Asml Holding NV (ASML) Q2 2025 Earnings Call Transcript

Good day and thank you for standing by. Welcome to the ASML 2025 Second Quarter Financial Results Conference Call on July 16th, 2025. At this time, all participants are in the listen-only mode. After the speaker's introduction, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and one again. 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 CEO, Christophe Fouquet, and our CFO, Roger Dasse. 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 risk 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 20F 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 Reserves 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 Reserves, 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 7.7 billion euros, which is at the upper end of our guidance, primarily due to revenue recognition of one INA system and additional upgrade business. Net system sales were at 5.6 billion euros, which includes 2.7 billion euros from EUV sales and 2.9 billion euros from non-EUV sales. Net system sales was driven by logic at 69 percent and the remaining 31 percent coming from memory install base management sales for the quarter came in above the guidance at 2.1 billion euros gross margin for the quarter was above guidance at 53.7 percent 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 H&A system revenue recognition. Operating expenses came in as guided with R&D expenses at 1.2 billion euros and SG&A expenses at 299 million euros. The effective tax rate for Q2 was 18.1 percent. For the full year 2025, we still expect an annualized effective tax rate of around 17 percent. Net income in Q2 was 2.3 billion euros representing 29.8 percent of total net sales and resulting in an earnings per share of 5.90 euros. Turning to the balance sheet, we ended the second quarter with cash, cash equivalents and short-term investments at a level of 7.2 billion euros. Moving to the order book, Q2 net system bookings came in at 5.5 billion euros, which is made up of 2.3 billion euros of EUV and 3.2 billion euros 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 33 billion euros. In addition to the regular changes from system sales and bookings, this reflects an adjustment of 1.4 billion euros in Q2 related to customers' response to the 2024 expectations. In Q2, ASML paid a final dividend of 1.84 euros per ordinary share. Together with the interim dividend paid in 2024 and 2025, this resulted in a total dividend for 2024 of 6.40 euros per ordinary share. The first quarterly interim dividend over 2025 will be 1.60 euros per ordinary share and will be made payable on August 6, 2025. In Q2 2025, we purchased shares for a total amount of around 1.4 billion euros, bringing the total share buyback of our 2022-2025 program to 5.8 billion euros at the end of Q2 2025. For that, I would like to turn the call back over to Kostak.

Thank you, Roger. As Roger has alighted, we finished the second quarter with good financial reserves. 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 only to gauge 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. 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 notes. 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 INE system, is expected to lead to overall EUV revenue growth of around 30% in 2025 versus 2024. The combined revenue of DeepUV and our metrology and inspection systems in 2025 is expected to be similar to 2024. With respect to install-based management, the upgrade business has been strong in the first half of the year as we completed most of the productivity upgrades on the NXT 3800E systems in the field to bring them to full specification. We expect continued strength in install base management for the second half of the year, driven by increasing service revenue as our install base grows, with a growing contribution from EUV services. With this, we expect install 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 in fact of a growing number of UV layers. On the other hand, as we said before, customers are facing increasing uncertainties based on microeconomic 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 praying for growth in 2026, we cannot confirm it at this date. 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 tariff 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 7.4 billion euros and 7.9 billion euros. We expect our Q3 install base management sales to be around 2 billion euros. Gross margin for Q3 is expected to be between 50 and 52 percent. The expected R&D expenses for Q3 are around 1.2 billion euros and FG&A is expected to be around 310 million euros. 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 INA 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 a second. For the 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 Grissel.

