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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.

Good day, and thank you for standing by. Welcome to the ASML 2025 Second Quarter Financial Results Conference Call on July 16, 2025. [Operator Instructions]. Please be advised that today's conference is being recorded.

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

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

The subject of today's call is ASML's 2025 second quarter results. The length of this call will be 60 minutes, and questions will be taken in the order that they are received. This call is also being broadcast live over the Internet at www.asml.com. A transcript of management's opening remarks and a replay of the call will be available on our website shortly following the conclusion of this call.

Before we begin, I would like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve material risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statements contained in today's press release and presentation found on our website at www.asml.com, and in ASML's annual report on Form 20-F and other documents as filed with the Securities and Exchange Commission.

With that, I would like to turn the call over to Christophe Fouquet for a brief introduction.

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

Thank you, Christophe, and welcome, everyone. Let me start with our second quarter accomplishments. In the second quarter of 2025, total net sales were EUR 7.7 billion, which is at the upper end of our guidance, primarily due to revenue recognition of one High NA system and additional upgrade business. Net system sales were at EUR 5.6 billion, which includes EUR 2.7 billion from EUV sales and EUR 2.9 billion from non-EUV sales.

Net system sales was driven by Logic at 69% and the remaining 31% coming from Memory. Installed Base Management sales for the quarter came in above the guidance at EUR 2.1 billion. Gross margin for the quarter was above guidance at 53.7%, driven by an increase in upgrade business, one-off items resulting in lower cost and lower-than-expected impact from tariffs, which was partially offset by the dilutive effect from the High NA system revenue recognition. Operating expenses came in as guided with R&D expenses at EUR 1.2 billion and SG&A expenses at EUR 299 million. The effective tax rate for Q2 was 18.1%. For the full year 2025, we still expect an annualized effective tax rate of around 17%. Net income in Q2 was EUR 2.3 billion, representing 29.8% of total net sales and resulting in an earnings per share of EUR 5.90.

Turning to the balance sheet. We ended the second quarter with cash, cash equivalents and short-term investments at a level of EUR 7.2 billion. Moving to the order book. Q2 net system bookings came in at EUR 5.5 billion, which is made up of EUR 2.3 billion of EUV and EUR 3.2 billion of non-EUV. Net system bookings in the quarter were weighted towards Logic at 84% of the bookings, while Memory accounted for the remaining 16%.

Regarding our backlog, we ended Q2 at around EUR 33 billion. In addition to the regular changes from system sales and bookings, this reflects an adjustment of EUR 1.4 billion in Q2 related to customers' response to 2024 [indiscernible].

In Q2, ASML paid a final dividend of EUR 1.84 per ordinary share. Together with the interim dividend paid in 2024 and 2025, this resulted in a total dividend for 2024 of EUR 6.40 per ordinary share. The first quarterly interim dividend over 2025 will be EUR 1.60 per ordinary share and will be made payable on August 6, 2025.

In Q2 2025, we purchased shares for a total amount of around EUR 1.4 billion, bringing the total share buyback of our [ 2022-2025 ] program to EUR 5.8 billion at the end of Q2 2025.

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

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

Turning to our EUV business. Customers continue to add capacity on the leading edge to support AI demand, in which EUV plays an increased role. For example, our DRAM customers have recently mentioned an increase in the number of EUV layers on their latest and future nodes. In 2025, we expect our advanced customers to add about 30% more EUV capacity compared to 2024. The higher productivity of the NXE:3800E means that we can address that capacity increase with about the same number of systems as in 2024, but with higher ASP and improved gross margin.

This low NA EUV capacity increase together with the planned revenue from High NA system is expected to lead to overall EUV revenue growth of around 30% in 2025 versus 2024. The combined revenue of Deep UV and our metrology and inspection systems in 2025 is expected to be similar to 2024. With respect to installed base management, the upgrade business has been strong in the first half of the year as we completed most of the productivity upgrades on the NXE:3800E systems in the field to bring them to full specification. We expect continued strength in installed base management for the second half of the year, driven by increasing service revenue as our installed base grows with a growing contribution from EUV services. With this, we expect installed base management revenue to grow more than 20% over last year.

