160,000 wafer start per month capacity addition in DRAM per year, '25 to 2030, and I think 200,000 in advanced Logic. How do you feel about those numbers? Were we in the right ballpark '25? And how are we looking at '26 and beyond? And I've got a follow-up.

Well, I think that we will all agree that things have changed a bit with AI in the last couple of years. So I think we have to go back and mostly look at those numbers again. I think we are going to most probably share the results for analysis next year in the Capital Market Day. I would say most probably the place where we see the biggest change is DRAM. I think we have talked about that for a few quarters. I think DRAM is very strong right now. Most probably the added capacity per year is above the number we have discussed at least this year. And we have to try to understand exactly how this will really play on the longer term. So I think too early to say a lot have changed in the last a few quarters.

If you remember two quarters ago, we were having a bit of a different discussion on the market. So give us a bit of time. I think we are most probably going to come back to all of you with our latest view on the long-term market next year at the Capital Market Day. So give us a bit of time to really digest everything that is happening and try to translate that into a bit of a long-term view of the market.

I mean what I'm hearing is that you're tracking towards the upper end of your guidance for 2030, but not going to put words in your mouth. Maybe a follow-up on that, maybe for Roger. I think you said 56% to 60% on EUR 44 billion to EUR 60 billion of revenue. So let's take a wild guess, let's say, you are above EUR 60 billion. Do you think your gross margins can be above that range? Or are they constrained by other elements that we have to take into account?

I think the same applies to what Christophe was just saying. It's very difficult to take out one element. I've given the moving parts in the past, the moving parts on the gross margin. A lot of it is an EUV, and it's on the one hand, us improving the productivity of the tool, and you see how well we're executing on that front. And that, to the earlier question, comes with a commensurate increase in the ASP and leads to gross margin improvement. So that's an important element.

A second important element is High NA volume. And [indiscernible], that is very critical, right, because the number of tools that we have at that stage and the number of tools that can absorb the fixed cost associated with High NA, obviously, is very critical in determining what your gross margin is on that front. Then we see continued improvement possibility in the installed base, and we have some ideas on deep UV. It's really in that quarter that things need to be addressed. But as Christophe said, let's wait for the -- for next year where we have our Capital Markets Day and can revisit all of these assumptions.

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

Yes. A year ago, I think there was some discussion in the market about a market structure for customers where ASML had essentially one very significant customer in the foundry side and 2 others lagging significantly. Since then, some have seen progress from 2 of the players on foundry relative to where we were in the past. So curious to what extent you're baking in a contribution from those foundry players in the coming year. And to the extent that those players are ultimately successful, how beneficial could this be in terms of market inefficiency?

Secondly, as a quick follow-up. There have been news articles talking about how ASML is looking to do more to help the hybrid bonding process. I wondered if you could help us understand to what extent you see hybrid bonding is important and how you think about the ways that ASML could contribute to customer efforts related to this?

Maybe I will start with the second one. I think we explained a few months ago. In fact, we started a Capital Market Day that we thought that 3D integration will become an important part of the tools our customers have basically to deliver density either for Logic or for DRAM. And as a result, we started to create all kind of activities in ASML in order to support our customers there. You talked about hybrid bonding. I'd like to mention that one of the things we see happening today first is wafer-to-wafer bonding, which is going to be used by DRAM Logic and where we think that our holistic lithography product, meaning the combination of metrology and process control our tool can help enormously our customer basically to adopt this new technology and deliver basically the performance they need on their wafer.

I think we also announced that we were entering advanced packaging with the XT:260. This has been an important tool. We continue to see good traction there. And on top of that, we are looking again at a few more things. Some of them have to do with lithography in advanced packaging. And for process such as hybrid bonding, I think we are continuing to look at the opportunity to support our customer in their activity, and that can be done in many different forms. I think right now, we're looking still at a limited amount of use practically of hybrid bonding, especially in front end. So not too much activity with our customer, but I will say some discussion for the future on how maybe we could help there. So that's the first part.

Yes. Back to the question you had on the foundry business and the potential for Samsung and Intel. It's pretty clear that the demand in the foundry business is huge and is outweighing the supply, right? So that leaves a bit of room for others than the market leader. And I think that's room that the other players are trying to enter into. We all know about the plans of Samsung in Taylor. So that's real. And of course, that also requires shipment for us, which is happening. The U.S. player in this business already has quite some capacity, I would say. So we've said it before that for this year, we're not counting on a huge number of shipments in that regard because they already have quite a bit of capacity.

Then you ask about the longer term. Of course, the market that is characterized by multiple players at least will sort of guarantee innovation. And that, I think, is what is important. I think the market leader has been tremendously innovative. So you cannot say that even in the market that was dominated by one player, you would still see a lot of innovation. I think that's what we've seen in the past couple of years. But having 3 players in there will probably guarantee even more innovation. And I ultimately think that, that is good for the ecosystem.

Our next question today comes from the line of Chris Caso from Wolfe Research.

Much has been discussed on the call about your own actions to increase your capacity to supply. Could you speak about your customers' capacity constraints, specifically the clean room constraints as well? And I guess this is perhaps a better question for next year, perhaps. But to what extent is your ability to ship constrained by your own ability to produce tools, your customers' clean room space? Or is demand going to be the constraint? Is it going to be a supply-constrained environment or a demand-constrained environment?

Well, I think we talked quite a bit about that last quarter where I think we saw a lot of demand coming in. So this was a bit coming very, very fast. I think we mentioned that the clean room capacity was one of the factor, if not the key factor on what we could do this year. I think you have seen us increasing our range for 2026, which means that we have progress there. We have even increased the upper part of the range. So I think that we see that the plan for 2026 are really solidifying, getting more and more clarity about the number of pedestal that will be available when. So that's clear.

And when it comes to 2027, I think that well, there is supply limitation right now. I think I mentioned before, we see our customers having a lot less hesitation to really accelerate their capital expenditure. I think you, of course, have noticed that our DRAM customers are doing extremely well, thanks to the price of Memory right now. And I think Roger just mentioned for Logic also that the capacity limitation is quite high. So I would say there is no hesitation whatsoever in the mind of our customer at this point of time, not only to invest also because sometimes they even get guarantee from their own customer on the investment, but also as a result to move as quickly as possible.

So that's the dynamic we are in. And I think that's why we see our outlook improving this year, and we continue to have, I would say, very, very active discussion with our customers to prepare next year. But I would say right now, everyone is really moving towards the more, the faster, the better.

Right. That's clear. As a follow-up to that, given what's happening in DRAM now, could you speak to what that means for litho intensity? And we've seen one of the remedies for the tight supply is migrating to some of the new nodes. How does that affect litho intensity? And does it have any effect on High NA adoption at your DRAM customers in an effort to address some of the supply constraints?

Well, I think first, for DRAM, I think DRAM has been a bit the perfect storm for ASML because, of course, we have this capacity buildup. But as we mentioned a few times, we have seen a major adoption of EUV in DRAM in 2025. And you may have noticed that our, I will say, U.S. DRAM customer also made this announcement that they were shifting also pretty strongly on EUV. And the reason for that is, of course, performance, but it's also capacity because if you are going to use more EUV layers, you are going to need less multi-patterning and multi-patterning takes a lot of space also in the fab.

So I think this is also definitely another argument in favor of EUV. I think this was mentioned, by the way, by this U.S. customer in their call. So I would say the first results of that is, first, more adoption of Low NA EUV, which I think is also translated into the number Roger was mentioning before with, I would say, a very high point on our memory business this year. That's also true for EUV. Now of course, what's true for Low NA today, I think we expect to be true for High NA in the future. So it's, again, not prime time for High NA today. But I can only say that more Low NA EUV adoption today can only help for more High NA adoption in the future because the logic of High NA is the same. It's going to single expose, simplifying the process, getting more space, et cetera, et cetera. So I think DRAM has been really a good story when it comes to litho intensity in '25. And I think it's translating very strongly into EUV demand this year and most probably in the years to come.

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

So firstly, on the DRAM sector or Memory sector in general. So we have learned that the Memory sector has been all signing those 3 to 5 years agreement. So with your customers' visibility higher on their own end market, do you see any behavioral change from your side, i.e., they are more willing to give you more visibility of order for your tools going forward? And also at the same time, because of they are currently desperate for capacity, do you see any room for charge more or upgrade more, i.e., DRAM business or memory business will be more profitable for you and higher visibility than it was previously?

Yes. So in terms of visibility and behavioral change, the visibility to us, customers are very, very open. By the way, that's also the case on the Logic side. But very -- customers are very open to us, and they're very openly discussing with us also their expansion plans for this year, but also beyond. It's also clear that if you look at the scale of the fabs that they're building, it's pretty significant, right? So if you look at the more recent fabs that are being built by our customers, it's pretty clear that they allow for quite some expansion. So if you talk about behavioral change, I think that's probably the #1 behavioral change out there. Vis-a-vis us, they're just very, very open in terms of how they see the market and how they see their further capacity expansion.

Now in our model of pricing, as you know, our model of pricing is not based on the squeeze that our customers find ourselves in. That's not the way we do business. The way we do business is that we look at the value that we provide to our customers, generation on generation, tool on tool, and we take our fair share in that. And you might say in the current climate, can't you squeeze out a little bit more? I understand that. But it's also true that when the market is good, it goes down a little bit and the customers are going through more difficult times that it also pays these fees.

So fundamentally, we believe that the model that we have is a fair model. It's also a model that is fair to all the players because I would find it difficult to explain why we're charging more in, let's say, the memory environment versus the logic environment. That's just not the way we do business. So we're very, very happy with the business model we have, which is based on the value of our tools, and we would gladly continue with that approach.

Okay. And next one is on your 80 at least 80 capacity for 2027. So your at least, if I understand correctly, is the 80 is based on what customers have told you for the time being. And is that at least based on customer is limited by clean room space so that they don't know and don't want to commit further or something else? What's driving that at least?

That at least is the alignment that we currently have with customers, which takes on board their gauge of the market situation, their gauge of the progress that they're having in fab building and our gauge of the ability to -- what's the right way to give them capacity. I told you unit numbers is one way to provide capacity, but there is more. So this really is the alignment that we currently have based on the signals that they're providing us and what we think is the appropriate way to give them that capacity.

Your next question today comes from the line of Lee Simpson from Morgan Stanley.

Maybe just a quick clarification question on the installed base management. I'm just trying to understand, well, I assume at least that most all of the outperformance in Q1 margin came from that. And that's largely because I think you said earlier, there was a high incidence of upgrade business that quarter and that most, if not all, of the rest of the year will be more of the maintenance type of business.

No, that would not be fair. So we expect upgrade business to continue throughout the year. But even in the upgrade business, you have different margin profiles of the upgrade services that you provide. And it just happens to be that the business -- the installed base business that we had in Q1 just happened to be the kind of business that is associated with very, very high gross margins. No, no, we definitely expect the installed base business and the upgrade business in that installed base business to continue. That's also what you would expect in an environment like this where, as we said before, customers are really asking for upgrades. But even within the upgrade business, you have the ones primarily software-based, which come with very high gross margins and then ones with maybe a little bit lesser gross margins. That's the mix effect within the installed base that we were calling out.

Maybe just on that mix effect, it does look still more and more the sort of warranty-like business that you have now with the installed base and EUVs coming through. So -- how much of a gap are we seeing closure between what is traditional maintenance and what is traditional upgrade cycle? Are we talking about less than 10 percentage points gap between those 2 elements now?

When you say 10 percentage points, you mean in terms of gross margin or what?

In terms of gross margin, yes.

In terms of gross margin. I cannot say that, Lee. It's too diverse. As I just mentioned, the margin profile is very, very diverse. So it's very much dependent on what kind of upgrade business. I mean on the service front, we've given you updates in previous years on the progress that we're making on EUV service gross margin. So 4, 5 years ago, we were bleeding money. We actually have negative gross margins and gradually, we were able to improve that. And we're now at a gross margin that is no longer -- it's very much apart from, I would say, the corporate gross margin. So we've gotten that, I think, to a level which I think is business-wise the right level for us to aspire to. On the upgrade business, it very much depends on what it is. So the profile is so different that it would not be appropriate for me to give you a number there.

That makes sense. I mean maybe if we take a step back and look again at the capacity as a multiyear proposition here because clearly, we are going into a massive up cycle with AI. And now we've got Agentic AI and driving to a different whole discussion on what the ROI could be. in and around AI. So our sense here is that EUV is becoming a bottleneck as other tools are in the system. And if we look at your own clean room build-out, it did look as though you took maybe -- and correct me if I'm wrong, it took maybe 2 or 3 years to get this set up, which was sensible given the paucity of demand at the time. But could we see this accelerating? Could we see a concrete pour shell build one year and then the next year fit out happening consecutively, whereby you could have 2 or 3 clean room projects at the same time, which I guess is me asking how much land bank can we secure in the immediate vicinity?

Well, I think the first thing I'd like to say is that we do not want EUV to be the bottleneck. So I think I'd like to say that very, very strongly. And as we discussed a bit before, we have many, many different ways to drive capacity up being, of course, the number of tool we manufacture, which also depend on our cycle time, the speed at which we manufacture them, productivity, et cetera, et cetera. And of course, adding more footprint is another one.

And I will say that we will use whatever is needed in the future to meet our customer demand. And we are reviewing this very carefully on a monthly basis with some, as you know, long-term visibility because of the lead time of our tools. And today, I think we are not in such a situation. And we have the ability again to use any of the tool we just discussed to make sure we continue. And that's something we'll continue to do. So I would just say, again, very strongly, we do not want to be the bottleneck for our customer. And so far, we have been using all the tools we have at hand to make sure we don't get there, and we'll continue to do that.

And the key thing that we've done, Lee, on that front is, as Christophe said, to get the long lead time items in place. That's what we've done. That gives us many degrees of freedom, including you talked about the land bank, including making sure that we have sufficient room to expand. We have worked on that extremely hard in this region to get that accomplished, and we were recently able to get that done. So we have a lot of degrees of freedom on a go-forward basis with long lead time items in place. And that gives us the kind of flexibility that Christophe is talking about to give customers what we think they need.

Yes. And maybe to illustrate that, if you compare a bit what we did in '25, which is what we could do in basically '27 with the at least 80 system, we more than double basically the total EUV capacity we can ship to our customer. This is down basically in about two years. And we do that, I would say, without blinking too much. So we're still, I would say, on top of our game there.

And I think, again, the combination of all the remarks we gave you is really putting us in a good position to continue to grow and also to continue to do that because this has been sometimes your concern when the market was not so good without spending too much money. I think that's also important. So I know the question of bottleneck comes back very often. I think we don't feel at all that we are the bottleneck today. We're very closely working with our customer. And again, we have many, many, many tools in our hands to make sure we keep it this way.

Okay. I'm afraid that is all the time we have for today. So on behalf of ASML, I would like to thank you all for joining us today. Operator, if you could formally conclude the call, I would appreciate it. Thank you.

Thank you. This concludes the ASML 2026 First Quarter Financial Results Conference Call. Thank you for participating you may now disconnect.

Hello, and welcome to ASML's Q1 2026 results video. Welcome, Christophe and Roger.

Roger, if I could start with you and ask you to give us a summary of our Q1 2026 results.

For the quarter, total net sales came in at EUR 8.8 billion. That was within guidance. Included in the EUR 8.8 billion was EUR 2.5 billion for Installed Base revenue. That was a little bit above the guidance. If you look at the gross margin for Q1, 53%. That was at the high end of the gross margin that we guided. If you look at the Installed Base business, as I just mentioned, the Installed Base business was higher than we anticipated. But also if you look at the components in the Installed Base business, there were components in there that actually come in at quite some strong gross margins. So as a result of that, a pretty high gross margin at 53%. Net income for the quarter, EUR 2.8 billion.

Can you also provide us with a guide for Q2 '26 results, please?

For Q2, we expect EUR 8.4 billion to EUR 9 billion of total net sales. Included in there, again, EUR 2.5 billion of Installed Base business. We expect the gross margin to be between 51% and 52%.

Christophe, if I can switch to you. And can I ask you to give us an outlook on the market and how you're seeing things at the moment?

Well, I think we see that the semiconductor industry growth continued to solidify. This is still very much driven by investment in AI infrastructure. So this translates into a lot of demand for advanced memory, for advanced logic. And we expect, in fact, that the supply will not meet the demand for the foreseeable future. So this is creating a strong constraint in the end market from AI to mobile and PC. And as a result, our customers are strongly invited to create more capacity.

So if we look at memory, what our customers tell us is that they are sold out for 2026 and their supply constraint will last beyond 2026. For advanced logic, we see our customer building capacity for several nodes, while they also continue to ramp 2-nanometer in order to address the AI products.

So then I guess it's fair to say, a lot of those capacity additions are adding positively to our own outlook?

Well, absolutely, we see our memory and logic customers increasing their capital expenditure and trying to accelerate basically their capacity ramp in 2026 and beyond. What's also very interesting is that a lot of this demand is supported by long-term commitment at their customer.

On top of that, we see both memory customers, DRAM customers and advanced logic customers continuing to increase their adoption of EUV but also immersion. So this translates basically into higher litho intensity and a higher litho demand for ASML.

So we're going to continue to work very closely with our customers to increase our capacity. We are doing that in 2026. We'll continue to do that in 2027.

And then maybe Roger, just adding on to that, can you provide a little bit more color or details on what we are actually going to do in terms of adding capacity to support market demand?

So I think Christophe said it right. We're very clearly working with our customers, fully aligned with customers to give them what they need, and that is in a combination of capacity in terms of new shipments, making sure that systems, that the performance of systems is upgraded as best as we can and also provide Installed Base products. So in that combination, we try to give customers what they need, specifically when it comes to our own capacity. What we're looking at for this year for 2026, we believe we can drive an output for this year of at least 60 systems for EUV Low NA. That's what we currently have. That's what we're currently driving.