Thank you, Roger. Turning to technology, we continue to make good progress on both our low NA and INA EUV products, and we are building a comprehensive EUV portfolio that gives customers the flexibility to meet their advanced technology roadmap goals and optimize their cost of technology. On the NXE3800E, we made strong progress this quarter, completing a large number of field upgrades to the final 220 with first-per-hour configuration. We are on track to finish rolling out these upgrades across the install bays through 2025. New NXE3800E systems are now all shipping at full specification. As mentioned earlier, the NXE38E is helping customers expand their use of EUV. On the latest DRAM nodes, they can now replace more complex multipatterning DPUV steps with single EUV exposures, which brings benefits like lower cost, faster cycle time, and better yield. On INA, 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 INA technology insertion into high-volume manufacturing. As a reminder, the system is capable of achieving at least 175 wifers per hour, which is approximately a 60% productivity improvement compared to the EXE 5000. As we shared during our 2024 Capital Market Day, the INA platform will enable customer roadmap and lower their cost of technology by moving from multi-patterning low-NA EUV to single-exposed INA EUV. For deep UV, the transition of customers to the advanced nodes also requires more advanced systems. This is due to the increasing critical requirements driving the adoption of both the NXT2100 and the NXT2150 systems, as well as the latest generation KRF system, the NXT870. So overall, continued good momentum as our customers work closely with us to further adopt our EUV and DPV technology. As mentioned earlier, there is increasing uncertainty on the short term, driven by geopolitical developments impacting macroeconomic conditions. 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 roadmap on low-NA EUV and the introduction of INA 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 €44 billion and €60 billion, with gross margin expected between 56% and 60%. With that, we would be happy to take your question.

Thank you, Roger, and thank you, Christophe. The operator will instruct you momentarily on the protocol for the Q&A session. Beforehand, I would like to ask that you kindly limit yourself to one question with one short follow-up as necessary. This will allow us to get through as many callers as possible. Now, Operator, can we have your final instructions and then the first question, please?

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. we will now take the first question and your first question comes from the line of Francois Bovigny from UBS please go ahead thank you very much can you hear me okay yes yes great thank you so my first question would be for you know the mix of this year it seems that China is a bit are stronger, you know, than expected.

And even though you said that, you know, EUV capacity is up 30 percent and your revenues is up 30 percent, it seems, you know, consensus was at 49 percent and flat units still like a much lower unit 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, you know, 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, François. So let's start with EUV and then I'll go to DPV. 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. I think there was a bit of confusion maybe on our side, so I apologize for that. But the big delta is actually with install-based 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 install-based 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 install-based business. So the install-based business is actually growing faster than you know we anticipated and you might have in your models at the beginning of the year so it's it's so it's a wash it's it's a wash between the euv business and the upgrade business associated with bringing the 3800s up to the 220 level so that's really what it's 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 this year and that is because you know 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 in a tools of 3,800. 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 3,800. And gross margin-wise, it's actually a positive, I would argue. But they can get the same capacity today we're looking for at a lower number of units. So finally, on DPV. So DPV in our current model and where we expected to be at the beginning of this 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 you know a little over 20 percent right now we're looking at over 25 percent so there is a bit of a shift in the DPV business from the non-China business to the to the China business that's that's the only moving part I would say that But that is for NDPV.

Makes sense. Thank you very much, Roger. And the second question is, I believe you said in the past that you price your tools, you know, in terms of value to the customer. So the little 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 $3,800. 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 doesn't adopt, 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-lethal spend. So the value to the customer is much higher. Therefore, you can price higher. So is it really neutral for ISML, the multi-patterning low NA versus single high NA? 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 summarized what we're 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 INA. And I think what you have to have with INA when you simplify basically the process of the customer, reduce the lead time, I think what you see then is the ability also for a customer to keep going to the next node. And I think one of the reasons we've been driving those tools historically is because as a customer goes to the next node, then practically they will shrink further and the lethal intensity will increase and INA fits exactly that I would say strategy like UV did in the past or immersion did in the past so the benefit of a tool like INA is also being captured by an increase in lethal intensity basically moving to the next node and I think we have seen that happening strongly with UV in the past. And as INE mature, as the customer validates the value you have described, I think we will see the exact same dynamic.

Makes sense. Thank you, Christophe.

You're welcome.

Thank you. Your next question comes from the line of Didier Simama from Bank of America. Please go ahead.

