Earnings Call Transcript - ASML Q4 2025

Monique Mols, Head of Media Relations

Good morning, everyone, good afternoon, depending on where you are, maybe even good night. Welcome to the Q4 full year 2025 financial results press conference. You may not see that when you're dialing in online and you're watching us online, but we are actually in a different location than we were last year. Today, we host the press conference in our training center in the ASML Academy, and that is located at the Brainport Industries campus in Eindhoven. And this is actually the place where we plan our expansion in the Netherlands. So we thought it would be a good idea to invite everyone here in the room to see what our new location is going to look like. There's nothing there to see yet, but this is where we are planning our expansion. And Christophe will talk more about that later in the presentation. My name is Monique Mols, I'm Head of Media Relations. So welcome to you all. I'm really happy to see that there are people in the room and people online. For those online, if you have a question later on, you can fill out the form on the website, and we will take your question from here. If you're in the room, my colleague, Mark will walk around with a microphone and pick up your question. Sorry. So this is our annual results. Forward-looking statements for those who like it. So again, we are here at the Academy. We have several of those training centers all around the world. Here, we have quite a big center where, on average, 400 employees come here every day to get training. So they actually work on the machines that our customers have in their fabs. And every year, we have about 26,500 people coming here to train. So this is a very important location for us. And we're very happy that we can host a press conference here today. With that, I'm not the only one who's going to talk to you today, of course. I have Christophe Fouquet; and our CFO, Roger Dassen, and they will talk you through the numbers, through the developments, and everything that's happening at ASML. So I would like to invite on stage, Christophe Fouquet.

Christophe Fouquet, CEO

Thank you very much, Monique. So Roger will be the one doing the good numbers later on. As you have noticed, we finished the year very, very, very strong with a record quarter record year, record booking. And this is basically a sign of the direction this industry is taking. We are very happy, of course, with the work the ASML team has done, being able to execute on such a big quarter in Q4 and also prepare us basically for 2026. So, a lot of good news today. And again, Roger will get into the numbers. I'd like to say that we welcome also that clarification. In the course of 2025, you have seen that sometimes the business was still a bit uncertain. The last 3 months have really clarified basically at least the horizon for 2026 and most probably a bit beyond that. So before we go into the numbers, I'd like to provide you some context about what's happening in the industry, what is driving basically this type of news today. And of course, the very first thing is AI. You have been hearing about AI already for a couple of years. You have heard major, major announcements about AI infrastructure. I think from the very beginning in ASML, we have been a believer that AI will be a big thing. And this is true because as with semi before, any major application moving forward will not only use semiconductors, but it will also use AI. And I put a few examples of those applications on this slide. It's pretty much everything you can think about when it comes to technology, when it comes to the future of society, this will all rely on AI. If you look at the opportunity, this has been said also before, this will drive basically advanced technology, advanced logic, advanced DRAM. This will also basically drive the entire data infrastructure. And the effect AI can have on the overall GDP is pretty big. In fact, if you look at the U.S., even in 2025, AI was counting for a very large part of the growth, and we expect that basically to be applied to the entire worldwide GDP. So the opportunity is there. What was a bit, I would say, frustrating for us for a while is that where we heard all those news, we heard about all those investments, but basically, this was not yet translating into capacity addition at our customer. I think what the last 3 months have done is change that. We have seen our customer basically moving forward. They start to really believe in the sustainability of the AI demand. That's true for memory, that's true for logic. And as a result, they started to invest. They started to plan for capacity. And of course, this will drive demand for our product at ASML. And when you look at the demand for our product, what's interesting with AI is that this basically touches on all products. Of course, AI is going to require very advanced chips, and this is going to drive EUV, for example. So this year will be a big year for EUV, Roger will talk about that. It's going to drive advanced inspection tools. But at the same time, AI needs a lot of data generation, a lot of sensors, and this will still be created by the use of more mature technology such as DUV. So AI will have also this effect basically to really drive our entire product portfolio in the coming years.