And added to that, we're looking at deep UV for 2026. As I mentioned a couple of months ago, when it comes to immersion deep UV, we actually had a bit of a slow start because in the course of last year, we decided to actually -- we were looking at a significantly lower demand for immersion. That has now reversed itself. And I would say in spite of that slow start, we're still for this year expecting to get pretty close to the immersion sales that we had last year in terms of unit numbers. So that's for 2026.

When it comes to 2027, in terms of capability, we're increasing our move rate really quarter-on-quarter. And then when you look specifically at EUV Low NA, we expect that we're able to get to an output for 2027. Again, if customer demand really underpins that, we think that we can get to at least 80 Low NA EUV units. And we're also looking at having the non-EUV business being in line with what customers are asking for, for all of their nodes.

And then specifically on 2026. Can you give us an update then on our own business then for the full year?

Yes. So clearly, 2026 is panning out very nicely. It's a very strong year. We're looking at a strong growth year. And based on all the customer dynamics that Christophe was talking about, we are actually narrowing the window and also increasing the window of our expectation to EUR 36 billion to EUR 40 billion for this year. If you look at the different moving parts as we already expected, EUV is strong this year. So EUV in combination of Low NA and High NA, strong year there.

On the non-EUV business, previously, we were expecting that to be flat in comparison to last year. Right now, what we're looking at is, in fact, an increase of demand there as well. So increased revenue on the non-EUV business is what we're expecting. I already mentioned what we're doing on immersion, but also the dry business is doing quite nicely and also the application business. So we believe in contrast to where we were a couple of months ago, we're looking at an increase for the non-EUV business.

When it comes to the Installed Base business, strong growth there because obviously, it is a very fast way for our customers to increase their capacity to cater to the demand that Christophe was talking about. And I would say that within the guidance that we provided, the EUR 36 billion to EUR 40 billion, we believe we can accommodate potential outcomes of the export control discussions that are currently ongoing.

And how about the gross margin then for 2026?

For the gross margin, we maintain our expectation of 51% to 53%.

Switching gears a bit to technology. Christophe, can you give us some insights and latest updates on how we're progressing with the technology and our road map?

Yes, I think we continue to execute very nicely on our technology road map. I think every year, we use the SPIE conference to give a bit of an update to the entire world about what we have achieved.

A few, I think, important news this year. The first one was our demonstration of the 1,000-watt source. And this is very important because it means that we can secure the extendibility of Low NA EUV for many, many years. It means, in fact, that in 2031, we'll be able to run this tool at 330 wafers per hour, which is a major step-up from what we have today.

Now the progress on EUV also has a good impact on the short term. We have been able to increase the throughput of our NXE:3800E from 220 to 230 wafers per hour, which is also helping on the short term with capacity. Our customers are very happy to be able to get more wafers out on any tool. And we are also increasing the specs of our next system, the NXE:3800F to 260 wafers per hour. It used to be 250 wafers per hour, and this will help us also with capacity around 2028.

And I think also at SPIE, there were some updates on our High NA platform progress. Can you share a little there?

Yes. And I think what was good about SPIE is that our customers start to talk about High NA. And they reported a few things. The first thing is, of course, the fact that High NA can allow them to reduce the number of masks significantly. DRAM and logic customers were talking about going from 3 to 1 mask for EUV using High NA. And they also mentioned that this can reduce the number of process steps from 100 to 10, which is, of course, significant. That's, of course, the reason why we have High NA.

I think we have seen also great progress on the ecosystem, some good presentation with some of our resist partners, pointing to the fact that High NA can be extended when it comes to logic to 18-nanometer line and space pitch. And when it comes to memory to 28-nanometer hole size. So it means basically that not only High NA is getting ready for prime time, but we already know that High NA can be extended mostly for 3, 4 nodes, which is, of course, very important for our customers.

And finally, maturity of the tool is important. We continue to see better availability data, more wafers per day, more wafers out. And this is just, of course, becoming more and more important as we see our customers starting to test High NA on real products.

So I'd like to thank you both for joining us today. And yes, thanks very much.

Pleasure.

Good day, and thank you for standing by. Welcome to the ASML 2025 Fourth Quarter and Full Year Financial Results Conference Call on January 28, 2026. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Mr. Jim Kavanagh. Please go ahead.

Thank you, operator. Welcome, everyone. This is Jim Kavanagh, Head 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 Fourth Quarter and Full Year 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 statement contained in today's press release and presentation found on our website at www.asml.com and in our ASML's annual report on Form 20-F and in 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.

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?

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 fourth quarter of 2025, total net sales were EUR 9.7 billion, which is within our guidance. Net system sales were EUR 7.6 billion, which includes EUR 3.6 billion from EUV system sales, including 2 High NA systems, and EUR 4 billion from non-EUV system sales. Net system sales were driven by Logic at 70%, with the remaining 30% coming from Memory. Installed Base Management sales for the quarter came in at EUR 2.1 billion, as guided. Gross margin for the quarter was also within guidance at 52.2%.

On operating expenses, R&D expenses were slightly higher than expected at rounded EUR 1.3 billion mainly due to higher nonrecurring personnel costs and the recognition of a grant that shifted into 2026. SG&A expenses also came in higher than guided at EUR 375 million, driven mostly by higher mainly nonrecurring salary-related costs, the sale of receivables and pull-in of certain IT spending. The effective tax rate for Q4 was 18%. For the full year 2025, the annualized effective tax rate came in at 17.7%. Net income in Q4 was EUR 2.8 billion, representing 29.2% of total net sales, resulting in earnings per share of EUR 7.35.

Turning to the balance sheet. We ended the fourth quarter with cash, cash equivalents and short-term investments at a level of EUR 13.3 billion. Our Q4 free cash flow was EUR 10.9 billion, 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 EUR 13.2 billion, split between EUR 7.4 billion of EUV systems and EUR 5.8 billion of non-EUV systems. Net bookings in the quarter were slightly weighted towards Memory with 56% of bookings and Logic accounting for the remaining 44%.

Turning now to the full year. Net sales came in at EUR 32.7 billion with a gross margin of 52.8%. EUV system sales realized from 48 systems, including High NA, were EUR 11.6 billion, which was 39% higher than 2024. Deep UV system sales decreased 6% year-over-year to EUR 12 billion. Our metrology and inspection system sales increased 28% from 2024 to EUR 825 million.

Looking at the market segments for 2025. Logic system revenue was EUR 16.1 billion, 22% higher than 2024. Memory system revenue was EUR 8.4 billion, 2% lower than 2024, and Installed Base Management sales were EUR 8.2 billion, 26% higher than 2024. We concluded 2025 with a backlog of around EUR 38.8 billion. In 2025, we continue to invest in innovation across our full product portfolio, increasing R&D spending to EUR 4.7 billion or about 14% of sales. SG&A increased to EUR 1.3 billion in 2025, which was about 4% of sales. Net income for the full year was EUR 9.6 billion, 29.4% of net sales, resulting in an earnings per share of EUR 24.73. 2025, we generated free cash flow of EUR 11 billion.

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 EUR 8.2 billion and EUR 8.9 billion. We expect our Q1 Installed Base Management sales to be around EUR 2.4 billion. Gross margin for Q1 is expected to be between 51% and 53%. Expected R&D expenses for Q1 are around EUR 1.2 billion, and SG&A is expected to be around EUR 0.3 billion. For the full year 2026, we expect net sales to be between EUR 34 billion and EUR 39 billion, with a gross margin of between 51% and 53%.

Regarding our cash return to our shareholders in Q4, ASML second interim dividend over 2025 of EUR 1.60 per ordinary share. ASML intends to declare a total dividend for the year 2025 of EUR 7.50 per ordinary share, which is a 17% increase compared to 2024. An interim dividend of EUR 1.60 per ordinary share will be made payable on February 18, 2026. Recognizing this interim dividend and the 2 interim dividends of EUR 1.60 per ordinary share paid in 2025, this leads to a total dividend -- final dividend proposal to the Annual General Meeting of EUR 2.70 per ordinary share.

In Q4 2025, we purchased shares for a total amount of around EUR 1.7 billion. This program finished in December 2025 with a total of EUR 7.6 billion repurchased out of the up to EUR 12 billion program. We returned EUR 8.5 billion 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 EUR 12 billion, of which we expect a total of up to EUR 2 million will be used to cover employee share plans. We intend to cancel the remainder of the shares repurchase.

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

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, especially as related to the continued buildup of data centers and AI-related infrastructure. This buildup is now translated 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 quarters, we have seen a notable increase in acceleration of capacity expansion planning across a 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 4-nanometer node to the more litho-intensive 3-nanometer node. At the same time, customers continue to ramp the 2-nanometer node in support of next-generation HPC and mobile application.

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 those nodes. This is expected to continue on their future nodes as they migrate more multi-patterning Deep UV to single exposed EUV, resulting in an increase in litho intensity.

As a result of these dynamics, we see our customer 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 as our advanced logic and memory customer expand capacity. As part of the outlook for non-EUV, we expect the China region share in our total net sales in 2026 to be in line with our current system backlog, which is around 20%. We also expect our metrology and inspection businesses to grow significantly as customers increasingly invest in enhancing their process control strategy.

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 customer 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 customer most advanced processes. We ramped our NXE:3800E for 2025, and its productivity gains support further replacement of complex multi-patterning with single exposed EUV for multiple layers on current and future DRAM. We also expect both immersion and EUV litho intensity to increase as customers migrate from 6 F-square technology to 4 F-square 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 customer in 2026, supporting their preparation for the insertion of High NA in high-volume manufacturing.

With the continued increase of 3D structure in advanced logic and memory, we see more adoption of our [ multi-e-beam ] inspection system to detect optically nonvisible yield-limiting defects. Our progress on system maturity and productivity supports further use of this multi-beam system in high-volume manufacturing on the most advanced nodes.

In summary, our product portfolio road map remains focused on supporting the road map 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 product and especially for our EUV system. As we shared during our Capital Market 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 road map on Low NA and the introduction of High NA supports further cost of technology reduction. It also supports the conversion of more multi-patterning Deep UV to single EUV exposure especially on advanced DRAM nodes. In line with what we shared at the 2024 Capital Market Day, we expect a [ 2000 ] revenue opportunity between EUR 44 billion and EUR 60 billion with an expected gross margin between 56% and 60%.

With that, we will be happy to take your questions.

Thank you, Roger, and thank you, Christophe. Now the operator will instruct everyone momentarily on the protocol for the Q&A session. [Operator Instructions] Now operator, could we have your final instruction and then the first question, please?

[Operator Instructions] And our first questions come from C.J. Muse from Cantor Fitzgerald.

So I guess first question, trying to better understand your outlook for calendar '26. Based on your EUV bookings, it looks like you're entering the year with about 114 Low NA-tools and your implied guide is about 56, give or take, Low NA. So is this a function of lack of certainty around the precise timing of clean room space adds? Are you facing challenges in sourcing lenses from Carl Zeiss? Are you seeing extension of lead times? Would love to hear your thoughts around those moving parts.

Yes, C.J., indeed, I think it's a number of the things I just called out, right? So obviously, we are ramping during the year to accommodate the demand is there. but the demand is also a little bit dependent on the progress that our customers are making in terms of the completion of their fabs during the year. So that's an important element in the bandwidth, if you like, of the guidance that we provide. So to a large extent, it's driven by that. It's driven by our ability to execute and to continuously ramp or move rate quarter-on-quarter. Those, I would say, are the most important drivers of the corridor that you just alluded to.

Great. And as a follow-up, I guess, on the High NA side, is there any change in terms of your vision for revenue in 4 to 7 tools in calendar '26? And then more importantly, how are you thinking about adoption? Do you think there's an opportunity for follow-on High NA orders in the second half? And could we be surprised by seeing DRAM adopt sooner than logic?

Well, I think there's no major changes compared to what we discussed last quarter, C.J. So I think that in terms of adoption, I mentioned it, we continue to see good progress at both DRAM and logic customer. I think some of our customers are even starting to play with limited product wafer to see the performance of the tool, which is a good news. We still expect a lot of those qualification data collection to last most of the year, which means that when it comes to decision for insertion new order, we indeed look at the second half of this year, 2027.

On the question if it's going to be DRAM or logic first, I think -- well, it's a bit of a neck-to-neck race right now. So hard to say. We see really good progress on both and the appetite to test the technology, I would say, in the coming months, sorry, on -- again, on product in both DRAM and Logic customers.

And maybe a final comment too, C.J., because you referenced, I think, 114 tools in the backlog, if I understood you correctly on EUV. I would tell you, I think that's a little bit on the high end at EUR 25.5 billion of total value of EUV, I think -- and that obviously includes also High NA. You might be a little bit on the high end of your unit number there.

We are now going to proceed with our next question. And the next questions come from the line of Joe Quatrochi from Wells Fargo.

I guess I wanted to just go back to the 2026 kind of revenue growth guidance. If I look at the range between 4% and 19% growth, what type of those variables, I guess, are ASML controlled versus your customers controlled?

Joe, I think I just said it, right? I mean it's obviously to a very large extent, driven by the progress that our customers are making in completing the fabs and their ability to take in the tool. So that's a significant one in terms of whether the demand falls in '26 or whether it falls a little bit beyond '26. And then, of course, there is our ability to execute, but it all starts with our ability -- with the ability of our customers to get the fabs in order and the episodes in order in due time. So it's a bit of a combination of both, I would argue.

Okay. So I guess just maybe as a follow-up, just can you remind us just how do we think about the manufacturing capacity capabilities in terms of just like the number of Low NA EUV tools? I know you've had some targets out there from some Analyst Days previously, but maybe just an update there.

Yes, Joe. So what we've done, and this is the way we talked about it in the past, we have put in infrastructure such that we can respond, let's say, within a 12 months or a little over that to demand. So that means that what we call the long lead time items, anything that takes a lot longer than, let's say, 12 to 18 months, that is in place. So we have a clean room in place. We have the equipment in place et cetera, et cetera.

So now what we're doing based on the stronger demand signals as we've gotten them in the past couple of months, now we're ramping up our capacity. Now you will appreciate you won't move from 44 EUV tools in 1 year to -- I'm just throwing it out -- 80 tools in the year thereafter, right? So obviously, that's a gradual process. And that's the process that we're doing. So you will see us increase our move rate quarter-on-quarter. So training -- getting the people in, training the people, et cetera, et cetera. And in that way, quarter-on-quarter, you will see an increase on the move rate, and we will do that hand-in-hand with our supply chain. So you will see the move rate increase during 2026. And in all likelihood of what we're seeing today is sustainable. You will continue to see that also beyond '26.

We will now take our next question. And the questions come from the line of Andrew Gardiner from Citi.

Christophe, Roger, you've spoken today about the customers' medium-term plans being revised up. I mean we can see that too in their public statements around revenue growth and CapEx for the coming years. In particular, from your biggest customer in TSMC, you said CapEx will be significantly higher for the next few years. And I mean some of that's quite clearly reflected in the record order intake that you just reported, but also quite clearly, not all of it.

And I'm just wondering in terms of the plans you just outlined, Roger, in terms of increasing that move rate over the coming quarters, how much more visibility are the customers providing you in terms of the equipment needs for next year and the year after? I mean, no one wants to be the bottleneck in the kind of growth that we're seeing in this industry, and I presume that goes for you guys as well, and you must be having those conversations with the customers. So can you give us any insight as to how that visibility is improving into next year and the year after?

I think the public commentary of customers on the sustainability of the -- particularly the AI-related demand that they see on advanced logic and on memory, I think they also share that in the conversations with us. And of course, that also translates into indications that they provide to us either for very concrete orders or what we call from demand. So their indication of how they see the demand develop.

I think the order intake in Q4, I think, is strong evidence of that conversation and that it's not just a conversation, but they're actually also putting evidence and money into that. But they're also talking beyond this year about what their expectations are, I would say, in particular for '27. So our move rate plans that we have also takes that element into consideration. So what they tell us, I think direction is very much in line with what they say publicly. But of course, they also give us a strong indication of how they see their demand develop year-on-year.

And maybe the one thing I'd add to that, Andrew, I think you have to be aware that -- so you have seen indeed our customer moving being far more vocal about their capacity planning. I think this has been also the results of many, many discussions with their customers, which are also providing, I would say, this midterm demand. So what we have seen really in the last 3 months in the alignment between the different parties that on the midterm, as Roger explained, we see basically a strong buildup of demand. And we have got many, many proof of that also in the last few weeks coming out of either logic or DRAM customers.

So I think it took a bit of why to really get to that point. But we really see that happening very strongly in the last few weeks. And I think this is aligned across a large part of the ecosystem.

We are now going to proceed with our next question. And the questions come from the line of Alexander Duval from Goldman Sachs.

Firstly, on 2026, I wanted to just go back to assumptions for the top end of your sales guidance. I was curious to what extent that would assume that China is meaningfully down. And then going back to the discussion about long-term capacity. You've obviously talked about customers being more confident on midterm demand and the longer-term situation. I think in the capacity planning you've done in the past, you talked about 80 to 90 EUV tools. But if we think very much towards the 2030 time frame, the kind of plans that the customers are talking about would imply something bigger than that. So what kind of lead time would be required for you to push beyond that kind of outcome? And would there be other means through which you could deliver the capacity needed, for example, making your tools more productive by investing in R&D?

So when it comes to the top end of the expectation, when we talk about China being 20% of sales, I would argue that's across the entire range, right? So -- which obviously means that if we're talking about EUR 39 billion, you're looking at approximately EUR 8 billion of China. So I would say that probably, our expectation on China probably moves with that.

If you look at what are the key expectations on the upside of that? Well, a, as we just said, it means that our customers indeed are able to take our tools that we're able to execute on it as we currently plan and probably also that the installed base business is running on all cylinders, particularly on upgrades. Which is not illogical because upgrades obviously are in very high demand right now because it's the easiest, fastest and most effective way for customers to get additional capacity, which in the current market is obviously very, very important to them. So those would be the key elements that I would say that would drive that. And in that model, you could also envisage a China market at 20% of that total sales number.