Good afternoon. thank you for taking my question um 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 lethal revenues associated with uh you know 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 thank you so 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 but i think it is a it is

still a positive development that you know the wider ecosystem uh is is being is being deployed and that's that's that restrictions are being lifted i think in the by itself is a positive You know, 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. And by itself, I think that happening, I think, you know, 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, you know, hopefully also for us.

Okay, got it. Second question is on just going back to the DUV outlook for the second half. I know you had said at the time of Q1 that China group revenues would be 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 a pool in 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. And I think that dynamic has necessarily changed in the past quarters until 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, you know, again, at the level that we were just talking about, this slightly around 25 percent.

Thank you. Can I have a quick follow-up, a tiny one, just on INA? 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 INA could be inserted at the 1.4 nanometer node? well you know our view i think has been very consistent and you know the question come back every time and i always give the same answer which is you know the phase we are in today is a phase where the customer are just qualifying the tool and they qualify the tool having in mind to insert it in high volume manufacturing you know 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, going over time because there's more and more data confirming that. But 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 5,000, the shipment of the 5,200 is an 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, you know, the way the customer looks 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.

DJ, 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. Understood. Thank you so much.

Thank you. Your next question comes from the line of Joe Kaczaki from Wells Fargo. Please go ahead.

Thanks for taking the question. 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, you know, customers or customer 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 ahead. But I think, you know, when we talked 90 days ago, I think this was a couple of weeks after both Liberation Day, but also the announcement that, you know, the tariff we are put on hold for 90 days. And I think we said back then that, you know, we were not at the end of discussion. We were most probably at the beginning of it. And I think today we're still not at the end of it. Three 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, you know, in the short term. So I think what has happened in the last 90 days is 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 three 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?

Yeah, 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, you know, this, this, the uncertainty around the tariff discussion is a pretty significant component in your business case. And, you know, how much are you going to, how much are you going to invest in the United States and in what timeframe? So that's a direct implication. And then to Christophe's point, there is the indirect impact. You know, we still don't know today. The noise levels are pretty high on tariffs. The potential implications it could have for GDP growth are pretty significant. So therefore, customers and are waiting with their investment decisions, you know, up until the point, you know, they're maximizing the waiting time they have for their investment decision. And that's what Christophe is signaling. You know, 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 timeframe. 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 made the statement that we made. Thanks for that. I appreciate it.

And as a follow-up, on the gross margin side, I think if we 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 to take a bit of a step down sequentially? Is that just mix as you look to, it looks like you're implying, you know, maybe three high NA tools being rev-recked in that quarter? Is that the right way to think about it? Is there anything else we should be thinking about?

Yeah, Joe, that is an important one, right? So the high NA one is an important one. So that will have that will have an impact because that the second half you know we will have more Hyenae tools Rav Rack than in the first half so that's a driver the second driver is that we as we as I mentioned before we have quite some upgrade business in the first in the first half I would expect that upgrade business to be a little little lower in and so that's it that's a driver and then we also have some some one-off cost benefits and in the first half that we cannot count on in the second half so it's a bit of a it's a bit of a mix of those as a result of which we we do believe that the second half is going to be is going to be slightly weaker thank you thank you your next question comes from the line of chris sanker from tv cowan please go ahead

hi thanks for the question i told them roji uh first one on calendar 26 i understand that uh you know, 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 a bookings run rate should we assume you need to get in Q3 to get some conviction on calendar 20th because of the growth year or not?

Yeah, Koresh, 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. 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.

That's it. No worries. I have a two-part question again on bookings, so sorry to be annoying. On the Q2 bookings, you know, can you tell us a little bit of how much of the $2.3 billion in EUV, how was it split between logic and DRAM for EUV bookings? And on the $3 billion or so in DPV bookings, how much will ship this year versus next year on DPV?

