ASML Earnings Call: EUV Strength and Strategic Reset

Asml Holding N.V. ((ASML)) has held its Q4 earnings call. Read on for the main highlights of the call.

ASML Earnings Call: Strong Growth, Strategic Reset Amid AI Boom

ASML’s latest earnings call struck an overall upbeat tone, blending record financial results and powerful AI-driven demand with a candid acknowledgment of internal growing pains and regional headwinds. Management emphasized that 2025 marked a record year across sales, orders and cash flow, underpinned by surging EUV demand and a rapidly expanding installed-base and metrology business. While a sizable reorganization, softer China contribution and weakness in Deep UV lithography weighed on parts of the narrative, executives framed these issues as manageable against the backdrop of robust momentum and a constructive multi‑year outlook.

Record Quarter and Year Underscore Earnings Power

ASML delivered a record Q4 2025 and a record full year, underlining its central role in the semiconductor equipment cycle. Full‑year 2025 net revenue reached EUR 32.7 billion, with net income of EUR 9.6 billion and earnings per share of roughly EUR 25 per ordinary share. The company highlighted strength across both new system sales and its installed‑base business, with order intake and cash generation also hitting record levels. For investors, these numbers confirm that ASML is converting its technology leadership into significant scale and profitability even as parts of the chip industry are still normalizing from recent cycles.

Margins Hold Firm in a High-Investment Phase

Profitability remained strong despite heavy investment. ASML reported a full‑year 2025 gross margin of 52.8%, at the upper end of typical capital‑equipment peer ranges. Looking ahead, management guided 2026 gross margins to remain between 51% and 53%, suggesting that rising R&D and reorganization costs will be absorbed without a major hit to unit economics. Maintaining this margin profile while scaling revenue and navigating mix shifts between EUV, Deep UV and services is a key signal that the company’s pricing power and cost controls remain intact.

EUV Outperformance Drives the Growth Story

Extreme ultraviolet (EUV) systems remain the main engine of ASML’s growth. EUV system revenue grew 39% year‑over‑year in 2025, and management expects EUV to drive a substantial portion of shipments in 2026, particularly from low‑NA EUV platforms in high‑volume manufacturing. The company framed EUV as critical to advanced logic and memory roadmaps, which are being reshaped by AI workloads requiring denser, more power‑efficient chips. For equity markets, this sustained EUV momentum supports the view that ASML will continue to command a unique, high‑barrier position in the semiconductor equipment value chain.

Installed-Base Expansion Strengthens Recurring Revenue

ASML’s installed‑base business, which includes services, upgrades and options for existing tools, grew 26% in 2025 to EUR 8.2 billion. This segment is increasingly important for investors because it provides recurring, less cyclical revenue and helps cushion swings in new tool demand. Management emphasized that as the fleet of EUV and advanced DUV tools grows, so does the opportunity for service, productivity upgrades and performance enhancements. This expanding base is a key pillar of ASML’s resilience and long‑term earnings visibility.

Metrology and Inspection Gain Traction

Metrology and inspection tools, which help chipmakers improve yield and control process variability, posted nearly 30% revenue growth in 2025. Demand was driven by needs in overlay metrology and multi‑beam e‑beam inspection, both of which are essential for advanced nodes where tolerances are extremely tight. Management pointed to this segment as an important complement to lithography, enhancing customers’ ability to fully utilize ASML’s scanners. The strong growth here broadens ASML’s addressable market and creates additional cross‑selling and stickiness with leading fabs.

Productivity Breakthroughs Boost Customer Economics

ASML highlighted significant productivity improvements across its tool portfolio, directly affecting customers’ cost per wafer. EUV system productivity improved by more than 40%, while throughput on its 3,800‑series tools increased from 160 wafers per hour (wph) to 220 wph. In immersion lithography, the NXT:2150 now delivers over 300 wph, and the NXT:870B exceeded 400 wph. The company also shipped the first TWINSCAN XT:260 system for 3D integration. These advancements enable chipmakers to process more wafers on the same equipment, reinforcing ASML’s value proposition and supporting pricing power.

High-NA EUV Hits a Major Milestone

The company reached a key technological and commercial milestone with revenue recognition and customer acceptance of the first 5200B High‑NA EUV tool, positioned as high‑volume‑manufacturing capable. This marks the transition of High‑NA from pure R&D into early commercial deployment. While volumes will take time to ramp, the step validates ASML’s long‑term roadmap for enabling future technology nodes, and it signals to investors that the next wave of lithography innovation is moving from promise to reality.

Dividends and Buybacks Underpin Shareholder Returns

ASML continues to combine growth with substantial capital returns. Management proposed a total dividend for the year of EUR 7.50 per share, including an interim payment of EUR 1.60 and a proposed final dividend of EUR 2.70, subject to shareholder approval. On buybacks, the company executed EUR 7.6 billion of its existing EUR 12 billion program, or about 63% of the authorization, and simultaneously announced a new EUR 12 billion share repurchase program to be executed over three years. While not all of the prior buyback was completed, the renewed authorization signals confidence in long‑term cash generation and a continued commitment to returning capital.

Positive 2026 Outlook Anchored by EUV and Services

Management offered a constructive view for 2026. ASML guided full‑year net revenue between EUR 34 billion and EUR 39 billion, with the midpoint implying roughly 12% growth on top of about 16% growth in 2025. For Q1 2026, revenue is expected in a range of EUR 8.2 billion to EUR 8.9 billion. The company anticipates gross margins of 51%–53% and an effective tax rate around 17%. Executives highlighted continued strength in EUV shipments along with ongoing expansion of the installed‑base business as the primary growth drivers, even as certain regional and product‑mix headwinds persist.