When you talk about the long-term demand, let me make a few comments and then Christophe, maybe you can weigh in. First, you should not forget that when we get to the 2030 time frame, obviously, at that stage, yes, we're looking at Low NA, but we're also definitely looking at High NA. And the Low NA tools that we would be providing at that point in time would, of course, be Low NA tools with, again, a higher throughput than what we have today.

So back to your question on R&D, absolutely. We will continue to push the road map on our Low NA tools and continue to drive capacity such that per tool, the customers get more productivity than what they get today. But also, at that stage, we expect a more meaningful number of High NA tools that would provide significant additional output capacity. And in that combination, I think the numbers that you were just throwing out I think will provide output capability to customers way ahead of the numbers that we're talking about today.

Yes. I think Roger said it all. I think the way I will summarize it is that we have, I would say, the flexibility to react to the development of the market. I think we talked about mid, short term already. I think it's also true on the long term. And yes, Roger is right. The contribution of High NA, the work, we continue to do on productivity, we already planned for that, will give us even additional flexibility.

So with the step we have done on our capability on EUV, Deep UV in the last few years, which, you remember, we did execute despite the fact that maybe the demand was a bit lower at some point. We have created basically the right flexibility to see the market coming.

We are now going to proceed with our next question. And the questions come from the line of Krish Sankar from TD Cowen.

I had 2 of them. First one, Roger, if I try to reconcile your bookings between EUV and memory. Typically, memory has been 30% of the EUV mix. So it looks like a big jump in the memory orders last quarter was driven by Deep UV. Is that fair? And then on EUV for memory, for 1C node DDR5, are we talking about 7 to 8 EUV exposures or lower than that? And then I had a follow-up.

Let me take the first one, and Christophe can take the second one. No, I think the order intake for memory is strong, but not just Deep UV, also EUV. And in all likelihood, if we look at the composition of our sales in 2026, you will see a major memory play in there. So the demand in '26 is far more balanced in terms of Logic versus Memory than it was in 2025. So that's what you see. But this is not just Deep UV, this is definitely also EUV.

Yes. And I think on EUV, I think when it comes to DRAM, I think we are going to benefit both from, of course, the demand for capacity, which we already discussed is very strong this year, most probably beyond that. And we have been talking about the number of EUV layers increasing on DRAM. This has been one of our focus. We have seen that happening in 2025. We continue to see that happening. I mentioned it in the introduction on 6 F-square but also on 4 F-square. And this is a bit of what I would call the perfect storm because when it comes to EUV as a result, DRAM share most probably will increase over time. So this is a very good dynamic on DRAM. Which, again, based on all the work we do with our customer discussion we have, we don't see stopping. So there's still some leeway for more EUV layers for more litho intensity on DRAM for sure. And we should benefit from that in the years to come.

Got it. Got it. And as a quick follow-up, sorry to get back to this manufacturing capacity. Is it fair to assume your EUV manufacturing capacity is around maybe 70 units? And does that potentially constrain your growth next year? The reason I'm asking is that is your manufacturing capacity limit crossing movement of tools between this year and next year, leading to a wide range of revenue guidance for '26?

Krish, as I said, our capacity is very dynamic because you -- we cannot move from one point to the other, just like that in one quarter, right? So that's why I said we had 44 units -- revenue units of EUV Low NA last year. You cannot go from one quarter to the other even from 1 year to the other from 44 to 80. So we will crank it up. Every quarter, you will see us increase move rate, you will see us increase capacity. And if the demand signals remain as strong as they are, that will continue into 2027 as well. And then I would say 70 would not be the limit that I would certainly be looking at. I think that is higher.

We are now going to proceed with our next question. And the questions come from the line of Mehdi Hosseini from Susquehanna Financial Group.

My first one has to do with just the capacity that Roger, you just highlighted. I want to better understand EUV capacity, and the topic that has been around since the 2021 when last time we had the shortages. I want to better understand what are the key factors. As you ramp the EUV capacity, is that going to impact the booking trend? In other words, are your customers actually waiting to have a conviction of you adding incremental capacity before they commit to booking or backlog that will be shippable in '27 and beyond? And I have a follow-up.

No. I don't think, Mehdi, that's what is going on. Customers know what we're doing. We share pretty openly with customers how we're looking at our ability to increase. I think customers appreciate that we've built in far more flexibility into our model than what we had before. If anything, if customers start to smell that for a certain year, you might be supply constrained, actually, the dynamic is the other way around. They want to make sure that they get their booking in before they are too late, right? So as a matter of fact, I would say, if they believe that the capacity might become a choke point, then they will jump to put in the orders. So I think it's more that than that they're waiting for a definitive confirmation that the capacity is there. But we'll very openly share with them what our plans are. And again, they appreciate the flexibility that we've built in and the significant reduction of response time that we have created as a result of creating the long lead time items.

Okay. Great. And I want to go back to the comments in the transcript that was posted with the earnings report. There was a comment that some of the bookings will be shippable in '27. So the question that I have is, what would it take for you to hit the high end of revenue guide for this year? Is that the China? I'm assuming that China backlog has a shorter lifetime. And to that extent, is that the China that is going to impact your ability to hit the high end of your revenue guide range?

I think I said it. I think first and foremost, it's the readiness of our customers to take tools. I think that is number one. So their ability to complete fab construction, put the pedestals and take our tools. I think that's constraint number one.

Constraint number two, our ability to execute. So I just talked about what we're doing to increase the ramp. We're comfortable with that. But of course, everyone needs to sing from the same song sheet, not just us, but also the supply chain. So we got to make sure that everyone is tuned into the same ramp that we have in place. So that would be the second one. So that would be more of a supply factor.

On the demand side, I think it's the demand for upgrades, and I gave some color on that earlier on. And as I mentioned on China, I think in our guidance, China is 20% of revenue. So China would breathe along with the corridor that we have given.

We are now going to proceed with our next question. And the questions come from the line of Didier Scemama from Bank of America.

I'm just asking about 4 F-square and DRAM really. So I think Christophe, you mentioned in your press release that you see in your interaction with DRAM customers that, in fact, DUV and EUV layer count could go up with 4 F-square. So I'm just wondering, obviously, there is a school of thought in the market that 4 F-square would lead to a cliff in EUV demand from DRAM customers whenever we see 4 F-square introduction, say, 2028. So is that a risk that you think is significantly diminishing because obviously, the view is reuse of tool capacity? Or do you think that now as the EUV layer count goes up and there is also a view that now wafer capacity in DRAM is going to have to expand dramatically over the course of the next 5 years because of Edge AI and more complex LLMs, that effectively this risk of a cliff and significant reuse of EUV tools is effectively really diminishing dramatically. I've got a follow-up as well.

Yes. I'll try to answer all the points. So I think the first thing to say is, if you look at 4 F-square, the structure require more advanced litho mass. So that's the first thing. So you get basically to look at a more complex structure. And that structure is going to require more lithography. This is why we mentioned that both, in fact, the immersion and EUV will go up.

Now you talk about a cliff a lot. Customers don't like cliff. Cliff are very bad for operation. What customers like is optimized technology over several nodes. And therefore, when we talk about EUV insertion with our customer, of course, the transition to 4 F-square is taken into account because no one wants to buy a lot of tools and be stuck with them. So cliff is never good for a customer when it comes to operation.

And what you see happening with DRAM is that EUV basically has become a very handy tool to simplify processes, to simplify the number of steps, to simplify cycle time -- to reduce cycle time, sorry, and even to bring more capacity because if you have less mask, if you have less multi-patterning, you end up basically with more space in your fab.

So EUV, I will say that the more DRAM customers use it, the more they like it because they get benefit on all those counts. And again, they want to include the cliff. So when we made the statement in our release, basically, it's really out of many, many discussions with customers. And I think that -- well, I don't know if the risk is going down. We never thought that the risk was pretty high, but I think we are very, very confident that, again, litho intensity will grow with 4 F-square, both on Deep UV and EUV. And as I said before, we see EUV number of layers continuing to grow both before and after this transition.

Very clear. So my follow-up is on the gross margin side. So I think perhaps one element of disappointments in the guide is the gross margin. And I think you mentioned the mix of EUV, Low NA. Obviously, immersion probably going to decline because of China and then also the, let's say, upgrades business and the sort of milestone payments that might not be as strong in '26. I'm just wondering, if you look into '27, do you think that your mix of Low NA EUV will sort of revert back to what you had said before, which is the majority will be 3800E? Or is there any reason why 3-nanometer capacity expansion will continue to grow into '27? I guess the immersion question on China is anyone's guess. But if you want to have this into an answer, I'm very happy to hear it.

Didier, on the mix for EUV, customers liked our 3800 so much that they took as much as they could get in terms of 3800 rather than 3600 in '25. But of course, we had a number of 3600s that still needed to be completed that we had all the parts for. And those will be shipped in all likelihood in '26. So the '27, mix in terms of EUV should be substantially better. And also, at that point in time, we're probably looking at the next generation. So the EUV mix by '27 should be better than '26. And you're right, that is an important element because if you look at how we plan towards the 56% to 60% gross margin in 2030. It's pretty clear that new generations of Low NA EUV are critical in that regard. So the EUV mix in '27 will be better than it is in '26.

Another mix effect that is in there indeed is on the Deep UV side. So quite a bit more dry rather than immersion. I would say, in all likelihood that is less a matter of demand, but it's supply, right? So on the supply side, we are constrained in terms of immersion for 2026. So it's in that result that with higher dry business and restrictions on the immersion side, that gives you a less favorable Deep UV mix that goes into the equation. And then an important swing factor because you still have a 2% bandwidth in the gross margin. An important element of the swing factor will be installed base and will be upgrade business. That gives you the moving parts, Didier.

No, that's great. By the way, do you want to say what you think will be the rev rec on High NA in '26? Rev rec on High NA. The amount of High NA units.

Probably a bit more than we had this year, but I don't want to go into too much detail there.

We are now going to proceed with our next question. And the questions come from the line of Francois Bouvignies from UBS.

I have one for Christophe and one for Roger. I mean, the first one maybe is for Christophe on the High NA. I just wanted to get in more details in here. I mean we see the industry moving into a rush in terms of capacity both at TSMC and advanced logic, I should say, and the memory overall. And I was wondering if you have a rush in this capacity, could that delay the High NA adoption? Do you see some risk happening of delay in addition because the industry is simply too busy to add capacity that they don't want to add another risk in terms of transition. So I was just wondering if it's something that's possible?

Well, I think from day 1, I've been talking about 3 phases of High NA adoption with R&D qualification for high-volume manufacturing, then insertion high-volume manufacturing with limited amount of layer and then the whole thing. And I would say that plan always provide basically the time to have a real qualification. So the acceleration you see today on capacity, of course, is on existing nodes that are ramping with known technology, and those nodes will call for the use of the existing product we ship today. So that's one, that's Deep UV, that's metrology inspection as we know it today.

The preparation of High NA for the next node is such that it does leave the time if customers want to use it to insert it properly. So sometimes, maybe some of you could believe that 1, 2, 3 phases is a bit long, but this is, on the other hand, the way to secure the insertion on the node because once the decision is made to use it on the node, they really want to use it. They prepare the mask for it. They qualify the whole process with it. So it's very difficult to change your mind and say, "Hey, I'm going to go back to the whole stuff." So I think customers try to do those things in such a way that they are not too sensitive to either a major acceleration or slowdown of their capacity. So it's a long answer to say, no, basically. So we don't see a risk there.

Perfect. And maybe, Roger, your question -- my question is for '26. I mean, if China is 20% of revenues, if we take the midpoint, it would imply China is down about 20%, 25% year-on-year, which is mainly in Deep UV. And you guided Deep UV flat for '26, which means non-China Deep UV needs to go up by 40% for [ 0 ] year-on-year kind of pool to get the flat Deep UV.

And I remember last year, I guess it's kind of a deja vu, where last year, you said there is a strong correlation between the non-China Deep UV and EUV growth. But when I look at '25, your non-China Deep UV was actually not growing much compared to EUV. You had a big disconnect between the 2. So I was wondering if there was a catch-up somehow from '25 to '26. So just trying to understand why this year, you would see this strong growth happening and we didn't see that in '25.

Yes, Francois, it's a really good question. And indeed, this is what we observed. So '24 was strong. Also on the non-China business, '24 was pretty strong also in the dry business for customers across the board. '25 disappointed a bit. If we look at '26, we see the market come back with our leading customers. Frankly, I think many of our customers are doing what we do, which is you put in the long lead time items, which, in our case, is more the EUV stuff, and you take a bit more flexibility in your shorter lead time items, which is the Deep UV business. I think that's what they've done for a significant part of the year. We actually could see the non-China Deep UV business come back in the last months of the year. And we frankly see that trajectory continue into 2026. So you're right. And that we found the '25 non-China Deep UV business disappoint. That is clearly the case. But we do see a reversal of that trend in the last months of the year and see that reversal continue into 2026.

We are now going to proceed with our next question. And the questions come from the line of Chris Caso from Wolfe Research.

My question is with regard to the expected timing of deliveries within the backlog. And you mentioned a few things in your earlier comments, including customers recognizing that, that capacity may be tight, there is availability of customer clean room space. I'm not sure you wish to quantify how much of the backlog is expected to ship in '26. But would you say that the timing of those expected deliveries is stretching out as compared to what's happened over the past few quarters?

Our expectation is, Chris, that the second half will be stronger than the first half, but I would say that that's a function of what I just said, which is, a, the availability of fast pace of our customers; and b, our continuous quarter-on-quarter ramp of our move rate. So as a result of that, we expect it, for the second half, to be stronger than the first half of this year. That's the way we currently model our shipments in discussion with the customers. But clearly, quite a bit of the order intake that we had in Q4. And clearly, part of the backlog is for '27. That is pretty clear. And it is '27, right? So the majority -- the lion's share of the orders that came in, in Q4, some of it is '26, but the lion's share we use for '27.

My follow-up question is with regard to gross margins, and you spoke about that a bit, but perhaps you could clarify what are the headwinds and tailwinds with respect to gross margin for this year? I presume that China is one factor. But what are the factors that cause you to be on the upper end or lower end of gross margins as you go through the year?

I wouldn't say it's China per se. I would say it's immersion, right? So immersion tool is -- immersion is a significant contributor to the gross margin. As I mentioned before, we do expect the immersion sales this year to be below 2025, which is not the result of demand, but it's the result of supply constraints on the immersion side. So that is a bit of a drag.

Then you see quite a bit of dry sales. As we said, we also expect the dry sales, which was fairly low in 2025. We already saw that reverse itself in the last months of the year, and we see that reversal will continue into this year. But dry tools come with lower gross margin. So that's a drag on the gross margin.

On the EUV side, there is a bit of a mix effect because we have 3600 in the year that we didn't have that much in 2025. And then if we have a bit more High NA, then of course, that also comes with a slightly depressing effect on the gross margin. So that's all the negatives.

In terms of all the positives, I would say, higher EUV numbers, right? So we're clearly looking at a significant step-up in the number of EUV tools this year. And that is margin accretive. So that's on the positive side. And as I mentioned, the big swing factor, as I look at it today is on installed base. And to the extent that the installed base will manifest itself in a positive way, high demand for upgrades, which at least theoretically, you could assume to be the case this year with all the appetite for capacity additions that our customers have, that should be helpful on the gross margin. So those are all the puts and takes, as I could see, it's for the gross margin this year, Chris.

We are now going to proceed to our next question. And the questions come from the line of Tammy Qiu from Berenberg.

So the first one is on Logic road map. So over the next few years, we do have A16, A14, A14C and A10. Can you confirm that for every single generation, are we still going to have EUV insertion of a couple of layers or some of the customers are really trying to minimize the incremental EUV layers, please?

Well, so let me try to answer that. So I think if you look at the midterm. So we talked about 2-nanometer. Indeed, we're going to go to A16, which is very similar to 2-nanometer, to be honest. This is not a big difference. I will skip that. We see then basically EUV layers increasing again at A14. As we discussed in the past, most probably 10% to 20%. We see that being even more true for A10, where the structure change could call for even more EUV layers. So that's a bit the view we have all the way to A10.

And in the discussion with our foundry customer, again, there's a lot of focus on that because this is key in enabling their future technology. So that's a bit where we -- what we see today on the foundries.

Okay. And I have a follow-up also on the capacity issue. So I remember that back in 2021, you were very clear about you would do 90 EUV tools and that is the capacity we need. Then of course, the unfortunate 2022 happened. So we took a pause of that. And it sounded like today, your capacity addition plan has been more cautious than you were previously. If there is any reason for that? Or just basically after 2022, it's better to take a cautious approach from a capacity perspective?

I think I tried to explain, but I guess I didn't completely succeed on that. So what I said is what we did in the earlier years of this decade is to put in what we call the long lead time items, which means that anything that takes more than, let's say, 12 to 18 months to get done, we did. Right? So we build additional factory. We put in equipment, et cetera, et cetera. So we build clean. So all of the things that take time, we did. So that's good news. So that gives you more flexibility.

But as I mentioned before, you cannot from one year to the other, move from a move rate -- an annual move rate of 44 to 80 in 1 year time. It simply doesn't work because you need to take in people, you need to hire people, you need to train those people, and you cannot double that in 1 year's time. That needs to be a gradual approach.

So this is the process that we're in right now because we also took a decision back in 2022, 2023, we're not going to put in people for an output of 90 because that would make no sense. They would have nothing to do, and it would be very, very costly. So we're gradually moving our move rate up. So does our supply chain, same story there. They're also gradually quarter-on-quarter moving up their move rate. And in that way, we will very meaningfully increase our capacity over what we had in last year. So that's what we're doing.

So we have the structural big investments to get to [ 90, ] and now we're gradually moving our move rate up in order to move our integral capacity to cater to the demand. And we think that our increase in capacity goes nicely hand-in-hand with the completion of fabs by our customers, such that we will not be the limiting factor in them being able to increase their capacity.

