Asml Holding NV (ASML) Q2 2026 Earnings Call Transcript

Good day and thank you for standing by. Welcome to the ASML 2026 Second Quarter Financial Results Conference Call on July 15th, 2026. At this time, all participants are in a listen-only mode. After the speaker's introduction, there'll be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Jim Cavanaugh. Please go ahead.

Thank you, operator. Welcome, everyone. This is Jim Cavanaugh, Head of Investor Relations at ASML. Joining me today on the call are ASML CEO, Christophe Bouquet, and our CFO, Roger Daffer. The subject of today's call is ASML's 2026 second quarter results. The length of the call will be 60 minutes and questions will be taken in the order they are received this call is also being broadcast live over the internet on www.asml.com a transcript of management's opening remarks and a replay of the call will be available on our website shortly following the conclusion of this call before we begin I would like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve material risks and uncertainty. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation found on our website at www.asml.com and on ASML's annual report on the Form 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 2026 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 2026 Reserves, as well as provide some additional comments on the current business environment and on our future business outlook.

Thank you, Christoph, and welcome, everyone. I will first review the second quarter 2026 financial accomplishments and then provide guidance on the third quarter and the full year of 2026 then we start with our second quarter accomplishments in the second quarter of 2026 total net sales were 9.3 billion euros which is above the high end of our guidance as a result of higher and expected install based management sales that system sales were 6.6 billion euros which included 3.8 billion euros from EUV system sales including sales of one high NA system and 2.8 billion euros from non EUV system sales net system sales were almost equally split between logic at 51 percent and memory at 49 percent install date management sales for the quarter came in at 2.8 billion euros almost 300 million euros above our guidance a result driven primarily by additional upgrade business. What's margin for the quarter was above our guidance at 54%, primarily due to the contribution of very high margin components within our insole-based management business. Our operating expenses were higher than guided due to the recognition of estimated costs related to the technology and IT transformation in Q2, primarily in R&D. R&D expenses came in at 1.3 billion euros, and FG&A expenses came in at around 0.3 billion euros. The effective tax rate for Q2 was 17.5%. For the full year 2026, we expected annualized effective tax rate is around 17%. Net income in Q2 was 2.9 billion euros, representing 31.3% of total net sales, resulting in earnings per share of 7.59 euros. Farring to the balance sheet, we ended the second quarter with cash, cash equivalents and short-term investments at a level of 7.6 billion euros. Our cash flow in Q2 was 1.3 billion euros. Moving to a cash return to our shareholders, in Q2, ASML paid the final dividend over 2025 of 2.70 per ordinary share. Together with the three interim dividends paid in 2025 and 2026, this resulted in a total dividend for 2025 of 7.50 euro per ordinary share. In the second quarter, we purchased around 1.1 billion euros worth of shares under the current 2026-2028 share buyback program. The first quarterly interim dividend over 2026 will be 1.88 euro per ordinary share and will be made payable on August 5, 2026. With that, I would like to turn to our expectations for the third quarter of 2026. We expect Q3 total net sales to be between 11 billion and 12 billion euros. We expect our Q3 installed base management sales to be around 2.9 billion euros. Gross margin for Q3 is expected to be between 55% and 57%. The expected R&D expenses for Q3 are around 1.2 billion euros, and FG&A is expected to be around 0.4 billion euros. Driven by continued strong demand, we are updating our full year 2026 guidance. We now expect total net sales between $43 and $45 billion, with a gross margin between 54% and 56%, billion numbers in euros. With that, I would like to turn the call back over to Christophe.