We now guide the full 2025 revenue to increase by around 15% with gross margin of around 52%. We expect demand to be more skewed towards the second half of the year. As we look ahead to 2026, we continue to see strong demand related to AI for both Logic and Memory, and we see the positive impact of a growing number of EUV layers. On the other hand, as we said before, customers are facing increasing uncertainties based on macroeconomic and geopolitical developments. Further, some customers are navigating specific challenges that might affect the timing of their capital expenditure. Against this backdrop, while we are still paying for growth in 2026, we cannot confirm it at this stage. We will continue monitoring developments over the coming months.

With that, I ask Roger to provide an update about how we are currently looking at tariffs and their potential effects. Roger?

Thank you, Christophe. As Christophe highlighted, we are currently facing an increasing level of uncertainty surrounding macroeconomic and geopolitical developments, which may have both direct and indirect implications for our business. With regard to tariffs, the direct impact results from tariffs related to system sales to our customers in the United States, the import of materials for our U.S. manufacturing facilities, the import of parts and tools for our U.S. field operations and the export of parts from the U.S. into other countries to the extent tariffs were to apply to those parts.

We continue working with our customers and suppliers to try to achieve that any direct impact of tariffs on our results will be limited. The indirect impact is more complex and very difficult to determine as it is related to the potential impact of tariffs on GDP and the resulting overall market demand.

With that, I would like to turn to our expectations for the third quarter of 2025. We expect Q3 total net sales to be between EUR 7.4 billion and EUR 7.9 billion. We expect our Q3 installed base management sales to be around EUR 2 billion. Gross margin for Q3 is expected to be between 50% and 52%. The expected R&D expenses for Q3 are around EUR 1.2 billion and SG&A is expected to be around EUR 310 million. The gross margin in the second half of the year is expected to be lower than the first half, primarily due to margin dilutive effect of the revenue recognition of a greater number of high NA systems in the second half of the year. Lower upgrade revenue and a number of one-offs that contributed positively to the gross margin in the first half that we do not expect in the second half of this year. For full year, we continue to expect a gross margin of around 52%, of course, with the caveat of the uncertainties around tariffs as we just discussed. With that, I would like to again turn it back over to Christophe.

Thank you, Roger. Turning to technology. We continue to make good progress on both our low NA and high NA EUV products, and we are building a comprehensive EUV portfolio that gives customers the flexibility to meet their advanced technology road map goals and optimize their cost of technology.

On the NXE:3800E, we made strong progress this quarter, completing a large number of field upgrades to the final 220 wafers per hour configuration. We are on track to finish holding out these upgrades across the installed base through 2025. New NXE:3800E systems are now all shipping at full specification. As mentioned earlier, the NXE:3800E is helping customers expand their use of EUV. On the latest DRAM nodes, they can now replace more complex multi-patterning Deep UV steps with single EUV exposures, which brings benefits like lower cost, faster cycle time and better yield.

On High NA, we continue to work with our customer teams to mature the technology using our EXE:5000. This quarter, we also shipped and commenced the install of the first EXE:5200B system, which is intended to support the High NA technology insertion into high-volume manufacturing. As a reminder, the system is capable of achieving at least 175 wafers per hour, which is approximately a 60% productivity improvement compared to the EXE:5000. As we shared during our 2024 Capital Market Day, the High NA platform will enable customer road map and lower their cost of technology by moving from multi-patterning Low-NA EUV to single-exposed High-NA EUV.

For Deep UV, the transition of customers to the advanced nodes also requires more advanced system. This is due to the increasing critical litho requirements driving the adoption of both the NXT:2100 and the NXT:2150 systems as well as the latest generation carrier system, the NXT:870.

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

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

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

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

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

Thank you, Francois. So let's start with -- let's start indeed with EUV and then I'll go to Deep UV. But in the EUV mix, I think what you see indeed is that we expect growth on EUV this year to be about 30%. At the beginning of the year, that percentage was a little bit higher. And there was a bit of confusion maybe on our side, so I apologize for that, but the big delta is actually with installed base business. And what you have there is, as you probably know, we shipped quite some tools last year, but also this year to customers at a lower configuration.

So they did not have the full 220 wafers per hour configuration. And the revenue that is associated with bringing those tools to the 220 wafers per hour level is not in system sales, but is in the upgrade business and therefore, is in the installed base business. So the delta that you would see, so this 10% delta, if you like, so 30% growth rather than 40% growth, the delta of that number sits in the installed base business. So the installed base business is actually growing faster than we anticipated and you might have in your models at the beginning of the year. So it's a wash. It's a wash between the EUV business and the upgrade business associated with bringing the 3,800 up to the 220 level. So that's really what it is.