Yes, maybe to add to that to second for Roger on that. So I think what we said, back to 2026. So we said that the major factor, in fact, on tool delivery would be the execution of our customer because we have to realize a lot of decisions have been done in the last few months. And this also means that they are extremely active in putting capacity in place, et cetera, et cetera. And in 2026, as Roger said, we can nicely follow basically right now their whole ambition, which is good.

When it comes to beyond 2026, as you know, the lead time on our EUV machine is at least 12 months, which means that as we speak, we are capable to have that discussion with our customer looking at next year, basically. And as we do that, we can adjust basically our planning exactly in the way Roger mentioned it. But so far, if we look at the short, midterm, we are capable to nicely follow basically what our customers are asking for.

So I think I sense a bit some concerns that we may be the bottleneck basically for our customer, this is not the case, certainly not this year. And again, for next year, we have plenty of time to continue to follow basically their demand. So I just want to make that clear. I think what Roger described is the process and the flexibility we have thanks to the investment we have made on our indeed 90 capability for EUV, 600 for Deep UV to follow basically very carefully what our customers are going to need in the next few quarters.

Okay. Unfortunately, we have run out of time. But if you were unable to get through on this call and still have questions, please feel free to contact the ASML Investor Relations department with your question.

So now on behalf of ASML, I would like to thank you for joining the call with us today. Operator, if you could formally conclude the call, I would very much appreciate it. Thank you.

[indiscernible] 2025 Fourth Quarter and Full Year Financial Results Conference Call. Thank you for participating. You may now disconnect.

Good morning, everyone, good afternoon, depending on where you are, maybe even good night. Welcome to the Q4 full year 2025 financial results press conference. You may not see that when you're dialing in online and you're watching us online, but we are actually in a different location than we were last year.

Today, we host the press conference in our training center in the ASML Academy, and that is located at the Brainport Industries campus in Eindhoven. And this is actually the place where we plan our expansion in the Netherlands. So we thought it would be a good idea to invite everyone here in the room to see what our new location is going to look like. There's nothing there to see yet, but this is where we are planning our expansion. And Christophe will talk more about that later in the presentation.

My name is Monique Mols, I'm Head of Media Relations. So welcome to you all. I'm really happy to see that there are people in the room and people online. For those online, if you have a question later on, you can fill out the form on the website and we will take your question from here. If you're in the room, my colleague, Mark will walk around with a microphone and pick up your question. Sorry.

So this is our annual results. Forward-looking statements for those who like it. So again, we are here at the Academy. We have several of those training centers all around the world. Here, we have quite a big center where, on average, 400 employees come here every day to get a training. So they actually work on the machines that our customers have in their fabs. And every year, we have about 26,500 people coming here to train. So this is a very important location for us. And we're very happy that we can host a press conference here today.

With that, I'm not the only one who's going to talk to you today, of course, I have Christophe Fouquet; and our CFO, Roger Dassen, and they will talk you through the numbers, through the developments and everything that's happening at ASML. So I would like to invite on stage, Christophe Fouquet.

Thank you very much, Monique. So Roger will be the one doing the good numbers later on. As you have noticed, we finished the year very, very, very strong with a record quarter record year, record booking. And this is basically a sign of the direction this industry is taking. We are very happy, of course, with the walk, the ASML team has done, being able to execute on such a big quarter in Q4 and also prepare us basically for 2026. So a lot of good news today. And again, Roger will get into the number.

I'd like to say that we welcome also that clarification. In the course of 2025, you have seen that sometimes the business was still a bit uncertain. The last 3 months have really clarified basically at least the horizon for 2026 and most probably a bit beyond that.

So before we go into the numbers, I'd like to provide you some context about what's happening in the industry, what is driving basically this type of news today. And of course, the very first thing is AI. You have been hearing about AI already for a couple of years. You have heard major, major announcement about AI infrastructure.

I think from the very beginning in ASML, we have been a believer that AI will be a big thing. And this is true because as with semi before, any major application moving forward will not only use semiconductor, but it will also use AI. And I put a few examples of those applications on this slide. It's pretty much everything you can think about when it comes to technology, when it comes to the future of society, this will all rely on AI.

If you look at the opportunity, this has been said also before, this will drive basically advanced technology, advanced logic, advanced DRAM. This will also basically drive the entire data infrastructure. And the effect AI can have on the overall GDP is pretty big.

In fact, if you look at the U.S., even in 2025, AI was counting for a very large part of the growth, and we expect that basically to be applied to the entire worldwide GDP. So the opportunity is there. What was a bit, I would say, frustrating for us for a while is that where we heard all those news, we heard about all those investments, but basically, this was not yet translating into capacity addition at our customer.

I think what the last 3 months have done is change that. We have seen our customer basically moving forward. They start to really believe in the sustainability of the AI demand. That's true for memory, that's true for logic. And as a result, they started to invest. They started to plan for capacity. And of course, this will drive demand for our product at ASML.

And when you look at the demand for our product, what's interesting with AI is that this basically touch on all products. Of course, AI is going to require very advanced chips, and this is going to drive EUV, for example. So this year will be a big year for EUV, Roger will talk about that. It's going to drive advanced inspection tool. But at the same time, AI needs a lot of data generation, a lot of sensor, and this will be still created by the use of more mature technology such as DUV. So AI will have also this effect basically to really drive our entire product portfolio in the coming years.

This is a bit of a summary of what our customers have told us. So I talked already about the fact that they are more confident that AI is here to last, and therefore, they are going to invest. I think, in fact, for a lot of our customers in 2026, capacity will mean market share. So we will see them very eager to get the capacity as quickly as possible.

There's a few more good news when it comes to AI, AI also drive very advanced technology. This drive an increased use of EUV. And one of the things we've been talking in 2025 quite a bit is the fact basically that we have seen the number of layers of EUV increasing basically at our key customer. And this means practically that the overall litho intensity is going up, which means basically more use of our advanced lithography tool.

2026, we expect, as you understand, as the number will show an improvement of the business, a significant growth especially on the advanced tool, EUV as said before, will be a big year. And again, on the midterm, we expect that to continue. Long term, we stick basically to what we have told the market already several times, which is what we share basically at our Capital Market Day in November 2024. We still expect for 2030 revenue between EUR 44 billion and EUR 60 billion with a gross margin of 56% to 60%.

Going a bit now to the effect of AI in the market. So this graph is showing a bit what AI will do. What you see here basically is the growth of the different segment of semiconductor. At the bottom, you see the historical growth of memory logic, which is about 6%, 7% year-on-year. 6%, 7% year-on-year is pretty great already. There are many, many industries that will wish to see this kind of number. But what you see with AI is that when we look at advanced logic, when we looked at advanced memory the growth on those segments is going to be more than 20% year-on-year for the foreseeable future. And this is really what is going to drive basically more demand on lithography. Why is that?

So we've talked in the past a lot about Moore's low, of course. And Moore's Law is law that say that every couple of years, we need to double the number of transistors per chips. And that law has been true for many, many years for PC for mobile application.

Now when you look at AI and this started to happen in 2010, the curve is far more aggressive. When you look at the most advanced AI product today, NVIDIA products, for example, the request is not to grow 2x every 2 years, but in the last few years to grow 16x every 2 years. So you see a major acceleration basically of the need for silicon. And of course, we provide that in 2 different ways. We provide that with scaling by making transistors small. We can put more transistor per chips. And this has been a good way basically to provide more transistor and follow Moore's law for many, many years, but that's not enough anymore.

And if you cannot put enough transistor per unit of area per chips, then the only option will be to make more wafers. And that's a bit what we see happening with AI. So the most advanced AI application are going to drive up volume. And this is why when we look at DRAM customer today, when we look at logic customer today, they are building mega fabs. Some of them are talking about hyper-cycle because they have to be able basically to also provide this volume to the market.

So just to illustrate that, I pick one example, and I picked it from NVIDIA because all of you are, of course, very much aware of what's happening there. Today, on the black wall system, you need about 2.5 wafers to create the product. If you look at 2027 on the revenue product, this number will go up to 10 wafers. So to provide the same product to their customer, NVIDIA will need 4x more wafer than today. And this is one of the reason why, again, we will see capacity extension driven again by this type of application.

That's what you see here. And this is again, I would say, a bit of a new dynamic we have in our market AI by this acceleration of the need for performance of power reduction is going to drive both volume and technology a lot harder than any technology before.

So what does it mean for technology, EUV is key. 2026 is going to be a good year for EUV. We are looking at more shipments. And this, despite the fact that we have increased the productivity of our tool by more than 40%. So we're going to ship a lot of capacity for EUV this year. If you look at it historically, we have already been having quite a bit of capacity.

So the capacity headed of EUV in the last few years have been in average 25% year-on-year growth, which is quite significant. So we have seen all our customers basically already adopting this, it was logic first, then DRAM, but we expect basically to see that even more moving forward.

Then we have High NA, and High NA, of course, is not going to be the tool that provide the capacity of EUV in 2026, '27, but that's the tool that will enable our customers to shift to even more advanced technology around '28-'29, that's important for DRAM. That's important for logic. And that's important for AI because as I said before, AI is going to be looking for more advanced chips with low power consumption and High NA is going to play into that very strongly. So good progress on High NA in the last few months. Our customers are still qualifying the tools. This takes a bit of time. The results are good. This year is going to be used to prepare a bit for insertion. And again, if we look at 2027, '28, we are going to see the first product being manufactured using some High NA system.

Deep UV remains very important. As I said, it's not all about advanced semiconductor. As you know, a lot of technology still require Deep UV. So we continue to drive the road map both on Immersion, where we have launched our 2150, which basically give us sub-nanometer accuracy and more than 300 wafer per hour. Productivity is important. Productivity, of course, a way to get capacity. So we continue to drive that on immersion, I think the example of the NXT:870B, which is a KrF system is even more spectacular because there we have been capable to achieve more than 400 wafer per hour. And that tool today is creating a lot of interest at our customer because productivity, again, is capacity.

We talked also last quarter about us starting to help our customer with what we call 3D integration. So I told you, when you cannot put all the transistor in one ship, you just make more chips and bring them together with 3D integration. We have our first system, the TWINSCAN XT:260 that was shipped last quarter, lot of interest from our customer. For us, this is the first product looking at this new market opportunity, and we will continue to work with our customers basically to define more product moving forward to support them also on that segment.

A few words on metrology and inspection. So we don't talk always about metrology inspection. But when you drive technology, yield become very, very important, and yield can be improved by doing more maturity and more inspection. So in 2025, we have seen our metrology inspection business growing up by almost 30%, which is a major growth number. It has to with need for more metrology in spectrum, it has also do with the quality of our product in optical metrology for overlay, but also in e-beam.

And one of the products where we have seen quite some progress in 2025 is multi-beam. Multi-beam is going to provide e-beam inspection at higher speed and most probably in the next, I would say, a couple of years really enable our customer to move this technology to high-volume manufacturing.

So a lot of good progress there as well. You all heard about Mistral, I say back in the end of the summer when we announced our collaboration but also our investment in Mistral. The rationale there was to get AI in ASML and to get the very best people, the very best competence in ASML in order to be able to first strengthen our core competencies, read putting AI in our product, support the connected market, to offer some of those capability to our customers and also create new opportunity basically moving forward. That's a project we are going to talk more about in '26, in '27. We are making great progress with Mistral, our partner. Our teams are working very, very closely together to basically execute on each one of those points.

Going a bit into some of the other things we are very, very proud of at ASML. This is our engagement in the community. We have been spending, I would say, both the time, talent, money in order to work together with the community on a few very important topics. The first one is mobility. Well, we are here today.

As you know, this is also close to our next campus, which I will explain in a minute. We plan to have a groundbreaking this year in a few months. We want to continue basically to work with the Brainport community to improve the infrastructure because we are very much aware also that as we grow, we can sometimes create more headache, and it's very important to address that. So we have major investment there also, of course, through the Beethoven program.

Affordable housing, there's been quite some press in 2025 about some of the progress we have done there. This is ongoing now for a few years. This remains very, very important, and we will continue to invest. You see the number there. I don't need to stress it to basically create more housing. We also understand that this is a broader challenge across the Netherlands, and we definitely want to do our part helping the community here.

Culture. So we are very proud to be one of the, I would say, initial partner for the future Rijksmuseum here in Eindhoven. We love the city of Eindhoven. We love this place. But sometimes we feel that if we can bring a bit more culture, a bit more activity, I think this will help people to enjoy it even more to attract even more people moving forward. That's why we stay very committed to the PSV Football Club, as you know. But this we thought was a very, very nice initiative from the city of Eindhoven and we really wanted to be there.

Finally, education, you know that we have a long-standing relationship with the TU University here in Eindhoven that could extend that to many other university across the Netherlands. This is key. We want to develop tenant that will be able to work in semiconductor moving forward, and we will continue to do that, of course, very strongly.

One last word. We need to continue to grow. I will come back to some of the other announcement we had today about our focus on innovation and engineering. At the same time, we see more demand for our product. And therefore, our footprint needs to continue to grow because we need to invest in customer service. We need to invest in manufacturing. We need to invest in space.

So last year, we opened 2 major sites, one in Korea, one in the U.S., and that intends to support basically our activity here. The big event in 2026 will be the groundbreaking of the big campus, which is our second big campus in the community. We'll do that mostly in May, June, and I'm sure you will be invited to join us with the idea that we can already start moving people as early as in 2028. So this will be very good for our people. It will be very good also to debottleneck a bit the campus in Eindhoven, of course. And this is a project, as you know, that is very, very important for ASML.

This is my update. I will come back in a bit to talk a bit about the action we are taking on our engineering team to strengthen our innovation. In the meantime, I'll give a chance to Roger to give us those very nice numbers. Thank you.

Thank you, Christophe. And good morning, good afternoon, everyone. So indeed, I will present the financials for '25 and the outlook. Christophe said it, clearly, Q4 2025, a record quarter by any standard. It was a record quarter in terms of sales. It was a record quarter in terms of order intake. It was a record quarter in terms of cash flow generation. On the back of all the good developments that Christophe just shared with you. So I won't call them out here, but just looking at the quarter, it's pretty clear that it was indeed a very strong quarter.

If we look at 2025, and if we look at the total business for ASML, we ended the year with EUR 32.7 billion in net revenue, 52.8% gross margin. And you see the key elements in here, a net income of EUR 9.6 billion and an EPS earnings per share of close to EUR 25 per ordinary share. All in all, a very, very strong year in which we also paid back and returned quite some money to our shareholders. And also, we're able to do the participation in Mistral that Christophe just alluded to.

Very clearly, EUV was the main driver behind it. And you will see it in the pie chart that I will share with you in a moment. It will clarify that it is particularly the leading technology that really contributed to the growth. So both immersion, but first and foremost, also EUV.

So EUV grew 39% in comparison to -- in comparison to last year to 2024, a mix of both more tools, significantly higher sales price of the tools because most of the tools that we sold, most of the low NA tools that we sold in 2025 were 3,800 tools, which, as you know, saw an increase in productivity from 160 wafers per hour to 220 wafers per hour and of course, a commensurate increase in the sales price. And obviously, we also had the recognition of a number of EXE tools, High NA tools. So it's in that combination that really EUV was the big driver of growth for us this year.

Big moment indeed, and Christophe showed it as well, the revenue recognition of the first 5200B really big moment for us because that is the high-volume manufacturing tool on High NA and the fact that we were able to not just chip it but also get it installed and get accepted by the customer and the customer and really looking at putting that tool into high-volume manufacturing for its leading nodes is a very significant moment for the company.

Deep UV went down a bit, decreased 6%. If you look at the geographies, you would see that most of the decline would come from -- would actually come from China. So that's where most of the decline on Deep UV was immersion is still quite strong, particularly on the dry side, it was lower than it was in 2024. But there, the step into the 3D integration market with the introduction of the 260, obviously was another big moment, application very strong.

Christophe alluded to it a 20% increase right there with the need for more process control for our customers at the leading nodes. And finally, very, very strong 26% increase in our installed base business, both on the back of service, our installed base and EUV is obviously growing. Therefore, you see a continuous step up of our service revenue from EUV, but also increased appetite in EUV in upgrades. I'll come back to that later.

This gives you some breakdowns and I won't call them out at all. But I think if you look at technology, it's interesting to see that the leading technologies, so both EUV and immersion combined give you 90% of our systems revenue. And I think that really talks volumes, I think, about the shift that Christophe is also talking about the shift to more and more leading nodes, clearly represented here in the share of technology.

In terms of end use, you see -- we see memory at 34%, logic at 66%. You see memory actually declining a little bit in terms of percentage. We actually see that flip in 2026. So in 2026, you will see that memory becomes more and more important.

In terms of regions, a lot to be said there, but I think China is still very, very big, but smaller than it was last time, both in terms of percentage of system sales and also in absolute numbers, you see a bit of a decline in the China market. We expect that decline to continue. As we said, we expect the China business for this year to be around 20% of our total sales. So here it was 33% of total -- of system sales was 29% in terms of total sales, we expect the 29 percentage number to go down to approximately 20% this year.

This gives you the net sales by end use over the years. I won't spend too much time on it. Just one fun fact. If you look at the installed base business at EUR 8.2 billion, that comes pretty close to the total revenue for ASML in 2017. That just tells you how unbelievably rapidly the company grew. And the fact that we have such a big number in terms of installed base business, obviously, also provides a lot of resilience for the company. So therefore, it's an important number for us to focus on and to continue to increase. This gives you the business over the years.

So if you just -- if you take the 4 year -- so the 4-year increase from 2021 to 2025, you would see that the company has grown 75% at the top line. You also see that R&D increases from 2.5 to 4.7, which, of course, was absolutely critical in getting us prepared for all the beautiful products that we're currently shipping to our customers. But I think it's also fair to acknowledge that this increase in R&D number has also driven some organizational complexity that Christophe will talk about after my contribution.

