ASML（Minutes）: Committed to enhancing equipment efficiency rather than increasing equipment quantity
ASML released its Q2 2025 financial results (ending June 2025) before the U.S. stock market opened on the afternoon of July 16, 2025, Beijing time. Key points are as follows:
Below are the minutes of ASML's Q2 2025 earnings call. For an interpretation of the financial report, please refer to ASML: The Hot Nvidia, but the Lukewarm Lithography Machine?
I. $ASML(ASML.US) Review of Core Financial Information
1. Second Quarter Performance
Revenue: Total net sales were EUR 7.7 billion, at the upper end of the company's expectations, mainly due to the revenue recognition of one high NA system and installation upgrade services. System net sales were EUR 5.6 billion, including EUR 2.7 billion from EUV sales and EUR 2.9 billion from non-EUV sales. Of the system net sales, logic chips accounted for 69%, with the remaining 31% from memory. Service business revenue (installed base management sales) exceeded expectations, reaching EUR 2.1 billion.
Orders: Net system orders for the second quarter were EUR 5.5 billion, with EUV lithography machine orders at EUR 2.3 billion and non-EUV lithography machine orders at EUR 3.2 billion. In this quarter's net system orders, logic chip orders accounted for 84%, and memory orders accounted for 16%. The backlog at the end of the second quarter was approximately EUR 33 billion. In addition to the usual changes in system sales and order volumes, this also reflects a EUR 1.4 billion adjustment in the second quarter due to customer responses to 2024 control measures.
Profit: The gross margin for the quarter was higher than expected at 53.7%, benefiting from the growth of installation upgrade services, cost reductions from one-time projects, and lower-than-expected tariff impacts, partially offset by the dilution effect of high NA system revenue recognition. Operating expenses were in line with expectations, with R&D expenses at EUR 1.2 billion and SG&A expenses at EUR 299 million. The effective tax rate for the second quarter was 18.1%. We expect the annualized effective tax rate for 2025 to remain around 17%. Net income for the second quarter was EUR 2.3 billion, accounting for 29.8% of total net sales. Earnings per share were EUR 5.90.
Balance Sheet: Total cash, cash equivalents, and short-term investments were EUR 7.2 billion.
Shareholder Returns: The total dividend for 2024 was EUR 6.40 per ordinary share. The final dividend per ordinary share was EUR 1.84. The interim dividend for the first quarter of 2025 was EUR 1.60 per ordinary share, payable on August 6, 2025. In the second quarter of 2025, approximately EUR 1.4 billion worth of shares were repurchased, bringing the total share repurchase amount to EUR 5.8 billion by the end of the second quarter of 2025.
2. Guidance
2025 Revenue Guidance: Full-year revenue for 2025 is expected to grow by approximately 15%. For the China business, revenue is expected to account for more than 25% of total revenue this year. The company expects EUV capacity for advanced customers to increase by about 30% compared to 2024, with overall EUV revenue also expected to grow by about 30% year-on-year; combined revenue from deep ultraviolet (DUV) and metrology and inspection systems is expected to remain flat compared to 2024; installed base management revenue is expected to grow by more than 20%.
Q3 2025 Guidance: Net sales are expected to be between EUR 7.4 billion and EUR 7.9 billion. Service business revenue is expected to be around EUR 2 billion. Gross margin is expected to be between 50% and 52%. R&D expenses are expected to be around EUR 1.2 billion, and SG&A expenses are expected to be around EUR 310 million.
Gross Margin: The gross margin for 2025 is expected to be around 52%.
3. Market Conditions
Artificial intelligence is a key driver of growth for memory and logic chips.
EUV is increasingly critical in meeting AI-driven cutting-edge technology capacity.
Demand is expected to be more concentrated in the second half of the year. AI is driving growth in logic and memory demand, with increased EUV layers being beneficial, but customers face challenges from macroeconomic and geopolitical uncertainties.
II. Detailed Content of ASML's Earnings Call
2.1 Key Information from Executive Statements
1. Technological Progress:
1) Low NA Platform (e.g., NXE:3800E): Significant progress has been made with the NXE-3800E, achieving a final configuration of 220 wafers per hour. All installed equipment upgrades are expected to be completed by 2025. The new NXE-3800E has been shipped in full specifications. At the latest DRAM node, customers can replace complex multiple DUV processes with a single EUV exposure, reducing costs, shortening cycles, and improving yield.
2) High NA Platform: Collaboration with customers to advance EXE:5000 technology, with the first EXE:5200B delivered, capable of processing at least 175 wafers per hour, a capacity increase of about 60% compared to the EXE:5000; the high NA platform helps customers transition from multiple exposure DUV to single high NA EUV, achieving cost reduction and patterning optimization.
3) The company expects the end market to shift more towards advanced logic and DRAM, driving demand for high-end lithography systems; the advancement of low NA EUV and high NA will reduce technology costs and promote the conversion of multiple pattern layers to single EUV exposure, further increasing the use of EUV layers.