In terms of unit numbers for EUV. This is just by virtue of the configuration that customers have chosen. As you would have seen this year is particularly rich in terms of the ratio between 3800 and 3600. You also would have seen that in the very high ASP for EUV that you see this year. And that is because the lion's share of the tools this year and actually all of the tools in the second half of this year, all the Low NA tools are 3800. So as a result of that, the capacity needs that our customers have can be fulfilled with a lower number of tools. Revenue-wise, it doesn't matter because of the higher ASP of the 3800 and gross margin-wise, it's actually a positive, I would argue. But they can get the same capacity that they were looking for at a lower number of units.

So finally on Deep UV. So Deep UV in our current model ends where we expect the Deep UV to be at the beginning of this year. But you are right, there is a bit of a shift there where actually China is a bit higher than we expected. You might recall that last year, we said we expected to be a little over 20%. Right now, we're looking at over 25%. So there is a bit of a shift in the Deep UV business from the non-China business to the China business. That's the only moving part I would say that is [indiscernible] in Deep UV.

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

So is it truly neutral for ASML, the multi-patterning Low NA versus single High NA? Just I've been talking a lot to investors on that, and I wanted to ask you.

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

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

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

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

Well, I think it is a positive because I think it is a positive for the entire ecosystem. Now are we going to sell 20 more tools as a result of that? Probably not. But I think it is still a positive development that the wider ecosystem is being deployed, and that restrictions are being lifted, I think in and by itself is a positive.

This is not the only lifting of restrictions that has happened in the past couple of weeks. As you also know, there was a lifting of restrictions when it comes to chip design software. In and by itself, I think that's happening, I think, strengthens the global reach of the ecosystem, which I think is a positive. So it's based on that, that I think this is a positive development for the entire ecosystem and hopefully also for us.

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

I don't think that dynamic has materially changed, right? So the 25% that we have been talking about now for the second quarter in a row is what we expect for the year. I think that's still the -- over 25% is still what we expect for the year. I don't think that dynamic has necessarily changed in the past quarters. That's still there. And exactly what is driven by considerations by customers, it's very hard to tell.

I think there is a customer need that customer need continues to be strong as we see it. I mean there have been discussions in the past is China falling off the cliff? Well, it is not. And it's also not what we see. We still see China demand strong and China demand more and more being brought in line with the percentage that it represents at our backlog, which is, again, at the level that we were just talking about, this slightly around 25%.

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

Well, our view, I think, has been very consistent. And the question come back every time and I always give the same answer, which is the phase we are in today is a phase where the customers are just qualifying the tool, and they qualify the tool having in mind to insert it in high-volume manufacturing in 2026, '27. And the exact format they will use for the insertion is depending basically on the progress we are making with them in the next few months. But the progress has been good. I think we talked a lot about the initial data back at the end of last year, early this year. The data are still good.

The more customers use the tool, I would say, the more they like it. And this means also that the opportunity for insertion is, of course, growing over time because there's more and more data confirming that. But there, at the same time, we still need a few more months. As I mentioned in my introduction, there's still a lot of work happening with our customer with the 5000. The shipment of the 5200 is important milestone because that's the tool for high-volume manufacturing. So this also means that this tool will be available on time. But there also we need to qualify it.

So I think the progress is good. We feel good about the way the customer look at the system and I think we'll continue to share with you the progress in the coming months. But we are happy with the progress, and I think so are our customers.

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

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

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

I will start and I think Roger can add. But I think when we talked 90 days ago, I think this was a couple of weeks after both Liberation Day, but also the announcement that the tariff we have put on hold for 90 days. And I think we said back then that we are not at the end of discussion, we are most probably at the beginning of it. And I think today, we are still not at the end of it, 3 months have passed. And I think those discussions are in all our customer minds and they are trying basically to understand what it means for them in the short term.

So I think what has happened in the last 90 days is, I would say, the impact of the announcement is there. There's a lot of discussion. No one knows even today, what's the end state. Some people are getting more optimistic. Some people are getting more pessimistic. And I think when we talk about uncertainties, we mean both basically. So I think our visibility because of discussion has a bit reduced, and therefore, we are being more cautious.