So this gives you the overview. And as you see earnings per share an interesting number, round it 25, 25 by 25 is something that you might easily recall on a go-forward basis. In terms of return to shareholders, if we look at dividend, the total dividend that we proposed to the AGM for the year EUR 7.50, this quarter, we'll do EUR 1.60 per ordinary share as an interim dividend in Q1. And therefore, if the AGM accepts our proposal, we would have a final dividend of EUR 2.70, and that's a significant increase over last year. In terms of share buyback, we did not complete the full program of share buyback. As you see here, EUR 7.6 billion out of the total program of EUR 12 billion. We did announce a new program, EUR 12 billion over a 3-year period.

In terms of outlook for the quarter, we expect net revenue between EUR 8.2 billion and EUR 8.9 billion with a gross margin between 51% and 53%. Look again at the installed base management sales, 2.4. So last quarter, 2.1 goes up to 2.4. What it really tells you is that the appetite from customers when it comes to upgrades is very, very high, because in the client that Christophe was describing, but customers really have a lot of appetite to increase their capacity as quickly as they can.

Of course, on the one hand, they will try and complete their fab billing as soon as they can, such that they can new tools in. But in the meantime, once these fabs are still in construction, the fastest way to get extra capacity is really to make sure that the tools are squeezed to the maximum and therefore, to put as much upgrades on the tool as possible. And that's -- that's what you see here, and that really contributes to very, very strong installed base sales going up again this quarter.

So the gross margin, 51% to 53% R&D and SG&A costs nicely under troll. For the full year, EUR 34 billion to EUR 39 billion, really on the back of all the developments that Christophe talked about. So the real steam engine behind this growth is once again EUV. So we once again expect the EUV business to go up significantly this year.

We also expect the installed base business to go up this year, and it will go a little bit at the detriment of the non-EUV business. We expect that to be about flattish. So non-EUV business is expected to flattish from '25 to '26. With us moving parts for the leading nodes, so for the big customers, both in memory and advanced logic, we actually expect the Deep UV business to go up a bit. As I mentioned, in China, we expect the China business will go down. Metrology and inspection, we expect to be quite strong. So those are more or less the moving parts within the non-EUV business.

Again, for the full year, EUR 34 billion to EUR 39 billion, which at the midpoint after a growth of 16% in '25. At the midpoint, you would be looking at a 12% increase in this year with good potential as the bandwidth also suggests gross margin 51% to 53% and annualized effective tax rate of 17%. And that concludes my presentation. And as I mentioned, Christophe has a part for you on the streamlining of our engineering and innovation function.

Thank you, Roger. Good. Yes, I have one slide I want to share with you on the action we are taking basically to strengthen our innovation and engineering team. So I think that the net results of that, which is 1,700 people leaving the company, I think, has been picked up pretty clearly already this morning. What I want to do is to give you some background. And of course, you understand listening to our outlook, listening to the numbers. We are not doing that in any case because we are in trouble because we need to save money, et cetera, et cetera.

Now the reason we are doing that is that we have been growing very fast. And this is also true for a technology team or innovation engine, and as you know, the technology team, the innovation engine of ASML has been the reason for our success. It's been true for many, many years, and this is still going to be true for many, many years to come.

And as we have said in 2025, we want to continue to innovate more. This is why we engage in AI. This is why we engage in 3D integration. This is why we have a long road map on e-beam, and we believe that innovation will for many, many years to come, define our success. But when we listen to the feedback of many of our stakeholders, they have told us in the last few years that we're not very agile in fact. And we are not, I would say, responsive enough. So our customer are pointing to the need for us on technology to be able to respond much faster to work on quality to work on new product.

A very important feedback we got is from our whole engineers who told us Well, a lot of the time we spend in ASML is not anymore on innovation, right? Because the organization has become so complex. We have so many people steering us in different direction that we have to spend a bigger part of our time just dealing with that. And this has been a very, very strong, and I would say, loud message from our people, and we felt the need basically to address that. Our supplier, if you talk to them, they also tell us the same, and therefore, we felt the need to move.

So you heard about the number 1,700. I'd like to give you a bit more color to this number. If you look at our technology organization today, we have about 4,500 leaders, which is quite a bit. When we look at a future organization where we simplify our processes, where we reduce the number of steering access towards our engineers, we believe basically that we need about 1,500 leader to run this organization.

So it's a 3,000 less leaders needed if we are successful in simplifying. So out of the 3,000 people that we don't need basically to lead the team, we are going to create 1,400 engineering positions. So we're going to add, in fact, some engineering bandwidth to work on existing product to work on future products. We want to, in fact, have out of this action, more engineers and less, I will say, leadership so that engineers can be fully enable to do their job.

And as a result of that, if you do the math, we have 1,600 people out of the technology team that will not have a job in ASML anymore. Now the difference between the 1,600 and 1,700 is 100 people coming out of IT when we have a similar situation, similar feedback and where there, we believe that about 100 leading position are not needed. So this is a bit the math, we want to really boost again our engineering capability, our innovation engine.

We want to improve, I would say, the satisfaction of our engineers, our customer, our supplier. And of course, this come at the cost of a very difficult decision we had to make. We explained our employees this morning. This is most probably the most difficult decision the management team ever had to make in ASML. But we do it because we truly believe that this is the right thing to do for the company for our stakeholders, starting with our employees and to basically continue to be this great company moving forward. So that's a bit more background.

And with that, I think we'd like to take some questions from you. Thank you very much.

Okay. Thank you. So we have some questions online, and we have some people here in the room and because you all came here, I think you should go first. So let's ask some questions in the room first. Please state your name and your publication first, so everyone knows.

I'm Sarah Jacob. I'm from Bloomberg News. Regarding the job cuts that you announced today, what kind of restructuring costs or charges can we expect from this?

That's obviously subject to the discussions that we're having with the Work Council and first and foremost, union. So I cannot talk about that, but these costs in the grand scheme of ASML would not be considered material. Well, the finalization of number is very much subject to discussion, but not materially in our numbers.

I got a question about -- there's a lot of talk about capacity expansion from your customers. We've seen a lot of announcements. But how much of those announcements or is related to real capacity expansion? And what part is CapEx inflation, so to speak, because the cost of a wafer is increasing. How sustainable is that? Can you elaborate a little bit on that?

Well, I think so, I talked about short and midterm. So I think that visibility we get from ASML is mostly for the next couple of years. And when we talk about capacity expansion, we talk about new systems. So that's why we said that if we look at 2026, we expect ship quite a few more EUV tool. It's also true with metrology with inspection. I think Roger was rightfully stressing the progress of our installed base business, which also include upgrades, and we will see also a lot of that.

So I would say when you hear our customer talking about capacity expansion, this translate directly into need for more tools. And for a long time, we heard our customer' customer, sometimes our customer, customer, customer talking about expansion, and this was still a bit far away from us. In the last 3 months, if you have listened to TSMC, Samsung, Micron. Micron has been announcing groundbreaking almost every week for the last few weeks. There, you have a direct translation basically into shipment for us. And we have not said that in our talk, but also build up of capacity. So of course, a lot of that will affect positively, not only ASML, but the entire supply chain here in the region.

Okay. Let's turn to an online question and get back to you then. So a question from Financial Times. Please can you talk a bit more about how the AI memory shortage is driving your business? And to what extent those customers are being more aggressive in their capacity expansion than logic?

I will start. I think that it's difficult to say if logic or DRAM is the bottleneck for AI today. I will still pick mostly memory at this point of time. And the reason for that is that it comes to memory, the demand for high bandwidth memory, which is the AI memory is extremely high. But the demand for DDR memory, which is for mobile PC is also very high.

And as a result, we have seen basically the price of DRAM going up significantly in the last few weeks. Therefore, there's a need for capacity. And our memory customers are moving very aggressively. I mentioned a few examples. And the reason for that is when you have such a demand for capacity, capacity is also market share.

And if we look at 2026, we know that the memory demand will be very, very tight because our customers are saying that publicly. So there is a huge appetite and it started most probably end of last year for our DRAM customer to really build up capacity as quickly as possible. And that's the dynamic we are in which, of course, has a major positive benefit for ASML.

Okay. Thank you. Mark, in the room, I see some hands.

So [indiscernible]. How does the stabilizing AI market influence the perspective of the amount of jobs you're about growing in Eindhoven?

Well, so if you look at the big picture, so I mentioned again our long-term forecast as we establish it in November 2024, where we still see us going towards EUR 44 billion to EUR 60 billion revenue, which means that we see still need for more capacity. Even as we speak, this year, we will be adding jobs in manufacturing and customer service in order to support basically the need.

So I will say the long-term trajectory is still a trajectory of growth. we take today a very specific action on a very, very focused part of the organization, which is the technology team and in fact, even focused specifically on the leadership of the technology team. But it doesn't change fundamentally our growth trajectory and therefore, our commitment to people, but also as I've shown to footprint, et cetera, et cetera, the supply chain I could add to that.

And I think it's very important to understand that even as a company grow and is very successful, there's still a need once a while to make sure that some of the key elements of the company and for us, that's the technology. Technology is really our heart. We have to make sure that we keep the heart in the best possible shape. And the action we are taking today is difficult, is painful. But the intention is to make sure that, that innovation engine keeps going so that as the market grow, we keep our very strong leadership position in the market.

Mark [ NSA ]. I have 2 questions. One relating to the reorganization and the other one is to being prepared to this huge demand in new machines. First of all, the reorganization we refer to the technology team, does it mean that something changes within the internal structure as well regarding D&E or R&D? And the other question is when it comes to being prepared for this new up cycle, is your supply chain also prepared. So did you do some stockpiling there? Or is every -- does everybody have to expand?

I'll take the first one and leave you the second one. So I think the short answer to your first question is yes. I think that the transformation, the change in the organization will be mostly around D&E, not only but mostly around D&E. The leadership I was referring to is mostly within D&E. That's also why Marco, our CTO, together with Jose are taking the lead also on that activity. But since innovation is the heart of the company, everything else is connected to that.

And by improving the organization, the D&E organization, we also improve the interfaces with operation. We improve the interfaces with our customer, and we improve the interfaces with our supplier, right? So all the people who told us basically, you've got to do something better should benefit from that. So a lot of the work will be focused on D&E. In fact, what we talk about today, I would say, practically doesn't concern the very large majority of the team ASML, but the impact, I think, will go beyond D&E.

Mark, on the capacity, what we've done, as you know, in the past couple of years is to put in what we call the long lead time items, which means that everything that takes, let's say, longer than 12, 18 months to realize is in place in order to get to a much higher volume. So that means factory space, et cetera, et cetera. We've done that, and we've worked with our supply chain for them to do that as well.

So what we're doing now based on the very strong signals that we're getting from our customers and also them indicating that they believe this development is sustainable. We're now making sure that every quarter, we increase our move rate because as you will appreciate, you cannot move from 44 units in 2025 to 80 units in 2026 doesn't work that way. So you gradually need to crank up your move rate, and that's exactly what we're doing right now.

We're doing that. We have a very solid understanding also with our supply chain. They're doing the same thing, and that will lead to a very, very meaningful increase in our capacity this year, but also moving forward.

I'm going to go to one online and then get back to you. Could you share how ASML's R&D spending is currently divided between EUV-related development and non-EUV technologies. This is a question from the Chemical Daily in Tokyo and we have a lot of people from Japan online watching us. So that's really nice.

The lion's share of the R&D expense really is an EUV, right? Because on EUV, we have both High NA, we have the Low NA platform that where we still see a lot of potential to develop that. And we're also working on what we call the high perform platform.

So we have 3 very significant work streams in the D&E organization to focus on EUV. So without a doubt, EUV is the lion's share of the development. But that said, we do have road maps for the other products as well. You heard us talk about the 260. You might have heard about the 870, which is a platform that really significantly increases the output capability in the drive business. So we're working there as well. Lion's share is really focused on EUV.

Folks, I had a question about the China business, which is going down quite dramatically. I'm wondering whether it's also going down in absolute numbers? And if that's the case, what's driving that? Where it just still a backlog thing or whether something else is going on as well?

Well, it is going down in absolute numbers as well, right? So if you do the math on the system sales, if you take the chart, you take the percentage and you apply it to the total system sales, you would see that actually it goes down in system sales, I think, something like EUR 850 million. But you can do the math yourself and verify whether I -- whether my memory serves me well here, but it's clearly going down from 24 to 25 and also at the 20% number that we indicated for this year, it will go down further. What's going on there?

Well, first of all, it's normalizing, right? Because I think the reality is we should ask ourselves a question what was going on in previous years. What was going on in previous years is that over the COVID period, we build up a huge backlog because we -- and in fact, we underserve the Chinese market during the COVID days. As a result of that, a huge backlog has been built, and we have been executing on that backlog in the past couple of years.

So at a certain point in time, we expect -- we already expected China to normalize. Frankly, the very strong China sales still in 2025 surprised us a bit. But given all the dynamics that we're looking at right now, we think 20% is probably the right number, which, by the way, still gives you at the midpoint close to EUR 7.5 billion of sales. So it's not in any way falling off a cliff, right? But it is reduced in comparison to what it was last year. So it's more normalization than that anything very spectacular is going on there.

So a lot of interest in the room. So let's go back to the room. Dan?

Dan from [indiscernible]. I have 2 questions. The first one is you mentioned that the EUV business will grow quite rapidly this year. I was wondering what share of that will be High NA. I think you mentioned this is really a preparation year for the coming years for insertion. Just wondering how many machines do you plan to ship this year? And the second one is, do you have a progress update on Hypernet the year you'll make a firm decision on it? And maybe on platform as well.

I'll take the first one, you take the second one. So on the -- the other way around. So the vast share of the growth will clearly be in low NA, right? So because it all goes into high-volume manufacturing because there is such a big need for customers to grow there.

So that's where the lion's share goes High-NA will just continue to go along the lines of what Christophe has described earlier on, which is the 3 phases, and we're not yet in the high-volume manufacturing phase though as we did point out, the fact that one customer has accepted, signed off on the 5200B, our first high-volume manufacturing tool, of course, is an important step in that direction. But the lion's share of the growth this year will be low NA.

Yes. On the Hyper NA before I go there, I need to take a bit of a step back. So we talk about low NA, we talk about High NA I think we talked about Hyper NA because we see that in the future, there may be a need for even a more advanced litho system. And we could end up in a war, I'm talking 10 years from now where the customer use basically each one of those 3 systems.

Now this being said, when you look 10 years ahead, it's very difficult to know exactly when this will happen. And in order to not have to answer that question today, what we did is develop a program, which we call high productivity platform. So Roger mentioned it as one of the key program in EUV, and that program basically consists in defining an EUV platform that will come to the market early next decade, and that will be able to support Low NA, this major productivity improvement. We look at more than 400 wafer per hour.

High NA, also with major improvement and potentially Hyper NA. So we're designing a platform basically that we'll be able to receive ultimately Low NA optic, High NA optic, hyper NA optic. This give us basically the full flexibility over time to decide exactly when and how we should introduce hyper NA. So the team has done a lot of work.

So if you talk to our engineers, they tell you we could do it more, but there's no need for it tomorrow. So what we will do is, again, just continue to prepare for it. If you follow a technical conference, there will be a presentation on that a SPA in a few weeks from now, so you get a bit more. But the key is to is to be prepared basically to serve the whole market with EUV and the high productivity platform program we have put in place and we're executing on allow us to do that exactly.

I have a question from online, and then I'll ask to you, Toby. Maybe can do this quickly, but I think it's a question that a lot of people ask themselves. This is from [indiscernible] Novel in France, you're going to cut 1,700 jobs, but you say you want more engineers. Are you planning to hire in 2026 and beyond? And if so, do you have a figure? Will this offset the 1,700 job cuts? Or will ASML's workforce ultimately decrease?

Yes. So I think 2 steps. So first, as I explained, we free practically about 3,000 people out of the action we take on the leadership in the technology team. And out of those 3,000 people, we already create 1,400 position. So that's the first thing.

The second thing I've said is that a lot of that is done to enable, I would say, the full potential of engineers. So our engineers tell us today, well, maybe we spend 20%, 30% of our time not doing engineering, but doing meetings, talking to many different managers, et cetera, et cetera.

Well, if we take that away from them, we give them also more bandwidth for development. So we also expect basically that our engineering workforce will be able to create more moving forward for the same amount of people. So it means that as we go through this transformation, we get 1,400 more people, and we get a lot more of everyone else in the organization. How this will really play out.

We don't know, but we believe that this could fuel quite a few of our programs basically moving forward. So we will continue to hire people based on our need, and we do that today on operation. We'll do that if we need to on D&E because we can afford it or so, let's be honest. But we also expect that at least the next couple of years, the gain we could make by enabling our engineers to the full extent, will create a lot more bandwidth for us to develop.

This is Toby from Reuters, Toby Sterling. Ballpark question. The only thing that did better than ASML's price in the past year is gold and silver. So I'm wondering if you guys can maybe say maybe not so much ASML, but how is this going to affect your industry? The rise in price for gold and precious metals?

Gold and Silver, I would say, our industry over whole I think it's very small. I think it's very, very small. I think from all the things we worry about -- I tell you something, we worry a lot more about energy cost than gold or silver, because energy is, as we've discussed in the past, most probably, we love AI, we love the opportunity. I think Elon Musk say that also last week in Denver, but energy is most probably the one thing to watch to make sure that this industry keeps going. And now the good news for us is one way to reduce energy consumption is to move to more advanced chips because they reduce basically power consumption. .

So that's also an opportunity. But I think if there's one thing this industry has to worry about as a whole is energy, cost and I would even say availability. Gold, silver, I say okay.

Paul here from [indiscernible]. Do you expect to max out on capacity this year? And if so, what will be the bottleneck?

The question is not necessarily just for us whether we're going to be maxed out. I mean, it will be a very busy year. That's for sure. But I think in everyone trying to drive up capability, we also need to look at our customers. So I think everyone will be scrambling to get more capacity. .