Thank you, Roger. I will now provide some additional details on the dynamics that prompted us to raise our guidance for the full year. The combination of continued strong momentum in customer demand and our ability to respond to that by driving higher output to strengths in our supply chain, our manufacturing, and our install teams in the field are the primary drivers of our improved guidance. Strong end market demand this year has motivated our customers to aggressively add capacity on their leading edge nodes. A number of our customers have revised their capital expenditure plans for the year, and our ability to increase output has allowed us to meet their request for additional lithography system. The dynamics are very similar in both Advanced Logic and DRAM, and the plans to build up capacity are equally aggressive. Our customers in both segments are entering into long-term agreements with their customers, providing them with longer-term visibility and the confidence to add significant capacity to support demand. In logic, there is a continued investment not only to enable the expansion of 3 nanometer capacity in support of the latest generation of AI accelerators, but also at both the 5 nanometer and the 4 nanometer nodes to support the diverse set of chips required by AI products. At the same time, the 2nm node continues to ramp rapidly to support next-generation HPC and mobile applications. And our customers are already planning investment to support the development of the 1.4nm nodes. These dynamics in the logic segments are driving both an increase in litho-intensity and greater demand for advanced lithography. We now expect advanced logic foundry-related net system sales to grow over 25% this year. In DRAM, the supply challenges driving up both DDR and HBM prices have prompted significant investments in fab expansion. Our customers are hiding meaningful capacity this year, while at the same time they plan further capacity expansion, as indicated by the plans to build multiple mega-flaps. This addition will come online in phases over the coming years. In addition, DRAM lithography intensity is rising as customers migrate to advanced nodes. This includes both EUV and DQV immersion, with EUV low NA growth driven by the increased replacement of multi-patterning with more cost-effective single-exporting. As a resource, we anticipate our memory-related net system sales to grow by over 75% this I will now turn it back over to Roger to provide details on what that means for the different parts of our business and our plans to support this growing development.

Thanks, Christoph. Starting first with our EUV business. We now expect to ship around 65 low-NA EUV systems this year, resulting in year-over-year EUV net system sales growth of over 45%. This demand is being fueled by very strong momentum in both DRAM and Advanced Logic. Moving to the DPV business. For immersion DPV, we expect about 130 shipments this year, which is similar to the output level of these systems in 2025. This year, we have worked closely together with our supply chain partners to re-accelerate our output of these systems. Shipments of dry DPV systems have also increased markedly this year. Further, greater process control intensity at advanced nodes has led to major traction when it comes to adoption of our optical and beam ED metrology products across all key customers. Given these trends in our DPP and metrology and inspection business, we expect growth in non-EUV net system sales of around 25% this year. Installed data management sales are expected to grow over 30% this year, driven by service revenue from our expanding EUV install bays, and custom demand for performance and productivity upgrades to support their increasing capacity requirements. Turning to our China-related business, we continue to expect this to make up around 20% of our total net sales for the full year as it increases in line with the overall business, mainly related to an increased demand in mainstream projects. With regard to our capacity plans, we are continuing to have very constructive conversations with our customers to better understand their demand or assistance beyond 2026. With increasing visibility into their customer plans, their customer plans, our customers have been able to share forecasts with us that extend out multiple events. You see this heightened visibility reflected in auto momentum that has remained extremely strong through the first half of the year. As a result, our backlog continues to increase with a broad mix of customers. For 2027, we are now close to being fully covered with orders for low NA EUV, and we are planning to increase our low NA EUV capacity by around 30%. Looking ahead to 2028, we have already received a significant number of low NA EUV orders. strong demand forecasts from our customers have led us to investigate a further 30% capacity increase for that year similarly for our immersion systems we intend to increase capacity by 30% in 2027 and are investigating a potential further 30% expansion for 2028 with that I would like to turn it back over to Christophe thank you Roger turning to our technology roadmap we see I&E UV continue to make good progress we are continuing to work very closely with our customers to prove

the value of ina technology for their process technology on maps in parallel the maturity of the platform is improving towards the level required for insertion into a high volume manufacturing we are also very pleased to announce in a press release earlier today that Intel Foundry is using ISML, INA-EUV technology on the Intel 18A process node to produce a subset of its Intel core ultra-series reprocessor. This milestone marks an important step in demonstrating INA-EUV readiness in a production environment. To conclude, customer demand remains very strong, with visibility now expanding several years into the future. We have responded effectively to the increasing demand and will continue investing to ensure our capacity and capability demands aligned with our customer needs. We also see that the rapid growth of AI-related demand in advanced logic and DRAM is accelerating the move toward more advanced lithography solution and increasing lithography intensity. At our next Capital Market Day, which will be held on June 10, 2027, we will update our longer-term views to reflect the market and technology dynamics since our last Capital Market Day. I look forward to seeing many of our investors there. With that, we will be happy to take your question.