I think Roger was mentioning the H20 chips, in the course of the last 3 months, they were both restricted and then allowed again yesterday. So a lot of this is still happening. And as you know, this type of uncertainty usually invites people who make investment to be more cautious. And I think what we report is the results of the discussion we are having basically with those people. Roger?

Yes. I think, Christophe, that's the story, right? So there is the direct impact, if you're considering expanding in the United States, you still don't know today exactly what tariffs are going to apply to you because on the one hand, you have the tariffs, the generic tariffs. But on the other hand, there is also the 232 review that at this stage, we don't know what the outcome of that is going to be. So if you have investment plans in the United States, and obviously, this -- the uncertainty around the tariff discussion is a pretty significant component in your business case.

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

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

Yes, Joe, that is an important one, right? So the High NA one is an important one. So that will have an impact because the second half, we will have more High NA tools rev rec than in the first half. So that's the driver. The second driver is that we -- as I mentioned before, we had quite some upgrade business in the first half. I would expect that upgrade business to be a little lower in the second half. And so that's the driver.

And then we also had some one-off cost benefits in the first half that we cannot count on in the second half. So it's a bit of a mix of those as a result of which we do believe that the second half is going to be slightly weaker.

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

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

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

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

On the first question on EUV, it's multiple customers and it's also -- it's both Logic and Memory, although I would say it is skewed towards Logic. So Logic is the better half of the number. On Deep UV, it's a bit of a mixed bag. All I would say is last time we told you that we were getting closer and closer to being fully booked for this year also on Deep UV.

I think by now, we can say that we're virtually covered for the full year. And that means that some of the orders that came in on Deep UV help bridge the gap that we still needed to be fully covered or virtually fully covered for this year. And then the balance is there to -- for '26.

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

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

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

Well, it's tied to roughly 50 tools.

Okay. Now to the 50 tools. So 50 tools. Well, an important explanation of the 50 tools versus the lower number of tools, the low 40-ish tools that we were just talking about. That is explained by the mix of tools in this year.

So this year is completely dominated by the 3800, only a handful of 3600 tools. And that's the reason why the tool number is lower simply because people get a much higher productivity on a per tool basis and that still gives them the 30% capacity increase that they were looking for, albeit with a lower number of tools. So it's the tool mix that has led to a lower number of unit numbers.

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

I would say on your first question, C.J., it's interesting that we have such a different perspective on what the world looked like 3 months ago versus today. I would say 3 months ago, I think versus today, I can tell you that our customers are more concerned about the tariffs discussion today than they were 3 months ago. 3 months ago, there was the indication of a pause in the tariffs. Right now, I think we're -- it seems like the countries are in full battle mode again when it comes to tariffs. Every single day, there is a new percentage. The 232 review, which, of course, is very meaningful in our industry, there is no line of sight there.

So when we have conversations with our customers, we do sense that they're uncertain as to what the tariff discussion where it might land and what the implications are for GDP growth. And as a result of that, what that means for the demand of their customers. So we sense in all conversations with customers a higher level of uncertainty than 3 months ago. And that's the reason why, as I mentioned before, they keep the cards closer to the chest and wait with confirming their demand up to the point in time that they can do that. That's what we observe. Christophe, anything on customer dynamics as you see it.

Yes. No, I think you summarized it well, again. And as I said before, we also appreciate that there is a different view and different level of optimism or pessimism. I think what we tried to do is to reflect basically the nature of the discussion we are having. And of course, to your question, is it top-down, bottoms-up, it's first top-down, but the interrogation on the business is, of course, also a more detailed discussion we're having. So that's a bit where we are.

Well, we will continue to have those discussions, by the way, because every day bring new news. Yesterday was a good news, as we discussed, and we'll see what's happened in the next few months. But that's really where our customers are today.

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

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

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

So if you -- to give you an idea, when we ship the first EUV system and the 3400B, we were at about half the productivity of the tool we are shipping today. So of course, this has an effect on the total number of tools. So if we are still shipping the 3400B today, the number of units will be at least twice as much. But what we look at, what's really important, what you should look at is really the total capacity added by our customer on EUV year-on-year.

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

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

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

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

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

You talked about how lithography intensity can benefit from leading-edge memory specifically. I wondered if you could elaborate this and how that's helping litho intensity? And to what extent do you see that as a sustainable trend into next year?