R&D Ramp Supports Ambitious 2030 Targets

ASML is investing heavily to sustain its technology lead, with R&D spending rising from EUR 2.5 billion to EUR 4.7 billion. These funds support roadmaps across EUV, including High‑NA and next‑generation high‑productivity platforms, as well as continued innovation in metrology, inspection and Deep UV. Despite the cost and complexity implications, management reiterated its long‑term 2030 revenue target range of EUR 44 billion to EUR 60 billion, paired with a gross margin ambition of 56%–60%. For investors, this reiteration underscores management’s conviction in secular demand trends and in ASML’s ability to monetize its technology pipeline.

AI and Capacity Expansion Fuel Structural Demand

The earnings call repeatedly emphasized AI as a powerful secular driver of lithography demand. Management described accelerating AI‑related needs across both logic and memory, translating into higher lithography intensity and rising wafer volumes. One example cited was the projected increase in wafers required for certain AI products, with some leading GPUs expected to need approximately four times more wafers by 2027 than they do today. This trend supports robust demand across EUV, Deep UV, and metrology and inspection tools, bolstering the case that ASML’s growth is tied not just to cyclical recovery but to structural changes in compute and data‑center architectures.

Workforce Reduction and Reorganization Target Agility

Despite strong fundamentals, ASML is undertaking a significant restructuring, planning to reduce about 1,700 roles, including roughly 1,600 in its technology organization and about 100 in IT. Management also noted a steep reduction in the number of leaders, from roughly 4,500 to around 1,500, acknowledging that the decision is painful and will create short‑term disruption and uncertainty for employees. The rationale is to simplify structures, increase engineering bandwidth and restore agility in decision‑making. For investors, the move highlights how rapid growth and scaling can introduce organizational friction, but it also reflects a proactive effort to streamline for the next phase of expansion.

China Normalization Weighs on Sales Mix

ASML flagged a notable decline in system sales to China, with an approximate reduction of EUR 850 million. The company expects China’s share of total sales to normalize to around 20% in 2026, down from roughly 29% in 2025, as the post‑COVID backlog clears and export constraints and customer spending patterns shift. While this represents a headwind for top‑line growth and Deep UV demand in particular, management framed it as a normalization rather than a structural collapse, with other regions and segments expected to offset much of the impact.

Deep UV Softness Highlights Product-Mix Challenges

Deep UV (DUV) lithography revenue declined 6% year‑on‑year in 2025, with much of the weakness tied to lower China demand. While EUV is capturing investor attention as the primary growth driver, DUV remains critical for many existing nodes and for mature capacity expansions. The decline underscores how regional shifts and customer spending choices can influence ASML’s product mix and cyclicality. Management did not signal a structural decline in DUV, but the segment’s softness is an area to watch as China normalizes and other regions ramp mature‑node capacity.

Unfinished Buyback Leaves Some Investors Wanting More

Although ASML executed a substantial EUR 7.6 billion of its EUR 12 billion share repurchase authorization, it did not fully complete the program. The company did not focus on specific reasons, but the partial execution may leave some shareholders questioning the pace or timing of repurchases. Still, the launch of a new EUR 12 billion buyback over three years suggests that management remains committed to returning excess cash, and sees sufficient balance‑sheet strength to support both aggressive R&D and ongoing capital returns.

Managing Organizational Complexity and Execution Risk

Management openly acknowledged that rapid growth in revenue and R&D has created organizational complexity, slowing agility and adding management layers. The restructuring is designed to simplify the organization, but it also brings execution risk and potential near‑term impacts on morale and productivity. R&D’s scale-up from EUR 2.5 billion to EUR 4.7 billion has been a key driver of that complexity. Investors will be watching whether the reorganization successfully restores nimbleness without disrupting critical development programs, especially in EUV and High‑NA.

Restructuring Costs and Customer Bottlenecks Add Near-Term Uncertainty

Restructuring charges tied to the workforce reduction are still being negotiated with works councils and unions, and management did not provide precise figures, noting only that costs should not be material in the broader company context. This leaves some short‑term uncertainty around one‑off expenses. Separately, ASML highlighted potential capacity bottlenecks on the customer side, including fab construction timelines and broader concerns around supply‑chain and energy availability. Even as ASML ramps its own tool output and secures long‑lead components, customers’ ability to receive and install equipment could influence the pace at which orders convert into revenue.

Guidance and Outlook: Growth Continues, With Normalization

Looking ahead, ASML guided Q1 2026 net revenue to EUR 8.2–8.9 billion with gross margins of 51%–53%, supported by approximately EUR 2.4 billion in installed‑base sales. For full‑year 2026, the company expects net revenue of EUR 34–39 billion, implying about 12% growth at the midpoint after a strong 16% expansion in 2025, and reiterated gross margin guidance of 51%–53% alongside an effective tax rate near 17%. Management expects China to settle around 20% of total sales, with EUV remaining the primary growth engine and installed‑base and metrology/inspection providing additional support. Longer term, ASML reaffirmed its 2030 revenue target range of EUR 44–60 billion and gross margins of 56%–60%, while maintaining an active capital‑return program through dividends and a newly announced EUR 12 billion share buyback over three years.

In sum, ASML’s earnings call showcased a company at the center of the AI and semiconductor build‑out, delivering record results and setting confident medium‑ and long‑term targets. While normalization in China, softness in Deep UV, and a sizable restructuring introduce some near‑term complexity and execution risk, management’s tone and numbers suggest that these challenges are overshadowed by strong technology leadership, robust EUV demand, a growing recurring‑revenue base and solid capital returns. For investors, the story remains one of structural growth with high margins, tempered by the need to streamline an organization that has grown rapidly alongside its markets.