Thank you, Roger, and thank you, Christophe. The operator will instruct you momentarily in the protocol for the Q&A session. Before hand, I would like to ask that you kindly limit yourself to one question with one short follow-up if 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 restore your question please press star one and one again we will now go to the first question one moment please and your first question today comes from the line of Francois Bovigny from UBS please go ahead thank you very much my first question maybe even that is ML has often described its pricing approach as being based on the value delivered to the customers.

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

Well, I think, Professor, I think I understand maybe the question of the connection between INA and the low-NA. So let me start with INA. We discussed that in the past, and, you know, every new generation of lithography system ISML ever brought to market was with a strong intention to reduce the cost of patterning. So when you look at INA single-exposed, the design of the tool, the performance of the tool will be such that it provides a cost-benefit to our customer. Now, of course, to reach that point, you need to have the right maturity of the platform. I just mentioned that we are still basically working in bringing the INA platform to the level of maturity of low NA. And, you know, when you achieve that, this is practically the time where the cost of INA is going basically to provide an advantage versus the existing technology. So I think that logic is still true. and again get implemented when the platform reached the right maturity therefore i think there's no real need to maybe look at one tool price versus the other because that logic i think was also true for low ina if you remember our discussion back in 2018-19 i think the key again for INA to be cost effective to beat the cost of low NA plus immersion multi-patterning is to bring INA to the right maturity and you know in that sense we are very happy with the press release this morning about Intel but

there is no function of low NA pricing that's all you go ahead Roger so I would say for fun in addition to that when it comes to low in a pricing of course you know that, you know, we keep on increasing the productivity of the low-N-A tools, so that, of course, that gives us a pretty strong runway for, you know, potential price improvements going forward, and you're right. I mean, value-based pricing is the concept that we follow within the ASML, and you're also right that in the current environment, of course, you know, value for customers is higher than in other circumstances. So I would agree with you that the current environment, you know, provides more flexibility for pricing than what you would have had in different days. Of course, you will also appreciate, given the long order lead times that we have, that that doesn't translate into pricing effects tomorrow. But clearly, you know, the environment that we live in today with the value that our products bring to customer is substantial. Of course, gives us flexibility on pricing more so than what you would have seen in the past. and, of course, we're executing on that as well.

When could that happen, Roger? I mean, to your point, it's not tomorrow. After tomorrow, so when is it?

So that really depends on the order situation that you have with customers. As I said, it's obviously linked to orderly times, and, of course, that varies from one to the other. But, you know, the dynamic is clearly there, François.

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

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

Thank you both.

You're welcome.

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

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

Joe, it's the balance as we see it today. The balance between demand and supply as we see it today gets us to the 30%, right? So that's the way we do it. If customers are going to come to ASML and say, ASML, we need considerably more, then just as we've been doing it in the past couple of months, you know, we need to look ourselves in the eye, we need to look at all the supply chain, and just see what can further be done. But at this stage, given the conversations we have, we think the 85 is a nice representation of the balance between what customers are asking of us and what at this stage we've been asking ourselves in the supply chain to do. If more is needed, you know, just as we've done it in the past couple of quarters, we're going to roll up our sleeves and see if more can be done.

And maybe, Joe, to answer that back to the first question. So, you know, I explained that the two times 30% is based on our existing footprint. So the question basically is really the speed at which we need to execute to support the customer demand and potentially at some point we can execute. But as I said, we will continue to both stay in sync with our customer, ask them what they need, and continue to work very hard on output. then, you know, the first mission of ASML is to provide their customer what they need, basically.