And then as a quick follow-up, you talked in the past about the focus at ASML on moving towards leveraging common platforms. I wondered if you could give the latest update on progress there and how you're thinking about the time line to that helping customers and helping ASML.

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

On the next platform. So I think what we explained last year is that we want to continue to improve the performance of EUV. We want to continue to scale productivity. We're going to do that as far as we can on this platform, most probably all the way to the end of this decade, we can continue to improve the performance of the tool on the current platform basically in terms of productivity and overlay. And when we see that this become more difficult, then the next platform, which is pretty much the same as the High NA platform will also become available for Low NA so that we can continue this journey for another 10, 15 years. So this will happen most probably, I would say, at the beginning of the next decade. That's at least our current estimation.

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

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

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

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

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

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

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

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

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

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

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

Okay. No worries. Can I just ask another question then, if that's okay?

So your interpretation, if I get a lousy answer, I'm entitled to another question. That's okay. Go ahead.

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

I think this statement should we start with the fact that 2 nanometer, we discussed that many times, is a node basically where we don't see an increase of EUV layers. Now of course, what's happened after that is that gate-all-around is the new architecture and customers are going to go back to drive more density. Many ways to do that. One way is to use, of course, more litho intensity. So I think that after the 1.4 nanometer node, we will see again some litho intensity increase some more EUV layers.

If you look at the long term also there, the Logic customers are extremely bullish about the need for more EUV layers. So yes, there is one node as it happened before with FinFET, where there's a bit of a pause. But I always explain the only reason for that pause is to enable more shrink moving forward. So for every node where you pause basically to change your transistor architecture, usually, you will see 3, 4, 5 nodes where you continue basically to shrink and there drive more litho intensity. Timing detail, this is still a very competitive market. AI is driving innovation. So our customers are not standing still. And I think we will see more opportunity in the next few years for sure.

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

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

Maybe I'll ask them both right at the get-go. So the first one was just some clarification, please, from Roger, about installed base management. If I look at the 3Q guide, the full year guide, looks like there's about a EUR 400 million decline sequentially in the fourth quarter. Is that the scale of the sort of the 3800E contribution to installed base management because I was thinking we'd have quite a lot of argon fluoride shipments from '23 and '24 starting to contribute. So just maybe some color about sequentially what's happening in the fourth quarter in your guide?

And then a question for Christophe just on High NA adoption, 175 wafers an hour, an impressive achievement. Clearly, you're shipping qualifying a lot. Maybe just in sort of layman's terms, could you share what are the milestones that are still needed for your customers to cross before we can be more confident about when volume manufacturing begins and just the dilution on High NA. Is it -- is the program already above breakeven?

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

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

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

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

Hello, and welcome to ASML's Q2 2025 video.

Roger, can I start with you by asking you to give us a summary of our Q2 2025 results?

Absolutely. Revenue came in at EUR 7.7 billion. Part of that was also the revenue recognition for one High NA tool in the quarter and included in the EUR 7.7 billion, EUR 2.1 billion of Installed Base revenue.

Gross margin came in at 53.7%, that was above guidance. The EUR 7.7 billion was at the high end of the guidance, 53.7% at the above guidance.

What are the reasons why it was higher? A couple of reasons. First off, there was Installed Base revenue in there, upgrades. As we said before, we're upgrading some of the 3800s that we shipped before. We're upgrading them in the field and that leads to upgrade revenue and that has a positive impact on the gross margin. Secondly, we had some one-off cost benefits in the quarter. Thirdly, actually the tariffs panned out to be a bit less negative than we anticipated. So those are the positives.

On the negative side, we had -- as I mentioned before, we had one High NA tool that we recognized for revenue in the quarter. That still has a dilutive effect on the gross margin. But all in all, that led to a strong gross margin of 53.7%.

Order intake, EUR 5.5 billion for the quarter. Included in there EUR 2.3 billion for EUV.

Net income for the quarter came in at EUR 2.3 billion.

And as a follow-on question, can you also provide some guidance on the Q3 quarter, please?

For Q3, we expect revenue between EUR 7.4 billion and EUR 7.9 billion. We expect a gross margin between 50% and 52%. EUR 2 billion approximately Installed Base revenue is what we're expecting for the quarter.

Christophe, if I can turn to you and ask, can you give us a view on how you're seeing the short-term market dynamics as they are today?