On the first question on EUV, it's multiple customers. And it's also both logic and memory, although I would say it is skewed towards logic. So logic is the better half of the number. On DPV, it's a bit of a mixed bag. um all i would say is last time we told you that um uh that uh you know we were getting closer and closer to being fully booked for this year uh also on dpv i think by now we can say that we're virtually covered for for the full year and that means that you know some of the orders that came in on dpv helped bridge the gap that we still needed to be fully covered or virtually fully covered for this for this year and uh and and then the balance is is there to uh you know for for 26. thanks a lot roger you're welcome thank you your next question comes from the line of

cj muse from cantor fitzgerald please go ahead yeah good morning good afternoon um i wanted to revisit the first question roger um where you guys have kind of reduced your outlook for euv revenues from 50% to 30%. That's roughly 1.7 billion euros. 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 de-risking 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, CJ, 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, you know, at the current levels of install-based business and keeping the DPV slash 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 install base. So the 50% is a number that I honestly don't recognize. The 50% grows.

Well, you know, it's tied to roughly 50 tools.

Okay, now we're 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, you know, completely dominated by the 3800s, 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. Perfect.

And then to follow up on your 26 outlook, where, you know, 90 days ago, you talked about growth and now, you know, greater uncertainty. I would think on the tariff front, there would be more certainty. And so curious, you know, 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, emerging, high NA ramp, or low NA demand, that is causing you to kind of, you know, 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, CJ, it's interesting that we have such a different perspective on what the world looked like three months ago versus today. I would say three months ago, I think, you know, versus today, I can tell you that our customers are more concerned about the terrorist discussion today than they were three months ago. Three months ago, you know, there was the indication of a pause in the terrorist. Right now, I think we're, you know, 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, you know, that they're uncertain as to what the what the tariff discussion work 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 send in all conversations with customers a higher level of uncertainty than three months ago and that's the reason why you know as I mentioned before they keep the cards closer to the closer to the chest and wait with you know with confirming their demands you know up to the point in time that they that they that they can do that that's what we observe the stuff anything on customer dynamics as you see it yeah and i think i think you summarize it well again

and as i said before we also appreciate that there is different view and different level of optimism or pessimism i think you know what we try to do is to reflect basically the nature of the discussion we are having and of course you know to your question is it top down bottoms up it's first top down but you know the interrogation on on the businesses 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 you know every day bring new news yesterday was the good news, as we discuss, and we'll see what's happening in the next few months. But that's really where our customers are today. Thank you. You're welcome.

Thank you. Your next question comes from the line of Tammy Q from Berenberg. Please go ahead.

Hi, thank you for taking my question. So the first one is regarding your comment on that 30% efficiency helped addressing customers' requirement of expanding capacity by 30 percent. So is it right to say going forward you need customer to expand capacity aggressively for you to sell more tools to your customers versus previously that the demand for Litho 2 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 we monitor i think you've seen that in the capital market day also where we look at the total wafer start per month and how these evolve over time so i think this this define 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 you know 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 growth margin. So I think we are more sensitive to the total capacity need of our customer than to how many tools we're going to need to fulfill it. And I would say the less number of tools we need to fulfill it, usually the better our margin and profitability will be. And for our customer, also the value is better because they have more space basically to run more capacity. So if you, you know, to give you an idea, when we shipped the first EUV system and the 3,400B, 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 3,400B today, the number of units will be at least twice as much.

But, you know, what we look at what's really important what you should look at is really the total capacity added by our customer on ewe okay thank you roger and the follow-up will 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 instead 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 customer are still strong i think ai is still very strong i think you also get sign of that in many news in the last few months so the The fundamentals are strong, and I think that the discussion around tariff around geopolitics is just inviting some time, you know, customer to be a bit more careful. So if this discussion was not there, I think, you know, the fundamentals are out 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 it's a 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're 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. okay thank you thank you your next question comes from the line of alexander duval from goldman sachs please go ahead question um you talked about how lithography intensity can benefit from leading edge memory specifically i wondered if you could elaborate this um and how that's helping litho intensity and to what extent you see that as a sustainable trend uh 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 timeline to that, helping customers and helping ASML.