And Joe, to further build on that, we should also remind ourselves that we shouldn't just be looking at unit percent increases, right? So we're looking at 30%, which is, you know, boxes, if you like, so 30% more tools. But you should also recognize that the tool mix that we're going to ship next year is a different tool mix from the tool mix that we shipped this year. So when it comes to EUV in particular, the two mix that we're going to ship next year will be E's and S, while this year it's a combination of E's and E's. And if you recognize the difference in output, then in essence what you're looking at is not 30% improvement of, you know, wafer capacity that we're adding, but approximately 45%. And in addition to that, as you also know, you know, we're offering a whole slew of upgrade packages to the install base to customers, which gives them another significant uptick. So it's in the combination of improving the number of the capacity that we have internally to crank out unit numbers and the productivity of the tools and the upgrades of the install base. And in that combination, as Christel said, we think, you know, that we're, you know, very successful in meeting the objectives and the demands of our customers.

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

Well, I think for INA, we follow the exact same principle, which is to match our supply with our customer demand. So I think, you know, we optimize across all the products. And, you know, there's also, of course, some discussion around INA, as we mentioned. There is some discussion about insertion. So we keep also, of course, the flexibility to be able to respond to that when the time comes. So, the optimization I was referring to before is really basically across all product. Now, I think everyone understands that, of course, a lot more is being done today on low NA and the immersion, for example, than INA.

But we are not sacrificing, I would say, any of our INA supply by doing the rest of the optimization. thank you thank you next question today comes from the line of Chris Sanka from TD Callen please go ahead thanks for doing my question I told them the capacity increase to 8500 and units you are meeting the demand not under shipping is that correct and if so if for you to increase are you waiting for purchase orders from customers before you start adding more capacity and then

add a follow-up well I think you know on the first question I think that as you have noticed in the last few months I don't think we have reached yet a stable state on what the demand would be for 27 certainly not for 28 so we keep on revising basically with our customer what that demand is and again the whole goal of our supply is to follow that demand so you know I will not say that we are done with this discussion I think you see the dynamic on the market this is still pretty pretty strong so this is also you know bringing some of course I would say always tension to make sure that the full number match but that's again something we'll continue to do so short answer is yes the capacity is there to meet the demand but the demand is still fluctuating we get nicer visibility for sure for 27 even 28 but we also mostly are not at the end of of the discussion with our customer and we're not we're not waiting until we get the orders right as we said we're investigating you know the the the 30 the 110 scenario for EUV in low-N-A by 2028.

Of course, we don't have, you know, orders for 410 EUV low-N-A at this stage. So we're not waiting. We're pre-empting. But we are doing this because the demand signals that we're getting from customers that have not yet translated into full PO, the demand signals we're getting from customers are quite strong. So that's why we're investigating this and preparing as best as we can at this stage.

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

Yeah, Krishna, at a certain point in time, we're simply sold out when it comes to D models, right? So, the D uses a specific QB from ZISE, and at a certain point in time, we're just done. And we expect to be done, or maybe virtually done, but done this year. There might be one or two flipping into next year, but essentially we're done with this year. And then, you know, from that moment onwards, there is no DPOB left anymore, and therefore we'll build the ETH and Fs next year. And, of course, that mix will come with a better ASP than the mix that we have this year, because it also will come with higher productivity, as we just laid out, and also comes with a better gross margin profile. Of course, I'm not going to guide you the gross margin for next year, Krish, but it is true that the mixed effect on EUV next year will be more positive than it is this year.

Thanks a lot, Rosie.

Thank you. Your next question today comes from the line of Stéphane-Houry from OWHF. Please go ahead.

Yes, good afternoon. So my question is for 28, where you say we have already large-order volumes. but not fully booked yet can you help us understand where you stand in terms of visibility out of the 110 unit targeted is it how is it covered today and can you talk about the the times as we speak and I have a follow-up thank you well the fact that the fact that we say that we that we investigate 110 we wouldn't investigate 110 if customers were telling us that that would be a ridiculous number, right?

So, we're investigating this simply because customers are signaling to us that the demand is very, very strong. But the fact that we now start talking about having significant auto intake for 28 already like two years in advance is pretty, pretty strong, right? So, that is something that we haven't, that situation we haven't enjoyed in many, many So I think that is a very, you know, a very good underpinning of the strong market dynamics that are currently going on. You know, we're not sharing order intakes. I'm not going to give you the coverage number. But I will tell you that the demand signals that we're getting from customers also when it comes to 28 are sufficiently strong for us to seriously investigate this 110 number and the related number on immersion that we signal to you.