Yes. So I think as we have said in the previous quarters, artificial intelligence is currently the main driver for growth for both Logic and Memory.

If we look at Logic, we expect logic to grow compared to 2024 because our customers are adding capacity in the most advanced node.

Memory remains very strong because there also our customers are investing in their latest HBM and DDR product.

When we look at China, we expect China revenue to be over 25%, which is in line with our backlog.

Going into 2026, there, the fundamentals of our AI customer remain strong and we are still preparing for growth. However, as we discussed last time, the level of uncertainty is increasing, mostly due to macroeconomic and geopolitical consideration. And that includes, of course, tariff.

And with those insights, Roger, can you give us some more color then on how you see 2025 for ASML and our business?

Yes. So if you look at the different components and the different technologies, so if we start with EUV, I think as Christophe already mentioned, obviously AI is largely driving the latest nodes, both on logic and on DRAM, and of course, that is a big driver for EUV because EUV is more and more significant, if you like, on those leading nodes.

For instance, if you look at DRAM, we do see that customers are more and more shifting towards EUV and have more and more layers on the latest node, but also on future nodes for DRAM. So that's, of course, a positive for EUV.

If you then look at the total capacity expansion that our customers are looking for when it comes to this, you're looking for EUV, you're looking at approximately 30% extra capacity that they are looking for. Of course, as you know, the 3800 tool that we have has significantly improved throughput in comparison to its predecessor. So we're actually able to accommodate that 30% increase of capacity that customers are asking for. We're actually able to accommodate that with about the same number of tools for EUV Low NA as we had it last year.

And then if you look at the full picture then for EUV, so with that, so with that number of tools with higher throughput and you add to that the number of High NA tools that were recognized in revenue this year, then you're looking at approximately 30% increase of the EUV business.

Deep UV and application business, about the same. So about the same as we had last year.

Installed Base business, we talked quite a bit about that previous quarter and also this quarter. So on the one hand, we have the upgrade business, which is strong, particularly, I would say, in the first half as a result of what I mentioned before, the upgrades that we do on the 3800 in the field. So that was a big boost, I would say, in the first half.

In the second half, you will see a sustained improvement of our service business, tools coming out of warranty, particularly the EUV tools coming out of warranty, and therefore the service on those tools really adding to the service revenue.

If you take that all together then on the Installed Base business, you're looking at approximately 20% increase.

If you piece it all together for total ASML, we're looking at approximately 15% increase for 2025 in terms of revenue over last year. We expect a gross margin of approximately 52% for the full year.

In terms of revenue, final comment there. You will see, obviously, as we mentioned before, that the second half of the year is bigger in terms of revenue than the first half. Within that second half year, you will see that revenue, based on our current shipment plan, is very much also skewed towards the last quarter.

And if we dive a little bit into the gross margins, I think last quarter, you said that you would expect the second half of the year to be a little lower than the first half. Can you remind us again on what some of the drivers are for that?

That's right. So if you look at a few data points, so as I mentioned before, gross margin for the quarter, 53.7%. If you look at the gross margin for the first half, 53.8%. As I mentioned, we expect for the full year approximately 52%. And as I mentioned before, we're looking at 50% to 52% for the third quarter.

Why 52% for the full year? So why is it going down a bit in the second half? A couple of reasons. First off, as I mentioned before, the upgrade business on the 3800 we expect that to decline a bit, and that is a big driver of gross margin. Secondly, we had some one-off cost effects that will -- we expect not to be there. And we will have a bit more dilutive effect of the High NA tools that we talked about and we'll have more High NA tools recognized in revenue in the second half than we have in the first half.

So that all brings you to approximately 52% for the full year. Of course, a little bit dependent on what's going to happen on the tariffs.

I think you spent a bit of time last quarter talking about the effects of tariffs. Can you remind us again, in short, how you see that progressing and the potential impacts there?

So tariffs last quarter, we talked about direct effect and indirect effect. If you look at the direct effect of tariffs, the things we mentioned at that point in time.

First off, obviously, when we send new systems to our customers in the United States, there could be tariffs on that. So that's the first one. The second is if we send parts for manufacturing in the United States. So that's the second component. The third component is if we send parts for service in the field operations in the United States. And the fourth one, to the extent that other countries would be putting tariffs on parts or modules that get out of the United States into, for instance, the EU, that could be a fourth category.