It starts with our customers because we can ship tools, but our customers also need to be in a position to receive them, and therefore, they need the fabs to be done. So I think that's what's going on. We will work extremely hard to get as much out as we can and as our customers are asking for it. But I think important factor will be when will our customers have their fabs ready to really receive those tools.

We have 4 minutes left. So let's go back to the room again.

San Hilson of Dutch Publicans. About the reorganization, I was wondering if you could share some insight on how did you end up in the situation in the first place, why did you create so many leadership roles in the past months or years? And can you give us a time frame on when the reorganization will be executed?

Yes. It's always a good question. And if you look at the growth of the company, I think at any point of time, you try to make the best decision for the company. And I think this has been down. But as any large company, you tend to have a side job over time with the belief that they really help, and I think to some extent, they do at the beginning because you strengthen certain axis, right?

You strengthen, I don't know, quality, you strengthen maybe the execution of part of the company. But there is a point of time where you add -- if you had too many of different axes, then people get confused. And we started to get that signal, I would say, already for 2, 3 years. We spent quite some time because the next question could be, how do you know now that the next things would be better than the previous one, which is another very good question.

We didn't want to rush in that, and we spend more than 12 months designing not in the board of management, but designing with the people that are working day after day in technology, but also in the sector because of the connection I talked about. So we spent more than 12 months working with those people to try to drive an organization that they believe will fit better what they need.

And I think we need to make sure over time that we keep on scanning the organization so that if we made maybe some non-optimized move in the past, we can correct it. So I think it's very normal in the company. What is not right is not to correct things if you feel they're not helping you anymore.

I think if you look in any rapidly growing organization, where do organizations grow? They grow because the number of competencies grow or products become far more complex. As a result of that, also the competencies that are necessary to get it done become more complex. 15 years ago, software, for instance, was not as important as it is today, just to call out one. So you see an expansion of capability and you need to see an expansion of a road map, many, many more products on the road map than we ever had before.

The answer to something like that, that any rapidly growing organization does is a matrix organization where the competencies and the products meet each other. So that's your answer. And that gives you scalability for a while. But there is a point in time where a matrix organization, any matrix organization becomes so complex that you got to act. And I think that's the journey that we've been on. That's the thing that we've now concluded and hence the action that Christophe calls out. And I think the worst thing you can do is not recognize the issue and just continue to go on as you did before.

In terms of timing, because that was your other question. I mean that completely depends on the negotiations that are currently going on with the unions, with the workers' council, et cetera, but this will definitely be a number of months. From our vantage point, as soon as possible because we want to be able to provide clarity to everyone in the organization and get rid of the uncertainty at the personal level. So that's why we would like to push as soon as we can in the interest of the people that are affected.

Okay. Our time is up. Thank you very much for coming. Thank you, everyone, online for watching. You can still send us your question. The media team is available for you. And for those in the room, nice you're here. There's coffee and we have some chats with some of you, and we look forward to seeing you next year. Thank you very much.

Thank you.

Thank you.

Hello and welcome to ASML's Q4 2025 and full year 2025 results video.

Roger, if I can start with you and ask you to give us a summary of both Q4 2025 and the full year's results.

So Q4, net revenue came in at EUR 9.7 billion. That included the recognition of revenue for 2 High NA systems. For the full year, revenue came in at EUR 32.7 billion, which was a 16% increase compared to 2024.

Installed Base business came in for the quarter at EUR 2.1 billion. If you take the full year EUR 8.2 billion, quite strong. Quite strong first on the basis of the service revenue for EUV. Obviously, with the expansion of the installed base for EUV, you see the service revenue increasing there. But also there was quite some appetite for upgrade business. So that led to quite a strong revenue for the Installed Base business.

Gross margin for the quarter 52.2%. If you take it for the full year, that was 52.8%.

Net income, again for the quarter EUR 2.8 billion. For the full year EUR 9.6 billion.

In terms of net bookings, net bookings came in at EUR 13.2 billion, included in there EUR 7.4 billion for EUV. If you look at the backlog that we had at the end of last year, the end of 2025, EUR 38.8 billion total backlog, of which EUR 25.5 billion for EUV.

And then can you give us some color on what you saw in terms of the business in Q4 specifically?

Clearly, it was a strong quarter, right? A strong quarter. It was a record quarter in terms of revenue. It was a record quarter in terms of order intake. It was a record quarter in terms of free cash flow generation. So from that vantage point, clearly a very strong quarter.

If you listen to our customers, both what they say publicly, but also what they told us, it's pretty clear that customers over the past couple of months have actually become more positive in their assessment of the medium-term market perspectives as they see it. I think it's primarily on the basis of the more robust view that they have when it comes to demand for AI, which seems to be more sustainable from their vantage point.

And that recognition has led some of our customers to really invest in capacity and gear up their plans for medium-term capacity expansion. So that's been clearly the case. And that perspective has obviously also led to a strong order intake for us.

And finally, I would say important for Q4 is also that we were actually able to demonstrate our ability to gear up our output, which again is going to be important also in light of the expectations that we have for '26.

Then moving to 2026, how are you guiding both Q1 and the full year?

So Q1, we're looking at -- we expect net revenue to be somewhere between EUR 8.2 billion and EUR 8.9 billion. That's the expectation for the quarter in terms of revenue. We expect a gross margin between 51% and 53%. When it comes to the Installed Base revenue, we expect around EUR 2.4 billion in Q1.

For the total year, we're looking at total net revenue expected between EUR 34 billion and EUR 39 billion with a gross margin between 51% and 53%.

Christophe, in terms of the market outlook that supports Roger's commentary there, can you give us a little bit of color on how you're seeing things?

Well, I think that Roger already mentioned very clearly that the market outlook has notably improved in the last few months. And this is especially true when it comes to the build-up of the capacity for AI application, being data centers or other infrastructure.

Now we start to see that this build-up is also translating into need for capacity at our advanced customers. So this is true for Logic. This is true for DRAM. And this starts to translate also into orders for our most advanced technology, especially EUV. So in the last few months we have seen our DRAM customers, our Logic customers, starting to accelerate their planning-capacity and having this discussions with us.

If I look at Logic first, so there we see our customers starting to be more comfortable about the sustainability of the long-term AI demand. And this means that they are more willing to accelerate their capacity planning.

They are transitioning also from 4-nanometer technology to 3-nanometer technology, which is going to be more demanding in terms of advanced technology. And finally, of course, the ramp of 2-nanometer is going on, and I would say is accelerating in order to fulfill the future need of mobile and HPC application.

When I look at DRAM, there also the demand is very strong for HBM, of course, but also for DDR. And this most probably will lead to a very tight supply at least in 2026 and most probably beyond that. So we see our customer ramping 1b, 1c node, which are going to be critical for that demand. And on those nodes, we see them increasing basically the amount of EUV layers. We have talked about that in the past. I think we see that happening very strongly right now.

So altogether, we see a very positive dynamic. I think a strong belief that the AI demand is real and a preparation for that, with on the short term a major addition of capacity. This will start in 2026 and will last beyond that.

Turning back to you, Roger, how do you see that then translating into ASML's business?

If we start with the EUV business, against the backdrop of the demand and the developments that Christophe was describing, we expect the EUV business to increase significantly. So EUV revenue to significantly go up in comparison to 2025.

When it comes to the non-EUV system business, in total we expect that to be kind of flattish in comparison to 2025, but with different moving parts in there.

If you look at advanced Logic, if you look at Memory, we actually expect the demand also on the non-EUV business to go up there.

On the China business, we expect the China business for us to come in at approximately the percentage that China also has in our backlog, which is around 20% of the backlog and therefore 20% of our revenue is what we expect the China business to come in at.

And then I would say very clearly also in the non-EUV business, it's pretty clear that the metrology and inspection business is quite strong. There is a lot of demand for process control, so therefore we expect that business to go up as well. So those are the different moving parts, but all in all, we expect the non-EUV business to be sort of flattish, the non-EUV business.

And then the Installed Base business, I already told you that we expect the Installed Base business in 2025 was quite strong. And we actually expect the same dynamics to also go into 2026. We actually expect that business to go up as well. So growth in Installed Base on the back of again the growth of the Installed Base business for EUV and also in the current climate, significant appetite we think for upgrades and for upgrade business. Because frankly, that's the easiest and fastest way for customers to get additional output capacity.

Then Christophe, if I can ask you to give us an update on how you're seeing the technology roadmap development for ASML?

Well, first I'd like to say that the appetite for technology from our customers for those advanced nodes is very, very high. And that's true for almost all the products of ASML.

If I start with Low NA, 2025 has been a critical but also a good year to ramp our NXE: 3800E. This tool is now extremely important for our customers. They're going to rely on it for the next advanced DRAM and Logic nodes. And we have been able to mature the product. Reach the final throughput of 220 wafers per hour but even demonstrate at some customers that we could go on this tool up to 230 wafers per hour.

And Roger said it, upgrades. When you need capacity, upgrades become very important. So this would be good for the 3800. But we're also providing on EUV. More upgrades for the installed base so that we help our customers with capacity on the very short term.

We also expect Low NA EUV to continue to see more utilization moving forward. We talked a lot about litho-intensity. When we look at, for example, the transition from 6F squared to 4F squared on DRAM, we also expect both immersion and Low NA to be used even more. So there we also expect good dynamic on litho-intensity.

Looking at High NA, customers continue to make good progress on the qualification. I talked about the 3 phases in the past. A lot of customers are finalizing their R&D phases with the 5000.

Intel has reported that they have accepted their first 5200, which means, basically, they have the first tool that will be used in high volume manufacturing. And other customers are going to also get that tool in their hands very, very quickly. So the qualification of the tool is going well. Imaging, performance, overlay performance, everything is looking good for our customers right now.

Inspection, metrology, Roger touched on that, almost 30% growth this year, which is significant. It means that both the need for those products is high, but also the products we're offering are basically meeting our customers' needs, both on optical, overlay metrology, but also E-beam inspection.

And on E-beam inspection, multi-beam is becoming more and more critical. 2025 was also a good year for this product, allowing us to mature the technology, demonstrate initial value with our customers. And we expect also that product, I would say, to have more traction in 2026.

So overall, huge appetite for technology. A lot of projects at ASML. Some of the key products should become production worthy in the coming months.

And back to you, Roger, would you be able to give us an update on dividend and buybacks, what we're doing on that front?

Yes. So this quarter we'll pay an interim dividend of EUR 1.60 per ordinary share. We're going to actually propose to the AGM to have a final payment as it pertains to last year of EUR 2.70 per ordinary share. If you combine that with the interim dividends, that would have been made at that point in time, then the total dividend as it relates to 2025 would be at EUR 7.50 per ordinary share, which would actually be a 17% increase over the dividend over 2024.

In terms of share buyback, the previous program ran until December. We didn't complete that, so we bought back shares for an amount of EUR 7.6 billion. The maximum amount was EUR 12 billion.

We're announcing -- actually, we announced today a new program for, again, a 3-year period. So it ends December 2028 and for an amount of up to EUR 12 billion.

Christophe, to finish, could you give us a reminder on how you're seeing the longer-term demand and what that means for ASML?

Well, I think one of the key points we made at our Capital Markets Day, November 2024, was that AI applications will require more advanced technology in DRAM and Logic and will drive basically some of our most advanced products. And I think that this is being confirmed as we speak. The last few months have pointed basically exactly to that dynamic.

We also see that the progress we continue to make on our cost of technology with EUV is driving for more litho-intensity. And that's, again, something that has been confirmed in the last few months. So if we look to the long term, in line to what we said in November 2024, for 2030, we expect a revenue between EUR 44 billion and EUR 60 billion and a gross margin between 56% and 60%.

Very clear. Thank you both very much.

You're welcome.

Good day, and thank you for standing by. Welcome to the ASML 2025 Third Quarter Financial Results Conference Call on October 15, 2025. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference call over to Mr. Jim Kavanagh.

Please go ahead.

Thank you, operator. Welcome, everyone. This is Jim Kavanagh, Head of Investor Relations at ASML. Joining me today at the call are ASML's CEO, Christophe Fouquet; and CFO, Roger Dassen.

The subject of today's call is ASML's 2025 third quarter results. The length of this call will be 60 minutes, and questions will be taken in the order that they were 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 statement 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 for a brief introduction.

Thank you, Jim. Welcome, everyone, and thank you for joining us for our third quarter 2025 results conference call. Let me start by saying how pleased I am with the recent announcement of the reappointment of both Roger Dassen and Frederic Schneider-Maunoury to the Board of Management. We also announced last week the appointment of Marco Pieters as our Chief Technology Officer. This appointment is part of our robust succession planning process. And with over 25 years of experience at ASML, Marco brings a proven track record in technology leadership.

Marco will take on the responsibility of driving our technology road map forward in support of our customers, and I look forward to our continued collaboration. In addition, ASML Supervisory Board announced that it intends to appoint Marco to the Board of Management as of the company's next Annual General Meeting to be held on April 22, 2026. Before we begin the Q&A session, Roger and I would like to provide an overview and some commentary on the third quarter results as well as provide some additional comments on the current business environment and on our future business outlook.

Roger?

Thank you, Christophe, and welcome, everyone. Let me start with our third quarter accomplishments. In the third quarter of 2025, total net sales were EUR 7.5 billion, which is within our guidance. Net system sales were at EUR 5.6 billion, which includes EUR 2.1 billion from EUV system sales, including High-NA system and EUR 3.4 billion from non-EUV system sales. Net system sales were driven by logic at 65%, with the remaining 35% coming from memory. Installed Base Management sales for the quarter came in as guided at EUR 2 billion. Gross margin for the quarter was also within guidance at 51.6%. For operating expenses, R&D expenses came in a bit below guidance at EUR 1.1 billion due to timing of spending and SG&A expenses basically came in as guided at EUR 303 million.

The effective tax rate for Q3 was 17.8%. For the full year 2025, we continue to expect an annualized effective tax rate of around 17%. Net income in Q3 was EUR 2.1 billion, representing 28.3% of total net sales and resulting in an EPS of EUR 5.49. Turning to the balance sheet. We ended the third quarter with cash, cash equivalents and short-term investments at a level of EUR 5.1 billion. Moving to the order book, Q3 net system bookings came in at EUR 5.4 billion, split between EUR 3.6 billion of EUV systems and EUR 1.8 billion of non-EUV systems. Net system bookings in the quarter were slightly weighted towards logic at 53%, while memory accounted for the remaining 47%. In Q3, ASML paid the first interim dividend over 2025 of EUR 1.60 per ordinary share. The second quarterly interim dividend over 2025 will also be EUR 1.60 per ordinary share and will be made payable on November 6, 2025.

In Q3 2025, we purchased shares for a total amount of around EUR 148 million. As of September 28, 2025, ASML has acquired 9 million of shares under this program for a total consideration of EUR 5.9 billion. ASML does not expect to complete the EUR 12 billion share buyback program in full within the 2022, 2025 time frame. We intend to announce a new share buyback program in January 2026. With that, I would like to turn to our expectations for the fourth quarter of 2025. We expect Q4 total net sales to be between EUR 9.2 billion and EUR 9.8 billion. We expect our Q4 installed base management sales to be around EUR 2.1 billion.

As previously discussed, we expect Q4 to be a very strong quarter as was the case in Q4 of last year. Gross margin for Q4 is expected to be between 51% and 53%. The expected R&D expenses for Q4 are around EUR 1.2 billion and SG&A is expected to be around EUR 320 million. For the full year, we continue to expect total net sales to be around EUR 32.5 billion with a gross margin of around 52%. With that, I would like to turn the call back over to Christophe.

Thank you, Roger. As Roger has highlighted, we finished the third quarter with good financial results. Looking now to the market, there has been a positive news flow across the industry in recent months that has helped to reduce the level of uncertainty that we were reporting last quarter. First, there were a number of announcements around the continued investment in AI infrastructure that supports demand in both leading edge logic and advanced DRAM. Second, the positive momentum around AI seems to extend to more customers in both logic and DRAM. Third, we see continued momentum around customers adopting more EUV layers in both logic and DRAM, migrating multi-patterning deep UV to single exposure EUV and continuing to support litho intensity. On the other hand, we expect to see China customer demand and therefore, our China total net sales in 2026 to decline significantly compared to our very strong business there in 2024 and 2025.

We believe that the impact of these dynamics will only partially affect 2026; however, overall, we do not expect 2026 total net sales to be below 2025. In this environment, we also expect the 2026 EUV business to be up driven by the dynamic in advanced DRAM and leading-edge logic and the deep UV business to be down compared to 2025, driven by the dynamics with our Chinese customer. We will provide more details on our 2026 outlook in January. Turning to technology. There has been a lot of good progress this quarter with latest achievement on EUV presented at industry conferences, the release of new 3D packaging lithography system and the announcement of our strategic engagement with Mistral AI. For EUV, we presented a number of papers at recent SPIE and SEMICON events that highlighted the progress we have made in helping drive down cost of technology on our customers' most advanced processes.

With regards to the maturity of High-NA, we shared data showing that we have now run cumulatively over 300,000 wafers on the system at our customer. Also, our customers have shared very positive data showing that the maturation level of the platform is well ahead of where low-NA EUV was at the same stage in its introduction. Further, SK hynix announced this quarter that they started to take delivery of their first High-NA system, the EXE:5200, positioning High-NA as a critical enabler for future advanced DRAM devices. We are also happy to report that this quarter, we shipped ASML's first 3D integration product, the XT:260. The XT:260 is an i-line scanner designed for applications that include advanced packaging and offer up to 4x the productivity compared to existing solutions.