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

Thank you.

I think the demand is really a combination of a lot more volume and DDR. I think we are seeing some. The other, the price point of DDR, I think, is extremely strong right now. So there's some optimization in effect. I guess that's one element. The second element is, of course, the number of EUV and immersion layer, which has increased basically on the nodes that are ramping very, very strongly right now. So the 1C node, for example, which is going to be an enormous node, or even 1B, this is really this combination, which ISML on DRAM this year, and most probably the next.

Okay. Thank you very much.

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

Good afternoon, thank you for taking my questions. So my first question is on 26. When I look at your guidance on units for immersion and EUV as well as your guidance for IBM, you know I struggle a little bit to get even to the midpoint. Sorry, I'm struggling to not get above the upper end, I apologise. So I'm trying to understand if your ASPs are going higher in Q3, Q4 because of your holistic lethal attach rate on software, or is there any mix impact that is particularly meaningful. And associated with it, when I look at your full year guide on gross margin, you're essentially saying that your gross margin exit rate Q4 is around 56 to 58%, which again would suggest that your mix, your volumes, your software upgrades, et cetera, are very strong. So just trying to understand what's going on in those ASPs and systems, in particular in Q3, Q4.

It's very hard to validate your number on the phone, but let me tell you that if you look at the guidance that we have provided that, of course, there is a little bit of a mix effect in there, I would say for EUV, we had quite some demodels in the first half. The mix effect will be a bit more positive in the second half. We'll also have in the second half, you know, we'll have all the 230 configurations in there. So that's going to help a little bit on the ASB side for sure. Of course, the immersion number in the second half will be substantially higher than in the first half. As you know, in the first half, immersion was low because, you know, we had decided in 2025 we were having size prep for a substantially lower immersion number than what we're currently facing. So we started the year rather weak. We will make up for that quite substantially in the second half of the year. So I would say the guidance, to get to the guidance, you know, is around 65 EUV tools. with a slightly better ASP mix because of what I just mentioned. And, of course, immersion will be quite strong in there. And, of course, you know, the install base distance, as I also indicated, will grow over 30%. I think if you take all those elements into the mix, you should be able to get to the midpoint that I just talked about. In terms of the gross margin, if you do the analysis and if you take midpoint by midpoint, I think you're looking for the second half at a gross margin of 56% approximately. So, you know, we guided 55 to 57 for Q3. So you should be, you know, looking midpoint at approximately the same number there for Q4. And why is that? Again, it's the mix because we have quite a bit more immersion and low in AUV in there, one. Two, because we have better-priced EUV in there for the second half. Three, because of the installed base business, which, you know, remains quite strong. Four, of course, we have volume effect. And the fact that we have so much more volume in the second half than in the first half obviously gives you a positive fixed cost coverage. So it's the combination of those four as a result of which you see, you know, an improvement of the growth margin in the second half.

Yeah, I got it very clear. And if I take the things that you mentioned in previous questions, you know, the mix of EUV tools, et cetera, et cetera, is there any reason why your gross margin should not go higher, in fact, in 27 than the exit rate of 26? I guess related to that, any color you can give us on the mix of low NA tools next year, whether you add prominently the e-tool or the f-tool capturing more than 50% of the value.