We're looking at all of those. We're trying to mitigate the effect for the entire ecosystem on all 4 of those accounts. Last time we spoke about free trade zones that we're looking into to mitigate some of the dynamic. And we are working with the supply chain and with our customers to at least make sure that the impact for ASML is as limited as possible.

And then obviously, there is the indirect impact to what extent could tariffs -- what kind of impact could it have on the overall macroeconomic situation.

Quite frankly, Jim, it's all very uncertain. Both the direct and the indirect impact are still very uncertain. So we just have to navigate that as best as we can.

Christophe, if I can turn to you and maybe if you can give us an update on where we are in our road map from a technology point of view and some of the highlights perhaps from the quarter.

Yes. So let me start with EUV, of course. I think we continue to make very good progress on both Low NA and High NA. And this really allow us to build a portfolio that will address our customers' needs when it comes to technology road map, but also optimization of their cost of technology.

On the NXE:3800, we now ship all our systems in final specification, 220 wafer per hour, which is 37% more than what we had on the NXE:3600, so a major boost of productivity. We have done also a lot of upgrades to 220 wafer per hour on the installed base, and we are in track basically to complete all those upgrades by the end of the year.

Now I think we explained that already a few times, this tool, thanks to the higher productivity, really allow customers to shift more multi-patterning layers to single expose. So this basically allows customers to reduce complexity, reduce yield loss, improve cycle time.

And we have seen that happening quite a bit in the last few months with DRAM, where for the last nodes, we really see a shift basically towards more EUV layer. And this is, of course, in our case, a nice increase in litho intensity.

High NA, we are continuing to mature the platform with our EXE:5000 system, which is at several customers. So this is basically the work we do with our R&D customers to prepare the technology for high-volume manufacturing. And for that, we have shipped our first EXE:5200, which is the tool that is going to be used in high-volume manufacturing. The tool is under install.

And as a reminder, this will provide our customer with 60% productivity improvement compared to the 5000. So we're talking about 175 wafer per hour. So now we are starting also to prepare insertion in high-volume manufacturing.

All of that, of course, as I mentioned on Low NA, will help us over time as Low NA EUV gets into multi-patterning, will allow us basically to also shift again some more layers to single exposed High NA to continue this trend.

A short word about deep UV as well. As our customers move to more advanced node, they also need better deep UV machine. That's true for immersion. That's true for KrF. And also our latest product, the NXT2100, our latest immersion tool; the NXT:870, our latest KrF tool are seeing good adoption and good performance at our customers to respond basically to this need.

So overall, I would say great progress on technology. I think we are validating that better cost of technology allows us to translate more multi-patterning layers into single exposed, and I think we have done good progress on our litho intensity.

If I switch again back to you, Roger, and talk a little bit about our cash. So we ended last year with quite a good position there. Can you expand a little bit then on what our plans are in terms of managing the cash towards shareholders?

Well, so capital allocation, some comments there. So we did quite some share buyback this year. In the last quarter, we did EUR 1.4 billion worth of shares we purchased back from the market.

In terms of dividend, in Q2, we paid the final dividend for last fiscal year at an amount of EUR 1.84 and that got the total dividend for 2024 to EUR 6.40.

For Q3, we expect to pay our first interim dividend at an amount of EUR 1.60 and we expect that to be payable by August 6.

Then to finish up, Christophe, can you give us an overview again of where you see maybe more longer term the market and what that means for ASML and our business in the long term?

Yes. I think long term, the semiconductor market remains very strong. And I think a lot of people say that AI is really a great opportunity and we have seen, again, the fundamentals around AI to be very, very strong.

Now of course, short term, Roger talked about it, some uncertainty. A lot happening, discussion around tariff, export control, macroeconomic uncertainties. All of that is also part of the things we have to manage.

As we discussed in the Capital Markets Day, the shift of our customers towards more advanced logic, advanced memory will also drive the need for more advanced lithography and this will basically be a good thing for litho intensity.

The progress we make on our EUV road map with Low NA, High NA providing the right cost of technology will continue to allow us basically to convert more multi-patterning layer to single exposed and we will see that happening in the course of the next few years.

So in terms of long-term forecast, we remain consistent with what we have said in our Capital Markets Day. We see an opportunity for 2030 of a total revenue between EUR 44 billion and EUR 60 billion and a gross margin between 56% and 60%.

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

Pleasure.

Thank you.