R.J.M. Dassen, CFO

Thank you, Christophe. And good morning, good afternoon, everyone. So indeed, I will present the financials for '25 and the outlook. Christophe said it clearly, Q4 2025, a record quarter by any standard. It was a record quarter in terms of sales. It was a record quarter in terms of order intake. It was a record quarter in terms of cash flow generation. On the back of all the good developments that Christophe just shared with you. So I won't call them out here, but just looking at the quarter, it's pretty clear that it was indeed a very strong quarter. If we look at 2025, and if we look at the total business for ASML, we ended the year with EUR 32.7 billion in net revenue, a gross margin of 52.8%. And you see the key elements in here, a net income of EUR 9.6 billion and an EPS earnings per share of close to EUR 25 per ordinary share. All in all, a very, very strong year in which we also paid back and returned quite some money to our shareholders. Very clearly, EUV was the main driver behind it. And you will see it in the pie chart that I will share with you in a moment. It will clarify that it is particularly the leading technology that really contributed to the growth. So both immersion but first and foremost, also EUV. So EUV grew 39% in comparison to last year to 2024, a mix of both more tools and significantly higher sales price of the tools because most of the tools that we sold, most of the low NA tools that we sold in 2025 were 3,800 tools, which, as you know, saw an increase in productivity from 160 wafers per hour to 220 wafers per hour and of course, a commensurate increase in the sales price. And obviously, we also had the recognition of a number of EXE tools, High NA tools. So it's in that combination that really EUV was the big driver of growth for us this year.

Christophe Fouquet, CEO

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

Roger Dassen, CFO

If you look at the installed base business at EUR 8.2 billion, that comes pretty close to the total revenue for ASML in 2017. That just tells you how unbelievably rapidly the company grew. And the fact that we have such a big number in terms of installed base business, obviously, also provides a lot of resilience for the company. So therefore, it's an important number for us to focus on and to continue to increase.

Christophe Fouquet, CEO

We talked also last quarter about us starting to help our customer with what we call 3D integration. So I told you, when you cannot put all the transistors in one chip, you just make more chips and bring them together with 3D integration. We have our first system, the TWINSCAN XT:260 that was shipped last quarter, lot of interest from our customer.

Monique Mols, Head of Media Relations

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

Sarah Jacob, Analyst

Regarding the job cuts that you announced today, what kind of restructuring costs or charges can we expect from this?

Roger Dassen, CFO

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

Sarah Jacob, Analyst

I have a question about the discussions surrounding capacity expansion from your customers. There have been many announcements recently. How much of those announcements actually pertains to genuine capacity expansion? Also, how much is due to CapEx inflation, given that wafer costs are rising? How sustainable is this situation? Can you provide some insights on that?

Christophe Fouquet, CEO

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

Monique Mols, Head of Media Relations

Okay. Let's turn to an online question and get back to you then. So a question from Financial Times. Please can you talk a bit more about how the AI memory shortage is driving your business?

Christophe Fouquet, CEO

I will start. I think that it's difficult to say if logic or DRAM is the bottleneck for AI today. I will still pick mostly memory at this point of time. And the reason for that is that when it comes to memory, the demand for high bandwidth memory, which is the AI memory is extremely high. But the demand for DDR memory, which is for mobile PCs is also very high. And as a result, we have seen basically the price of DRAM going up significantly in the last few weeks. Therefore, there's a need for capacity. And our memory customers are moving very aggressively. I mentioned a few examples. And the reason for that is when you have such a demand for capacity, capacity is also market share.

Monique Mols, Head of Media Relations

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

Unknown Analyst, Analyst

How does the stabilizing AI market influence your outlook on job growth in Eindhoven?

Christophe Fouquet, CEO

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

Unknown Analyst, Analyst

So I have 2 questions. One relating to the reorganization and the other one is to being prepared for this huge demand in new machines. First of all, the reorganization we refer to the technology team, does it mean that something changes within the internal structure as well regarding D&E or R&D?

Christophe Fouquet, CEO

Yes, the transformation, the change in the organization will be mostly around D&E, not only but mostly around D&E. The leadership I was referring to is mostly within D&E.

R.J.M. Dassen, CFO

What we've done, as you know, in the past couple of years is to put in what we call the long lead time items, which means that everything that takes, let's say, longer than 12, 18 months to realize is in place in order to get to a much higher volume.

Christophe Fouquet, CEO

The key is to be prepared basically to serve the whole market with EUV and the high productivity platform program we have put in place and we're executing on allows us to do that exactly.

R.J.M. Dassen, CFO

I think the reality is we should ask ourselves a question what was going on in previous years. What was going on in previous years is that over the COVID period, we built up a huge backlog because we underserved the Chinese market during the COVID days.

Monique Mols, Head of Media Relations

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