3D integration is of increasing importance to the road maps of our customers and the semiconductor industry. And our customers have been sharing with us a need to innovate in order to meet their future requirements. The discussion with our customers on those requirements point to a good opportunity to transfer some of our holistic lithography technology to 3D integration to meet their future needs. The XT:260 is the first example of several opportunities we are evaluating. With the XT:260, we are able, as I said, to multiply the existing productivity by up to a factor of 4 using a unique optical design. As mentioned, we shipped our first system this quarter and expect to ship this tool to quite a few more customers in the coming quarters, reflecting the strong interest in this technology solution.

With that, I ask Roger to provide some insight into our recent engagement with Mistral AI.

Roger?

Thanks, Christophe.

In September, we announced that we closed a strategic partnership with Mistral AI, a pioneering company in generative artificial intelligence with a strong business-to-business focus and widely recognized for its leadership in large language models that assist in areas such as software coding development. ASML is normally associated with hardware, software plays an increasing role in driving the precision and speed of our tools. Our partnership with Mistral AI allows us to embed AI across our entire holistic portfolio in order to increase the performance and productivity of our systems and the yield of our customers' processes.

Also, we believe this collaboration will allow for faster innovation, resulting in improved time to market and lower development costs when delivering state-of-the-art solutions to our customers. In addition to the collaboration agreement, ASML has invested EUR 1.3 billion in Mistral AI's Series C funding round as lead investor, resulting in ASML holding around an 11% share in Mistral AI and having a seat on their strategic committee. It allows us to become even more closely connected to the AI ecosystem.

Thank you, Roger. Looking longer term, as we shared in our Capital Market Day, we start to see that the end market dynamics is leading to a product mix shift towards more advanced logic and DRAM. Those applications require a more intensive use of advanced lithography system. We expect that to continue. The combination of our strong productivity road map on low-NA and the introduction of High-NA supports further cost of technology reduction and the conversion of more multi-patterning layers to a single EUV exposure, especially on DRAM advanced nodes. 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, Roger and I will be happy to take your questions.

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

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

My first question on this -- what you said, Christophe, that you saw positive news in the last month that helped you reduce uncertainty. And I was wondering, can you elaborate on this? Because obviously, you got this EUR 5 billion orders, which is helping. But I guess just one quarter of orders doesn't give you the full flexibility on '26 completely. So do you have more visibility in terms of the full capacity they need for '26 now? They give you like more numbers around all of that or the layers. So just trying to understand what changed versus last month? Or you just rely on positive news out there and you try to extrapolate. Just trying to understand this dynamic.

Yes, Francois, I think first, I referred to a lot of positive news on AI infrastructure. And I think you know -- I think you all know that usually, this doesn't translate immediately into order for us. So this takes quite some time. But if you look at the sum of the announcement, I would say this creates a pretty positive backlog of opportunity for AI moving forward. The second one is also quite important. So I think we mentioned the fact that we see now that more customers will benefit from the AI opportunity. I think it's important for many reasons.

The first one being that in order to respond to this huge demand of this huge amount of good news on AI infrastructure, you need to make sure that the market capacity will be high enough. And I think that seeing more customers entering logic opportunity or DRAM opportunity is a pretty good news for the long term. And to know exactly how this will affect the next few years is still difficult to say. I think as I said before, only part of that will be effective next year. And for the rest, I think it's far too early to say on our side.

Makes sense. And the follow-up is on China. I mean that has been a key driver of growth in the last few years, and you mentioned it will go down significantly. So it's again a bit on the visibility side here. I guess you see the strong H2. I would imagine 3 to 6 months lead times because it's deep UV. So I would expect you not to see much beyond Q1 '26. So is it some conservatism because you see the strong base and maybe a soft Q1 '26? Or you really -- do you have the full picture already on '26, how it's looking?

Well, I think that we have about the same clarity that we had last year about this time. And I think around that same time, we still try to provide you a bit of our view of the market. I think on China, we have been very consistent that we thought that the level of business in the last 2, 3 years was very high and in no way normal. So I think we have been experiencing a very high cycle in China, especially through the last couple of years. And again, our expectation and the visibility we have right now is that next year, we go back to more reasonable business.

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

I had 2 of them, Roger, you kind of mentioned about the recent AI investment strength. Some of it will come in 2026. I'm kind of curious, given your long lead times, how to think about linearity of your revenues or orders in 2026? And any early thoughts on what it implies for 2027?

Yes. Krish, interesting question. I think we're -- we said -- what we said on '26, I think it's way too early to make any comments on '27. I think you will see that orders came in strongly in the last quarter. Actually, the quarter before that also came in strongly. So I think linearity of orders is an anomaly. I think we said orders always come in lumpy. I think we've had a healthy run in the past 2 quarters, but I don't think you can talk about linearity. So way too early to talk about what this means for '27.

I think going back to Christophe's earlier answer, I think the news flow that you got in the past couple of months, I think, is a positive news flow and is a positive news flow, particularly in the medium term. But to now translate that into concrete expectations for '27 is really quite a bit too early.

Fair enough. Fair enough. And then a follow-up for Christophe. Clearly, you're seeing strength in DRAM. I'm kind of looking longer term, there is a view that when you go into 4 F-squared from 6 F-squared for DRAM architecture, that's actually negative for EUV, the EUV layer count comes down. Can you just help us understand that, Christophe?

Yes, it's a good question. It's a question we get a lot. The short answer is no. If we look at the number of EUV layer going from 6 F-squared to 4 F-squared, we do not expect the number of layers to drop. In fact, as 4 F-squared road map continues after the transition, we, in fact, expect the number of EUV layers to continue to grow. And I make that statement after many discussions with our customer. On top of that, what I'd like to add is 4 F-Squared has a bit of a more complex structure. So it's, in fact, adding overall more litho mask, more advanced litho mask. So there is a benefit also to some extent, to advanced deep UV. So in any case, you still doubt about it. 4 F-squared is in no way a bad news for ASML. We are looking forward to it.

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

I was wondering if you could talk a little bit more about just the updated commentary for '26. Is that more your more positive view, a bit more DRAM slanted or equally balanced with logic? And then same for more customers benefiting from AI infrastructure build-out. Is that more of a DRAM comment?

Sorry. Joe, I think it's related to both markets actually. So last quarter, we talked about uncertainties. I think the uncertainties and Christophe went into the positive flow that has happened thereafter. One element of the uncertainties that we called out at that point in time was also the uncertainty around tariffs that was out there. I think there is more clarity on that front right now. But that uncertainty also prevented customers from being very concrete as to what exactly they were going to do and where they were going to build their capacity. I think that has decreased, and I think that has given rise to the commentary that we now make on '26. But I would say, in general, when we talk about the positive news flow on the leading edge, leading to our expectation that EUV is going up next year, that is related both to DRAM and to advanced logic.

And as a follow-up, I was wondering if you could maybe just walk through some of the puts and takes on your gross margin guide. I think what you're guiding for, for the December quarter is a bit better than what you're implying a quarter ago. Is that -- is that something related to tariffs or mix or something else?

So it's -- well, obviously, volume is quite high, right? So that is a positive moving from Q3 to Q4. Mix has many elements to it. It's -- of course, we -- well, we expect 2 EXEs in this quarter in Q4. So that is a negative. But on the other hand, we will also have good Low-NA in there. We're a bit positive on upgrade business, as you could see, right, because that business is a little bit up. And if you then take it all in all, we see a slight improvement at the midpoint in comparison to what we had in last quarter. So those are the dynamics. I would say fairly small movements, but all in all, leading at the midpoint to a slightly better gross margin than maybe we thought we were going to be...

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

My first question is about things that you talked about a little bit before. I just wanted to press you a little bit more. So we've all seen the press release of SK Hynix and Samsung following the visit of Sam Altman to Korea talking about a letter of intent of 900,000 wafer starts per month of HBM capacity, which is probably more than double the current HBM capacity.

So my question is this, my estimate would be that there are about 30 EUV tools in DRAM today, not all of them for HBM, but the majority presumably, that would imply if we believe those numbers and many people think those numbers are absolutely good task, but let's do it for the sake of the argument, you would need something like 65 EUV tools just for HBM and then comes on top whatever Samsung Foundry, Intel and TSMC would need. So I guess the question is, a, what do you think of those numbers? And then b, do you have enough capacity for EUV low-NA, let's say, by 2030 to get to satisfy that potential demand?

Well, I think we won't get into the calculation because I think we said it already a couple of times. I think we are a bit careful with how the big announcement can translate into real capacity need on the ground. I think the one thing I'd still like to stress one more time is we see the broadening of the customer base, I think, a very important news in that matter because whatever you do is the first set of news, I think we can all agree that we need to make sure that the market will not be supply limited. And this has always been a risk with a limited amount of customers supplying AI chips, both in logic and DRAM.

So I think the broadening of the installed base is a very good news there. And on the last question, we have said for a few quarters that we have been preparing for growth. So we were following those dynamic. And I think we know now that EUV most probably will be stronger next year. So we've been preparing for that. We have, as you know, also worked on longer-term capacity. So we continue to track basically the market carefully, having in mind that we want to be able to follow the demand. So I would say we don't have any concern there at this point of time.

Okay. Great. My follow-up for Roger, perhaps. Just wanted to understand what I'm missing. So if we look -- if we assume like, let's say, you booked EUR 5 billion of orders in Q4, give or take, that would imply you exit calendar year '25 with a backlog just about EUR 30 billion. Even if you strip out the High-NA tools in there expectations, call it, EUR 1.5 billion, EUR 2 billion, that makes me comfortably above, let's say, modest growth for next year. So is there a large portion of the current backlog, which has got maturity beyond '26? Is that the reason why you're still hesitant at calling '26 a, let's say, strong growth year or high single-digit growth year or even double-digit growth year?

Well, I mean, of course, that's a big question, right? The big question is what is in the backlog that pertains to beyond '26. And that is a reasonable number. So as a result of that, your math doesn't work exactly right for 2026 because there is a pretty healthy number in there for beyond '26. And we also know that there's always a question about a bit of pull in here, a bit of push out there, and that makes it extremely hard to make at this stage any concrete projections on '26. But to your point, there is already a healthy order intake in the backlog that is beyond '26. Also as it relates to High-NA, I think that the High-NA contingent in there is actually pretty strong.

Would you say how many you expect to recognize next year?

High NA? No. That's a January topic, Didier.

your next question comes from the line of Andrew Gardiner from Citi.

I might try Didier's question in a slightly different angle to see if I have any -- you've highlighted the news flow, Christophe. We can all see it. It feels like you wake up every day to another massive announcement from somewhere within the AI food chain. And you sort of -- you spent a lot of time talking about how that to create a theoretical backlog for you, not yet orders. But I'm just wondering, you are a critical supplier into this market. You have the potential to be a backlog -- to be a bottleneck rather for the market. Now of course, you don't want that to be the case. You're preparing for growth, et cetera. But do you feel like there's sufficient understanding through the chain, whether it's of where you sit or perhaps your customers? How can you as a critical supplier, make sure that the broader market isn't supply limited come 2027, 2028, given the kind of announcements that we're seeing on a near weekly basis?

Well, so first, I think we wish we had a formula to translate all the announcement on what it means exactly for us in the next few years. But I think no one has that. So I think that the experience also of 2022 has mostly taught us a lesson to be ready and to have maybe more flexibility because we know the market can swing. So we've done a lot of work on that in the last few years. We have prepared building, as we discussed before, which are usually the longer lead time item. And for the rest, when it comes to define exactly how many tool we want to produce, I think the lead time is a lot shorter. So we have more flexibility. But I would say we have structurally maybe improved ourselves so that because we cannot answer those questions after the announcement, we at least have the flexibility.

The other thing I'd like to add is, of course, well, our customers at the end of the day, tell us what they need. And I think that's a constant dialogue, dialogue we try to always reflect with you on a quarterly basis. And I think we continue to do that. So we are prepared. I think we stressed a few times, we were preparing for growth, and this was also in light of some of this activity we have seen. And come January, we will be most probably knowing even more about what's happened then, and then we'll continue to monitor the market. But I think we are, I would say, a lot more prepared than we were a few years ago.

And I think Christophe said it exactly right. We are very well prepared, particularly by having invested in the long lead time items. That still, by the way, means that when it comes to shorter lead time items, of course, that you need to have a dialogue with your customer that gives you a timely heads up, right? So because, of course, we need to kick our supply chain into gear. We need to hire the people, et cetera, et cetera. So we have a lot more flexibility than we used to have, but it is also critical for our customers to give us a timely heads up such that we can make sure that within the long-term infrastructure that we have, we're also able to get to higher output levels and get supply chain and people in place.

Okay. And I suppose without naming names, I mean, do you feel like your customers are giving you that heads up, right? Is there a sufficient acknowledgment through the chain?

I think they do their very best. I will say it this way because they have the same challenge as we do. So I think they do their very best. And I think we're very happy with the transparency and the honesty around those discussions because over time, that's very helpful, also helpful in trying to really avoid the bigger surprise. So I feel that this discussion really has improved in the last few years. And I think this is very helpful for them, for us, but also for their customer.

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

So first one is the High-NA kind of order pattern and demand ramp-up curve. So as per my understanding, there hasn't been High-NA order for about 2-ish, 2-plus quarters now. So I understand that you're working on your backlog. But does that mean if order only coming in from end of next year that you may actually have a, let's say, somewhere like 2027 or 2028, a few quarters of -- or a year of 0 High-NA revenue. So the ramp-up curve of revenue of High-NA is going to be quite lumpy. Is that correct?

Well, I think you -- first, you summarized, Tammy, the situation pretty well. So we are indeed working on High-NA out of the pretty healthy backlog we have. I think explained in the past that this backlog allow our customer to be covered for, of course, R&D. We're pretty much done with most of those shipments, but also with the system they want to use for qualification and insertion. And for the rest, the next wave of order, we expect to happen basically when the data coming out of the qualification can confirm basically that the maturity of the tool is there. I think when it comes to performance, most probably we have passed that milestone. And yes, I think as we discussed last quarter, we expect that to happen most probably towards the second half of next year and after that.

Now this being said, we do more than just waiting for order with our customers. So it's not like nothing is going to happen also in the next 18 months in terms of assessing the progress and therefore, also assessing the likelihood of the type of insertion we're going to look at. So as we did, we just talked about the way we were preparing for growth on EUV in the last few months, and we did that without having necessarily the full clarity of the demand, we will be able to do that through the discussion with our customer. But in terms of orders, so you look, yes, towards end of next year. And in terms of shipment, you look at '28 and beyond.

Okay. That's very clear. And second question is on China. So you mentioned that China revenue would be down significantly year-on-year in 2026. And also that's because of demand. I'm wondering that's because the customers are not sure about the demand, so they wouldn't want to commit. Therefore, you're being conservative or the customer told you for some reason, their end market demand has been weak. So therefore, they are buying less. We don't actually currently seeing Chinese market further weaken from where we are today. So I wonder what's the reason for that comment to be weaker significantly year-on-year?

Tammy, I think the comment that Christophe made, and I think he also said it goes back to also the comment that we made a year ago, right? So for quite a while, we have been eating into our backlog. That's really what happened. So for quite a while, the China sales were very high because we've been eating into a substantial backlog because of underserving the Chinese market. So that was the reason why, in fact, a year ago, we said we expect the China sales to be more commensurate with the China percentage in the backlog, which at that stage was around 20% of the backlog. So that's what we said.

So actually, as Christophe said, we were actually quite surprised that the China sales this year are as strong as they are. But that -- but still the underlying assumption and our underlying perspective on the Chinese market is still the way it was a year ago. And that has to do with the fact that the Chinese market is a very specific one, right?

It's focused on mainstream logic, as we call it. And simply given the dynamics, of that market. It is our assessment that the sales level that we currently see this year is very high in comparison to what we would think is a normalized level for that -- for the mainstream market. So that's the reason why we've indicated this assumption of a significant decline. So that's based on our understanding of the market. It's based on the dialogues that we have with our customers. Could that change? Absolutely. I think we've seen that this year. That could change in comparison to our perspective. But if you ask us for an honest assessment at this stage, how we think it's going to be in '26, it is as we communicated.

Your next question comes from the line of Stephane Houri from ODDO BHF.

Actually, I've got 2 questions. The first one is on the advanced packaging product that you're highlighting in your presentation, the XT:260. Can you maybe say a little bit more about what it's doing, the price of the machine, type of clients, who you're competing with and the market outlook, if you have a few information. And I have another one.

Yes. So let me give you a bit of context. So I think we mentioned that product in our press release also in the call, not necessarily because of the high price, high value of the product, but because this is the first product ASML is providing to its customer to support 3D integration. And I think that's mostly where the important news is. I think we all know that when it comes to Moore's Law, our customers are asking us to drive transistor density, still doubling it basically a factor of 2 every 2 years. I think that we also know that over time, litho scaling has slowed down, and that creates a need basically for more either stacking or packaging of transistor. And our customers are really asking us to help there because what they want is also speed is also over time accuracy. And I will say some of the technology we have been developing for our litho portfolio.

So this is a bit the starting point. I think we also mentioned mostly we'll be looking at some more product there. I think what's very interesting is the interest we see from our customer on this product. It's a i-line scanner to answer your technology. So this is based basically on i-line technology, which, of course, we have had at ASML for many years. But in this case, we have a new optical design that really enable us to provide a 4x improvement on productivity. Competitors are basically the people who do i-line scanner. So I think you know them. But what's very interesting is that if we look at next year, we have quite a few customers very eager to take this technology. And because we provide a nice technology, some good improvement, I will say that the business and the benefit we can get out of this product is quite a lot higher than what we have done historically on i-line.

Okay. And the follow-up would be about the gross margin in 2026. I know you're not giving guidance and you will say more in January. But given what you have described, i.e., less China, more EUV, but also at the same time, more EUV High-NA, can we expect some increase in the gross margin next year?

Yes, Stephane, indeed, I will give -- we will give more clarity on that, obviously, in January. But I think you're right, that product mix, obviously, is very in what drives it. And then as you know, what we ship to China today to a very large extent is immersion. Immersion comes with a very good gross margin. So less China business would be dilutive on that front. But you're right, EUV comes in with very strong gross margin. So therefore, if we predict that EUV, particularly low-NA goes up, that would be a positive again on the other hand. And then there is the question on the number of tools that we're going to recognize for High-NA, which, of course, is still dilutive to the corporate gross margin.