So on the first question, I think we talked quite a bit about, you know, little intensity of 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 customers. 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 the EUV layer for some of the customers. And the DRAM roadmap, the technology roadmap 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 three, four, five nodes, and that includes for F-square, by the way, we see a very positive trend with our DRAM customer. And I think we're forcing 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 UV. 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 becomes more difficult, then the next platform, which is pretty much the same as the INA 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 will say, at the beginning of the next decade. That's at least our current estimation.

Thank you very much.

Thank you. Your next question comes from the line of Chris Casse from Wolf Research. Please go ahead.

Yes, thank you. Good afternoon. I guess the first question is with regard to memory. And, you know, 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?

I think what we said 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, you know, AI is both about logic and HBM. So capacity has to be built on both. I talked about AI fundamentals before. That covers 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 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 for 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 object. It's lumpy.

Yes, understood. Good. 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. Because of the upside you're seeing to China this year? Does it 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. Thank you.

Thank you. Your next question comes from the line of Aditya Matuku from HSBC. Please go ahead.

Yeah, good afternoon, guys. Hopefully, can you hear me?

Yes, can I hear you fine?

Yeah, yeah, yeah. 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 to EUV and whether this was across multiple customers or whether this was just one or two 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 was a 1.4 adjustment in the backlog that you need to understand and that 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 de-booking or the cancellation of orders for about 1.4 billion. That's the comment that I made. That's a data point you need to understand the 33 billion backlog that we ended the quarter with. So this is all DPV and a bit of application business but in essence most of this is DPV.

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

I'm not going to give you a grade on your math, Adija, so I'm not going to do that. I'm not going to do that for obvious reasons, as I just shared with Sikrish. 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 there.

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

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

Okay, thank you. Just a slightly different topic. But recently, there's been this thesis going around that within the logic and market, there won't be a rise in litter intensity now until 2030, when your largest customer is expected to adopt high-end AUV. I just this seems a bit pessimistic to me but I just wondered how you see you know if you would agree with the statement or do you think you know there will be logic no transitions before 2030 that will lead to a rise in little intensity potentially the 14 angstrom node any color you can give around this would be helpful I think you know this statement should we start with the fact that two nanometer we discussed that many times is a node basically where we don't see an increase of UV 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 little intensity. So I think that, you know, after the 1.4 nanometer node, we will see again some little intensity increase, some more UV layers. You know, if you look at the long term also there, the logic customer are extremely bullish about the need for more UV 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 three, four, five nodes where you continue basically to shrink and they drive more lethal intensity. Timing, detail, you know, this is still a very competitive market. AI is driving innovation. and so our customers are not standing still. And I think we will see more opportunity in the next few years, for sure.

Understood. Thank you.

Okay. We have time for one very last, very quick question. So 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. Now, Operator, can we have that last quick question, please?

Thank you. Your last quick question comes from the line of Tim, from Rothschild & Co. Redburn today.

Hey there. Thanks so much for taking my questions. 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 400 million euro decline sequentially in the fourth quarter is that the scale of the sort of a 3 the 3800e contribution to install based 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, you know, 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 the program already above break-even? Thank you so much.

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 business, particularly the upgrade business, as we mentioned before was particularly high in the first 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 from rfi but definitely from euv right so on euv you know you see more and more tools getting out of warranty so that contributes to an increase in 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 and that might confuse the analysis yeah on INA so I think you

know we talked about the three phases in the past so I think we're still in what I call phase one which is basically R&D customer really qualifying the the technology with the 5000 there I think the good news is The imaging is doing great. Overlay is good. So performance of INA has been validated. So some of the data I shared a few months ago. The shipment of the first 5200 means that we are heading towards phase two, 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 interruption so that the customer not only like you know the performance but can trust the performance to basically be repeatable in high volume manufacturing so i think the next key milestone is is about the maturity of the tool and this will be a lot for this year next year and when this is validated this is where customer you know start to really count on the system to to do some some some good work in manufacturing so that that's a bit the sequence of the of the milestone great many thanks all right so now 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