So, you would appreciate I'm not going to give you guidance on the 27 gross margin, but if you look at the main drivers that I just gave you for why the second half is better than the first half, on the mixed effect within EUV, of course, that should only be better, because as I mentioned, you know, next year we're going to get a mix of e's and f's, I think it will primarily be JBEs. There will be a number of Fs in there, but the lion's share of the tools next year are going to be E's. Nonetheless, the mix next year will be better than the mix this year and will be better than the mix even in the second half of the year. If you look at immersion and EUV, well, given that we're talking about, you know, planning for 30% more immersion, 30% EUV, you know, then I would argue that that shouldn't disappoint, right, If, indeed, we're able to get those done, then clearly our high-margin scanner products, you know, with the 30% increase that we just talked about, should be positive in there. The volume effect, of course, the fixed cost coverage, you should get that effect, right, if, indeed, we're going up 30% in those two businesses. And then the swing factor, of course, is the in-sold-based business, which, of course, the service component of the install base business, you know, should be strong, right, because that simply grows with the install base almost by definition. So that part should be strong. And then the question is, how strong will the upgrade business be, you know, which in the current climate is very, very strong because customers are looking for productivity. So in the current market dynamics, you could realistically assume that. So that's a qualitative description of the different components. Again, we're not going to guide gross margin, but, you know, if your perspective on 27 is that, yes, again, that will be a bullish market where customers are looking for a lot of capacity expansion, then you could argue that the drivers of the gross margin that I just gave you should also be strong in the next year.

Absolutely. Thank you so much.

You're welcome. thank you next question today comes from the line of Nigel from Morgan Stanley please go ahead all right thanks a lot got a follow-up question on the the difference between boxes and productivity super helpful that you laid that out 30% unit growth but 45% on the actually predicted productivity that you are shipping to customers. Now, beyond productivity, I think 3800F is also providing, you know, overlay improvements. I think in the past, those were a little bit more difficult in discussions with customers. But I'm assuming that if you look at, you know, the outlook today and getting your previous comments, that maybe 45% productivity is really, you know, the lower end of what we should model for revenue in terms of EUV over that period. That's my first question.

Yeah, I'm not going to guide in any way the business for next year. I think we've said what we wanted to say about what we planned for in next year, and we're not going to translate that into your amounts yet. I think you're very well capable of putting that into your model.

No, no, percent is great. I think you're implying 3,800 apps pretty much only in 2.38, which makes sense. I mean, high productivity. It's just that, you know, given the commentary, I think in the past it was sort of a straightforward math almost that, you know, productivity gains are shared. I'm just trying to get a better sense of, you know, there's more than just the productivity and simple throughput. There's overlay improvements, et cetera. And I'm just, you know, thinking of that is what we should think about when you say there's more flexibility in pricing.

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

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

wants to get more capacity on their existing fab as quickly as possible so this creates we know a number this would be still true three beyond that so you know the need for capacity on very successful advanced node is there the upgrade products we are developing version of version system so we are really capable basically to provide product to our customer that can be implemented to every single version of our UV or immersion tool a very strong acceptance discussion where we are being requested to try to accelerate that and create new product which we plan to do in in 27 and even 28 so I will say as long as we continue to experience this huge demand existing nodes on the constraints of their existing I think we we would expect that the demand for those products would be very strong thank you thank you and I'll take the

next question and the 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 um based on my feedback investors usually compare your growth to the women's family from the spending growth and uh based on my understanding this year you have a lot of upgrades because some customers were lack of clean room etc And in 2027 and 2028, in theory, we are having more cringons coming out of the states. So, therefore, there will be more greenfield investment. Do you think you will be, therefore, in a better position to grow comparing to WFP, comparing to what we are seeing in 2026?

The sound is not very good. I don't think we understood your question. I apologize. Can you try again? Maybe make it a bit shorter or so.

Yeah, sure. So, basically, 2026 has a lot of cleanroom constraints, and 2027 and 2028 will be more cleanroom space-based greenfield expansion. And in my view, that puts you in a better position to outgrow WFPE or at least grow it in value with WFPE. Do you think coming into 2027 and 2028, you'll be able to outgrow or grow more than WFPE for your business compared to 2026?

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

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

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

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

Okay, thank you.

Thank you. Next question today comes from the line of Chris Cato from Wolf Research. Please go ahead.

Yes, thank you. good morning. The first question is about the capacity additions and basically how long does it take to affect the capacity additions? If you were to take a decision, you know, now to add more capacity, when would that capacity be effective for shipment?