2. Tariff Impact: The direct impact of tariffs on the company's performance comes from the import and export of U.S. products, but the company is working with customers and suppliers to minimize it; the indirect impact is more complex, depending on the potential impact of tariffs on the global economy and market demand.
3. Market Dynamics: For logic chips, we expect system revenue in 2025 to grow compared to 2024, as customers are increasing capacity for authorized nodes. For memory chips, we expect system revenue in 2025 to remain strong as our customers transition to the next-generation nodes to support the latest HBM and DDR5 products.
Advanced customer EUV capacity in 2025 will grow by about 30% year-on-year, with the higher productivity of the NXE:3800E meaning that increased capacity demand can be met with a stable number of systems, at higher average selling prices and gross margins.
4. Gross Margin Expectations: Gross margin in the second half is expected to be lower than in the first half, mainly due to the dilution effect of a large number of high NA system revenue recognitions in the second half. Lower upgrade revenue and some one-time expenses contributed positively to the first half's gross margin, but we do not expect these positive contributions in the second half.
5. Future Expectations: Revenue opportunities in 2030 are expected to be between EUR 44 billion and EUR 60 billion, with gross margins expected to be between 56% and 60%.
2.2 Q&A
Q: Although EUV capacity remains strong, is there any change? Why is it slightly lower than expected?
A: We expect overall EUV growth of about 30% this year, with the difference mainly in the installed base business, which involves upgrading previously delivered but lower-configured equipment to the full specification of 220 wafers per hour. This part of the revenue is classified as upgrade service business rather than system sales. The 10% difference from the previous 40% growth is actually reflected in the installed base business. Additionally, even if the number of EUV units purchased by customers is lower, the 3800 system's higher average selling price and gross margin still benefit overall revenue and profitability.
As for DUV, the market share in China exceeded expectations, rising from the previously expected slightly above 20% to over 25%, indicating that DUV business is tilting towards the Chinese market.
Q: If customers do not adopt high NA and continue using low NA multiple exposures, is it really revenue-neutral for ASML? Since high NA brings more value to customers, does it mean ASML can set higher prices?
A: Yes, as long as production efficiency, overlay, and imaging performance are improved, tool value can be enhanced and prices can be raised accordingly, and the same applies to high NA; its simplified process and shortened cycle will help customers advance to more advanced nodes, driving lithography intensity and continuing the successful path of EUV development.
Q: Why do you think lifting the ban on AI chip exports to China is a good thing? Does this mean you expect the role of the Chinese market or emerging markets in the ecosystem to increase?
A: Although lifting the ban on AI chip exports to China may not directly significantly increase ASML's shipments, from a broader perspective, it is beneficial for the healthy development and openness of the global semiconductor ecosystem, which is a positive move.
Q: In the first quarter, it was said that the revenue share in China exceeded 25%, while the previous expectation was 20%. Do you think the accelerated growth of the DUV business in China is due to customers stocking up in advance for potential further export restrictions next year?
A: Our expectation for the DUV business in the Chinese market remains that the annual revenue share will exceed 25%, with no substantial change; current demand remains strong, and there are no signs of customers purchasing in advance to avoid future restrictions.
Q: How are customers doing with high NA at the 1.4-nanometer process node?
A: Currently, customers are mainly in the verification stage, aiming for mass production preparation in 2026–2027; with accumulated usage experience and data support, customer recognition of the equipment is improving, and high NA equipment is progressing well, but several months of verification are still needed, and specific order details are not disclosed at the request of customers.
Q: In the past 90 days, due to geopolitical and export policy uncertainties, customers have become more cautious about future capital expenditures, with frequent discussions but unclear outcomes, leading to decreased visibility for ASML and more conservative market expectations. Regarding comments on 2026. I would like to better understand what changes have occurred in your communication with customers over the past 90 days.
A: Due to the unclear U.S. tariff policy, customers face high uncertainty when evaluating investments in the U.S., coupled with the potential indirect impact of tariffs on the macroeconomy, leading customers to generally delay decisions and adopt a more cautious attitude.
Q: What is the main reason for the quarter-on-quarter decline in gross margin in the fourth quarter? Is it solely due to product mix changes?
A: High NA system shipments will increase in the second half, but upgrade services may decline, and the one-time cost benefits in the first half cannot be sustained, leading to lower gross margins in the second half.
Q: From an order volume perspective, what level of orders is needed in the third quarter to ensure revenue growth in 2026?
A: Order volume fluctuates greatly and cannot accurately reflect business momentum, so we will not provide guidance for 2026 performance, nor do we intend to indirectly disclose related expectations.
Q: In the second quarter, how were the EUR 2.3 billion EUV orders distributed between logic chips and DRAM? And what are the shipment volumes for the approximately USD 3 billion DUV orders this year and next year?
A: EUV orders cover multiple customers, with a larger share for logic chips; DUV orders are nearly full, and after filling this year's demand gap, the remaining orders will be used in 2026.
Q: Why did the EUV revenue expectation drop from 50% to 30%, and what changes occurred in equipment sales? Is it due to reduced risk in the logic field, or are there other reasons?