So I think that's an important one. And the other one is our expectation on the installed base business. You know that particularly the upgrade business is pretty important when it comes to gross margin. So it's all those moving parts, exactly where they land will eventually determine what the expectation is. But those are indeed the moving parts. It's product mix and it's the expectation on the composition of the installed base business, which, first and foremost, is going to drive that perspective.

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

I guess the first question is on installed base. And if you could update us on your thinking as we go into calendar '26. Previously, you had talked about having to back out some of the upgrade revenue as you go into '26. What's the current thinking on an installed base as we go into next year?

Yes. I think -- well, let's first look at the installed base for this year, right? So I think you will see that our expectation for the installed base this year has actually gone up a bit if you look at what we guide for Q4 because originally, we thought that the first half was going to be quite a bit stronger than the second half. And now that second half is as strong as the first half. What you see there is that actually the service business is developing quite nicely.

And so while we might have had a bit more upgrade business in the first half, the second half is really benefiting from the service business. As you know, the service business is very much tied to the development of the installed base in EUV, right? And with the increase in the installed base in EUV, of course, that also drives -- further drives up the service business. So that's an important one that I think you can sort of back of the envelope calculate what the impact of that is going to be for next year. And then the question indeed is how sustainable is the upgrade business. So clearly, did it fall off a cliff in the second half of this year. And we'll give you an update in January what our expectation is for '26.

That's helpful. Just as a follow-up and maybe summarizing some of the earlier comments about some of the more optimism -- the optimism you had with regard to some of the AI developments. I mean, is it safe to say that the bookings -- total bookings haven't really increased here. Is this more a function of your customers are telling you based on some of these developments, there's sort of an expectation for stronger bookings in coming quarters because of the capacity needed to provide that as compared to what's in the backlog right now. I guess this is an indicator of potentially stronger bookings if this comes to fruition.

Yes. And I think, Chris, that is indeed the way to look at it. You know our view on bookings, right? The bookings, we always say is not necessarily a good proxy of the business momentum. I think the bookings that we had in this quarter are actually pretty decent as they were pretty decent in the previous quarter without being down wide spectacular, but pretty decent for sure. But indeed, I think most of the things -- most of the positive developments that Christophe talked about and Christophe actually said it, they only partially affect '26. So most of this, so the AI investments, the fact that multiple customers of us are benefiting from AI, whilst in the past, we always said it's only a limited number of customers that are benefiting from AI.

The technology progress that Christophe referred to, the fact that we see more and more Layer transitioning to EUV. So all that is good stuff. But all of that, I would say, is good stuff, not just -- not necessarily being cashed in for '26, but primarily beyond that. So I think that's the way to look at it. All good stuff, definitely some of those having a partial impact on '26, but the great optimism is also, I would say, for what it does to the business in the longer term.

Your next question comes from the line of Timm Schulze-Melander from Rothschild & Co Redburn.

Maybe to begin with for Christophe on the High-NA technology maturity. Could you maybe just talk a little bit about on what measures High-NA is kind of ahead of 0.33 at a similar point in time? And then just thinking out to sort of 2028 and that journey, are you kind of halfway there, 3/4 of the way there? And then I had a quick follow-up for Roger.

Well, I think it's a good question. So typically, when we look at the maturity of the system, I think there's 2 elements to it. The first one is when do we demonstrate the final specification of the tool at our customer. And when we look at the EXE:5200, we expect that to happen in the next few months, most probably this year. So that means that we validate the overall capability of the system. That's point number one. And point number two is the availability of the tool, how much -- what percentage of the time the tool can be used to run wafer. And I think there, a major difference between low-NA and High-NA is that when we looked at Low-NA maturity back at the time we were ramping the product, the availability was really dragged down for many years by the source performance. The source was by far the biggest detractor of our maturity on the Low-NA tool.

Now I think you're fully aware that the source of High-NA is exactly the same as the one on Low-NA. And if we look at the availability number of the source itself, we are exactly matching the performance of Low-NA. So what is basically separating us from today to find a maturity is just the platform itself. And there, our experience is that most probably in 12 months, 18 months from now, we will be in a very good shape. So there's no showstopper in the way we look at it today when it comes to maturity of the tool. There is a few more months. We have to work with our customer to validate that. But when I look at the technology, when I look at the reason why we were struggling with Low-NA, those reasons are not with us with High-NA. And that's why I think our customers are also eager to report that maturity. That's also what they see, and that's also their logic there.

Great. Very, very helpful. Maybe, Roger, just in terms of profitability, High-NA that you recognize revenue on, could you just maybe talk about -- I know gross margin is dilutive, but are we positive? What's the sort of runway there? And then maybe just thinking about the operating expenses, given the maturity of the High-NA platform, what's the outlook for the sort of cadence of R&D expense, the R&D burden for the business going forward?

Yes. So yes, indeed, High-NA is dilutive. The key thing that will make it less dilutive or the key thing that will drive up the gross margin is volume, right? Because you have a significant capability, both in the factory and also in the field for High-NA. But that total cost base is only absorbed by a very limited number of tools. So it's volume that is ultimately going to drive up the gross margin. So as Christophe was saying, you're looking at taking stuff into high-volume manufacturing in the '28, '29 time frame, right?

And that's where in all likelihood, you're going to see meaningful numbers. At that stage, you will see the gross margin profile improving. I did say at the Capital Markets Day that even by 2030, I still expect High-NA to be margin dilutive, right, because it takes quite a long time before you get on the maturity curve and before you get significant volume for this to meaningfully contribute. But at that time frame, once you get meaningful numbers, at that stage, the dilutive nature of it will be limited. In terms of...

Are we profitable?

What was that?

Sorry, but was it profitable, the gross margin level in the quarter? Or is it still loss-making, please?

You mean High-NA?

Yes.

High-NA is very low margins. It's very low margins. But you're talking very low positive margins. That's what you're looking at. In terms of operating expenses, R&D, I would say we still have a formidable road map ahead of us. So in spite of the fact that we have High-NA up and running, you hear us -- if you look at the road map, if you look at the significant breakthroughs that we think we can still push in terms of Low-NA, in terms of productivity of those tools, in terms of imaging quality there, but also the progress that we continue to make on some of the deep UV tools that we talked about.

We still have a pretty formidable road map. I would say, however, that we are looking at increasing -- further increasing the efficiency that we get out of the organization. So from that vantage point, I do believe that you will continue to see us manage our -- both our SG&A and our R&D quite nicely because we do feel that out of the formidable team that we have here at ASML in our R&D department, we can get even more value and efficiency there. So I think you will see us navigate those numbers quite diligently and keep the increases quite controlled.

Your next question comes from the line of Alex Duval from Goldman Sachs.

You talked today about lithography intensity inflecting positively. I just wondered if you could clarify the time line you're thinking about here? And to what extent this is a function of progress having been made in the gate-all-around transition versus other factors? And secondly, we've discussed on this call today about the degree of ambition around AI investment. But we've also seen news items talking about AI chip makers being more aggressive on the nodes they target for future chips. And that seems to be somewhat different to how one had thought about where they would locate themselves relative to the bleeding edge. So I wondered if you could talk about the implications for ASML of a faster cadence of these more powerful AI chips over time.

Well, so maybe on the first question, I think nothing really new there compared to the last few quarters. I think on logic, we explained a few times, the gate-all-around transition is happening without an increase on the number of EUV layers just because customers typically do first the transistor change before they start shrinking more aggressively again, which we still expect to happen at A14, A10. So I think very consistent there in the previous view. I think in DRAM, we talked about 4 F-squared already today. We have got -- since the Capital Market Day last year, we've got a lot of confirmation that indeed DRAM could get more aggressive in terms of EUV adoption for 6 F-squared for 4 F-squared as well, as I mentioned.

So there, I would say, the trajectory is very strong towards more use of advanced litho moving forward. Now the second question is a good one. And I think we also mentioned last year in November that more AI application will drive more advanced logic and more advanced DRAM. And I think most probably that part is still to be seen because we're looking at 12 months, which is a fraction of a node in terms of timing. But I think what you see happening is what you described is those applications, the value people can extract out of those applications can justify most probably moving to new nodes that are more expensive, as you have noticed looking at the price of the wafer, but today can be justified by the value of AI. And this has changed indeed the way people used to look at the industry. When we look at the industry driving mobile only, there was a lot of doubt on does the next advanced logic node make sense.

I think that those nodes -- those doubts have gone away quite a bit. And I think that the size and the speed of the ramp of 2-nanometer node on logic are the very first proof of that. But we would expect that also trend to continue. We have not seen yet a real acceleration per se. But we mentioned again, the larger customer base for those products. And as you know, also larger customer base also means that you get more competition and potentially also more motivation to move faster on those advanced nodes. So I think that question is a very good one and one that we all have to look at in the next 12 months.

Okay. We have time for one last question. If you are unable to get through on this call and still have questions, please feel free to contact ASML Investor Relations with your question. Now operator, can we have the last caller, please?

Your last question comes from the line of Mehdi Hosseini from Susquehanna Financial Group.

All the good questions have been asked. I just have 2 follow-ups, one for Christophe, obviously, we're all seeing the headline with AI and everything, and you have been highlighting how AI could drive incremental investment. But the way I see it, you're also constrained with increased concentration of customers, especially on logic and one customer is doing all the investment for the leading edge. And that by itself drives more volatility in your booking, backlog and even quarterly revenue. And I'm not asking you to name that customer, but is that the right way of thinking about how AI is incremental, but it does limit your visibility? And I have a follow-up.

Yes. I don't think we need to mention the customer. Your point is clear. But I think we discussed that. I don't think there was any concern in terms of either visibility or in terms of sometimes pricing power. That's a question we got a lot if we had only one customer. I think the only concern really when you have only one customer is are we going to be supply limited? Are we going to look at a market that is supply limited because if you have one customer, well, the market will have the size of what that market -- that customer can deliver. So I think this was a bit our bigger concern.

So I think that's a concern that most probably goes beyond ASML, right? It's what we discussed before because it's great to get all those good news about AI infrastructure investment. But at some point of time, you have to get the chips out. And as we mentioned a few times already today, I think that the news in the last few months of most probably more customers being able to play in AI, both for logic and DRAM, I think, is a very interesting development for the entire market. And that applies also, of course, for us.

Sure. And a follow-up for Roger. How should I think about working capital intensity over the past several quarters? Inventories have actually gone up, same with accounts receivable. As shipment strength improves, should I expect some improvement here with working capital and just overall cash from operations?

Yes. I think working capital is going up. Inventory is going up to a large extent because of High-NA, right? With High-NA, it takes quite some time before a system is being installed. As a result of that, obviously, that drives up the inventory level there. So I think that's a major element. The other element is down payments, right? So that's the other side of the equation. So to the extent that down payments kick in, and that obviously is related to order intake, that's an important negative. I would say those are probably the 2 most important elements in there.

So when it comes to High-NA, an important element in there, obviously, is reducing cycle time. That's a very important driver of driving down the working capital that is tied up in High-NA. And that's something that we're very clearly working on. But of course, there, you need to have the volumes in order to make meaningful progress there. So I think the working capital levels that you're currently looking at, I think, are sort of reasonable, I would say, for the business that we have today. To the extent that we're able to drive down cycle time that I think is the single biggest driver of reducing working capital for us.

Now on behalf of ASML, I would like to thank you all for joining us today. Operator, if you could formally conclude the call, I would appreciate it.

Thank you.

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

Hello, and welcome to ASML's Q3 2025 Results Video with Christophe Fouquet and Roger Dassen.

Roger, if I can start with you, and can I ask you to give us a summary of Q3 2025 results?

Sure. Net sales came in at EUR 7.5 billion. That included, by the way, the recognition of one High NA system. Also included in there EUR 2 billion for installed base revenue. Gross margin for the quarter came in at 51.6%. All of that, I would say, within guidance.

Net income for the quarter came in at EUR 2.1 billion, and we recorded net bookings for the quarter of EUR 5.4 billion, included in there EUR 3.6 billion for EUV.

And Roger, can I ask you to give us a guidance on Q4 2025 as well as the full year for 2025?

Sure. So for the quarter, we're looking at revenue between EUR 9.2 billion and EUR 9.8 billion. It's a big quarter, a lot bigger than last quarter. But actually, that's as planned and also as we communicated before. And it's also what we saw in 2024. We also had a very big Q4 there.

Included in that number would be an installed base revenue of approximately EUR 2.1 billion. The gross margin for the quarter, somewhere between 51% and 53%. If you then take that to the full year, we would be looking at a full year around EUR 32.5 billion in terms of net sales. The gross margin, we say around 52%. As a matter of fact, if you take the midpoint of the guidance for the quarter, you get a little bit above the 52% for the full year.

Christophe, if I could ask you then to give us your view on how you're seeing the market at the moment?

Yes. I think we have seen a flow of positive news in the last few months that have helped to reduce the uncertainty, some of the uncertainties we discussed last quarter. First, we continue to see strong news about commitment to AI, which means we think investment in advanced logic and DRAM.

Second, and it's very important for us, it looks like AI is going to benefit a larger part of our customer base. Third, we continue to make very good progress with our litho intensity, especially with EUV that continue to be adopted with DRAM and advanced logic customer.

On the other hand, when we look at China, we believe that the demand of our Chinese customer is going to be significantly lower in 2026 than it has been in 2024 and '25, where we had very strong business there.

So what does that mean then for ASML in 2026?

Well, we believe that the impact of these dynamics will only be effective partially in 2026. But still, for 2026, we expect our net sales to not be below 2025. If we look at our product mix, the dynamics are going to favor EUV, which we believe will increase, while the dynamic in China will most probably lower the business in deep UV. And we will provide more details about 2026 in our January call.

Turning to technology. Roger, can I ask you to give us your thoughts on the recent announcement that we had in terms of the collaboration with ASML and Mistral AI?

Yes. Indeed, we entered into a partnership with Mistral AI. I think Mistral is really recognized on a number of fronts. I think they're recognized for their business-to-business approach. They're also recognized for the quality of their large language model, particularly when it comes to software coding and software coding development. So they're recognized for that.

That's the reason why we entered into the partnership with them because many people look at ASML, look at our products and really looking at hardware. But I think increasingly, I think people appreciate the very significant software content that is within those systems. And I think people really understand that if you get to the level of precision and the level of speed that we have in our scanners, but also, quite frankly, what we need in metrology and inspection, it's pretty clear that the software contingent therein becomes increasingly important.

So that's the reason why this is very strategic to us, why it's very strategic to improving the performance, improving the precision and the speed of our tools as we bring them to our customers. So therefore, this collaboration is truly a strategic choice for us.

I would also say that on top of the significance that it has for our products, it's also -- AI is also a great way to improve the speed of our product development, to improve the speed of our time to market of any product development to our customers. And that's another big area that we're collaborating with Mistral on.

So all in all, we believe a very strategic partnership. We also, to underscore that strategic partnership. As you know, we were the lead investor for their Series C funding round. And by being the lead investor, we took approximately an 11% share in Mistral. We also have a seat on their strategic committee. We truly believe that by doing this, we also get closer and closer to the AI world, which we believe is so pivotal to what we do at ASML.

Staying on technology. Christophe, can you share then maybe some of the highlights over the last quarter in terms of our road map?

Yes. I think we continue to see a very strong execution of our technology road map. I'll start with EUV. We had some very good papers presented at SPIE, semicon conferences, stressing the progress we are making driving down the cost of technology for the most advanced nodes of our customer.

On High NA, we shared the fact that at our customer, more than 300,000 wafers were now run. And some of our customers also reported the fact that the maturity of High NA today is quite ahead of what the maturity of Low NA was at the same period of time. So this was very positive.

I think one important news also came from SK hynix, who announced the start of the installation of their first 5200 in their production fab, positioning this tool basically as one of the key enabler for the future of DRAM. On top of that, I think we're also very happy to report that we have shipped our first advanced packaging product.

We have said in the past that we'll be supporting our customer with 3D integration. We have shipped the XT:260, which is a high productivity scanner that will support advanced packaging and provide up to 4x productivity compared to the existing product.

So yes, you're mentioning then 3D integration. What's some of the rationale and maybe some of the opportunities you see for ASML in this space?

Well, I think 3D integration, of course, is the other way to drive Moore's Law. And when it comes to 2D, we have our lithography road map. When it comes to 3D integration, I think we mentioned in the Capital Market Day that we will start helping our customer in this field.

Our customers have told us that there is a need for innovation in 3D integration, because their requirements will become more and more stringent. When we look at those requirements, we also see that a lot of the technology we have developed for holistic lithography can be transferred to 3D integration. And this is why we are looking at several opportunities.

The XT:260 is the first product. There will be more. And because of innovation, we are capable again to bring technology that can really make a difference. If we look at next year, we see many customers that have shown interest in this tool, proving again, I would say, the future value of our technology there.

Then, as a final question, can I ask you to remind us of maybe the long-term opportunities for ASML and a little bit the market you see there?

Well, first, as we mentioned in the Capital Markets Day, we said that most probably AI will drive more advanced applications in semiconductor, so advanced DRAM, advanced logic. I think this is happening, and this is driving more advanced litho, higher litho intensity, and we expect that to continue.

As we just discussed, we see that 3D integration will become a new opportunity, which we are going to pursue. And as Roger explained very nicely, we also see that AI could create a lot of value on our products moving forward. So we continue to see a very strong opportunity on our technology road map.

Finally, to close on the number, as mentioned in the Capital Markets Day, we expect 2030 to see an opportunity for revenue between EUR 44 billion and EUR 60 billion and a gross margin between 56% and 60%.

Great. Thank you very much. Thank you, both Christophe and Roger.

Thank you.