And if you can go through some of the steps that you would need to take, I suppose that would suppose that the supply chain would be a big part of of any decisions to add capacity yeah it's it's a Chris it's a combination right so we have as Christophe said obviously we're doing work here so you know we're freeing up cabins so making sure that cabins are fully dedicated to output right now we will to have prototypes and and R&D tools in cabins so we're finding in another hole for those tools such that all the cabins that we have here are fully dedicated to output. We're looking at reducing cycle time. So those are the key things that we're doing here within ASML. And, of course, we're working with our supply chain to, in essence, you know, make sure that they do the same things. Just as I've said, they've made, as we did, they've made big investments in the past on what we call the long lead time items. So now it's just leveraging those investments from the past and making sure that we get the maximum, you know, out of that capacity. And in terms of how long does it take, well, you know, I think the 30% that we talked about gives you a good proxy for that. You will, in essence, you know, as we've said before, every year you will see us end with a move rate that is higher than the move rate that we enter the year. And so we're continuously building up move rate quarter on quarter. and the end result of the plans as we currently have it is the 30% that we mentioned for next year and the 30% that we're investigating for 2028. So that's the answer, I think, to the timing question that you just wrote.

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

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

Thank you. Next question today comes from the line of Mehdi Hussaini from Susquehanna. Please go ahead.

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

I think the answer to this question today is very simple. It's really an end. So I think that our customer wants to buy the fastest possible tool. This is why we had a pretty fast migration towards the 3800E. I think this has become you know today the tool customer really wants and they also want to upgrade existing system because typically they sit on different technologies so the new tool moving forward you know I'm going to turn on a turn and then we go to 1.4 or a lot of the upgrade will be for the nodes that come before that so we are really in the end city appetite for both upgrade but So, to define the transition from E to F is going to be, again, the maturity of the platform and then our ability to RAM going from E to F. But that's what is with the E. Today, our customer, I think, short answer, they want both, and they want as much as both as possible.

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

Well, I think the F will certainly be used for 1.4 nanometer because the timing is matching, basically, the timing of the F. For 2 nanometer, I think what we also allow between the E and the F is to what we call mix and match the product. So when it comes to imaging overlay, the customer won't see a difference. They will just see a faster tool. So that also means that when the tool is ready, if there's need for more capacity for 2 nanometer, then the F would definitely...

And what's the update assumption for high NA UV system and REV recognized this year, 2026?

You mean the number of tools that we REV registered this year? We've said 45. Yeah, 45. It's still a review for this year. You're welcome.

Thank you. Our next question today comes from the line of CJ Muse from Cantoffice. Cheryl, please go ahead.

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

Yes, T.J., we're not going to quantify that guidance, but you are right that we have been managing our OPEX quite nicely, so FG&A and R&D. You also know that we said that we believe that if we look at the R&D team that we have today, we believe that, you know, also with the reorganization that we talked about before, that we can get even more value out of the team than what we enjoy so far. So, we believe that with the, you know, with the current team that we have in R&D, there is a lot of value and a lot of innovation roadmap that we can still pursue. So, you know, if you contrast the way we've done it in the past. In the past, you know, we increased the headcount of R&D quite substantially. I would say that today we believe that with the team that we have today, we can really entertain a very aggressive roadmap going forward. So, all in all, I think you will continue to see us manage both R&D and SG&A quite nicely. And as a result of that, the operating leverage that you apply, I think the operating leverage will indeed, you know, become better in the quarters and the years to come.

Very, very helpful. And then I guess on your manufacturing footprint, I guess a couple quick questions. Number one, what would it take for you to actually look to add there? And then I guess number two, what's the fungibility around mirrors and other optics between low N-A and high N-A?

I'm just curious if you are kind of sold out on low N-A, does that create the situation where customers you know you know really desperate for supply might adopt INA sooner thanks so much well I think maybe starting with the second question I think that you know as the maturity of DNA platform improve then of course I and a become a potential option also for capacity and I think that's an option that it will become more and more valid of the time because the tool at some point of time will cross this maturity threshold and if it does it can do the job and as I explained before can even provide some some benefits so I think that's that's I would say potentially in another opportunity moving forward assuming that we continue the good progress we have seen on maturity one of the reason also our customer are testing the tool on product, as you have seen with the press release about Intel today.

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

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

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