A: Our initial expectation for EUV growth was 40%, not 50%; the shift from equipment sales to upgrade business led to a decline in system business but growth in upgrade business, so the overall growth rate remains around 40%. This is mainly because the NXE:3600D model is more dominant than the NXE:3800E, and the production efficiency of a single tool has improved, achieving about 30% capacity growth despite a reduction in quantity.
Q: Why do you think uncertainty has increased in the past 90 days? Is it due to tariff issues, changes in customer construction plans (such as adjustments in the Chinese market or North American capacity), or mainly from a macroeconomic perspective?
A: In the past three months, uncertainty in tariff negotiations has increased, and customers are more doubtful about the final outcome and its impact on GDP and demand, leading to more cautious decision-making and a general wait-and-see attitude.
Q: Does the 30% efficiency improvement support customers in achieving 30% capacity growth, and will future equipment sales still depend on customers' willingness to expand capacity?
A: ASML focuses on customers' total wafer capacity demand rather than the number of equipment; by improving equipment efficiency to meet capacity growth, reducing the number of required equipment, thereby increasing gross margin and customer value.
Q: Although there is uncertainty in 2026, customers are still preparing for growth, but with tariff negotiations unclear, is it possible for industry investment to slow down overall?
A: The fundamentals of customers remain strong, especially in the field of artificial intelligence; the uncertainty brought by geopolitics and tariffs makes customers more cautious, and resolving these issues is crucial for restoring customer confidence and stability, and we hope this is only a short-term impact.
Q: Can you elaborate on how lithography density benefits from high-end memory, and how does this help lithography density? Will this trend continue into next year? ASML focuses on leveraging a universal platform. Can you provide an update on this aspect?
A: The adoption rate of EUV among DRAM customers has significantly increased, simplifying process flows and accelerating performance achievement, and this trend is expected to continue for the next 3-5 nodes. ASML plans to continue improving the productivity and overlay accuracy of the current EUV platform until the late 2020s. When further improvements on the current platform become increasingly difficult, the next-generation platform will be deployed, allowing the company to continue this technological upgrade process over the next 10 to 15 years.
Q: The revenue and orders in the storage sector slightly declined this quarter, but what is the trend of AI-driven storage demand such as HBM? When is this demand expected to be reflected in storage orders?
A: The revenue from the storage chip business is expected to reach about 70% of the 2024 level in 2025. This quarter, the proportion of storage orders fell to about 16%, a significant drop from the previous quarters, especially the first quarter's 40%, with order volumes themselves fluctuating greatly and being unstable.
Q: Given that sales in the Chinese market exceeded expectations this year, how do you think this will affect next year's revenue expectations for the Chinese market? Have current restriction changes altered your judgment?
A: ASML does not make specific predictions for 2026, but the long-term demand in the Chinese market remains healthy, with no signs of sharp decline or excessive expansion, and the company is prepared to support the continued development of this market.
Q: Please explain the order adjustments in the backlog: what proportion of EUV and DUV orders are involved? Are these adjustments for multiple customers or individual customers? Can you provide more details?
A: About EUR 1.4 billion of orders in the backlog were canceled due to adjustments related to last year's Chinese export restrictions, and the vast majority of the adjusted orders are in the DUV business.
Q: Setting aside the impact of tariffs, do you agree that obtaining a cumulative EUR 6 billion in orders over the next two quarters is sufficient to ensure stable growth in 2026? And will orders exceeding this level drive higher growth?
A: ASML will not discuss orders in depth, and there are many assumptions related to the composition of orders and the year.
Q: Do you agree that lithography density in the logic end market will not significantly increase before 2030 until high numerical aperture EUV technology becomes widespread? Is there a possibility of transitional technology leading to increased lithography density at the 1.4nm node before then?
A: After the EUV layer count stabilizes at the 2nm node, lithography intensity will increase at the 1.4nm and later nodes with the popularization of new architectures, increasing EUV layer count; logic customers are optimistic about future demand for more EUV layers, and the market will continue to compete and progress driven by innovation.
Q: Please explain the reason for the quarter-on-quarter decline of about EUR 400 million in installed base management revenue from the third quarter to the fourth quarter, especially the contribution related to the 3800 equipment, and the impact of DUV shipment volume on revenue.
A: Installed base management business was particularly strong in the first half, and a slight decline is expected in the second half; however, as more equipment goes out of warranty, service revenue will continue to grow, and the overall change is mainly normal fluctuations, with rounding of numbers possibly leading to seemingly large fluctuations.
Q: Can you explain in simple terms the achievement of high NA tools processing 175 wafers per hour, and what key milestones do customers need to complete before confirming mass production and dilution? Has the project reached the breakeven point?
A: High NA technology is currently in the first stage, with customers using EXE:5000 equipment for verification, and imaging and overlay results are good; the shipment of EXE:5200B equipment marks the entry into the second stage, which is to verify the maturity and repeatability of the equipment in mass production, and this year and next year, the company will invest a lot of effort in this area.
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