Q3 2024 ASML Holding NV Earnings Call

Okay.

Operator: Good day, and thank you for standing by.

Speaker Change: Good day, and thank you for standing by welcome to the ASML about 'twenty 'twenty four third quarter financial results Conference call on October 16th 2024 at this time all participants are in a listen only mode. After the Speakers' introduction that there'll be a question and answer session to ask a question during the session.

Operator: Welcome to the ASML 2024 third quarter financial results conference call on October 16th, 2024. At this time, all participants are in a listen-only mode. After the speaker's introduction, there'll be a question and answer session. So ask a question during the session. You will need to press star, one, and one on your telephone. You will then hear an authoritative message, advising your hand is raised. To restore your question, please press star, one, and one again.

Speaker Change: You will need to press star one on one on your telephone you will then have an automated message advising you'll have this race to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now.

Operator: Please be advised that today's conference is being recorded.

Skip Miller: I would now like to have the conference call over to Mr. Skip Miller. Please go ahead.

On the conference call over to Mr. Skip Miller. Please go ahead.

Skip Miller: Thank you, operator.

Skip Miller: Welcome everyone. This is Skip Miller, Vice President, Vest Relations at ASML. Joining me today on the call are ASML CEO, Christophe Fouquet, and our CFO, Rosé Dassen. The subject of today's call is ASML 2024 third quarter results. The length of this call will be 60 minutes, and the question will be taken in the order that they are received. This call is also being broadcast live over the Internet at ASML.com.

Speaker Change: Thank you operator, welcome everyone to Skip Miller, Vice President of Investor Relations at ASML.

Speaker Change: Joining me today on the call are air Smells CEO Christophe, Okay, and our CFO Rose Dawson.

Speaker Change: The subject of today's call is ask the miles 2024 third quarter results.

Speaker Change: Length of this call will be 60 minutes and questions will be taken in the order. They are received this.

Speaker Change: Call is also being broadcast live over the Internet at ASML Dot com.

Skip Miller: 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'd 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 uncertainties.

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.

Speaker Change: Before we begin I'd 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.

Speaker Change: These forward looking statements involve material risks and uncertainties.

Unknown Executive: For discussion of risks, I would like to ask a question. I would like to ask a question.

Speaker Change: 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 <unk> Dot com and in the Air Smells Annual report on form 20-F, and other documents as filed with the Securities and Exchange Commission with that I'd like to turn the call over to Christophe Okay for a brief introduction.

Christophe Okay: Thank you skip.

Christophe Okay: Welcome everyone and thank you for joining us for third quarter of 2024, He says conference call.

Christophe Okay: First let me apologize for the countries, Germany yesterday after the early publication of our press release.

Speaker Change: Picnic O'neil.

Speaker Change: Particularly given the serious nature of the key message is we wanted to deliver it and discuss with you. This was very unfortunate.

Speaker Change: Before we begin the Q&A session, Jorge and I would like to provide an overview and some commentaries on the third quarter of 2024 as well as provide some additional comments on the current business environment and on our future business outlook.

Jorge: Thank you Christophe and welcome everyone.

Jorge: I'll first review of the third quarter 'twenty 'twenty four financial accomplishments and then provide guidance on the fourth quarter of 2024.

Jorge: Let me start with our third quarter accomplishments total net sales came in at seven 5 billion euros, which is above the high end of our guidance driven by more deep UV system sales as well as higher installed base management sales.

Jorge: Net system sales came in at $5 9 billion euros, which is made up of $2 1 billion euros of EV sales and $3 8 billion euros, none would be sales.

Jorge: Net system sales was driven by logic at 64% with the remaining 36% coming from memory.

Jorge: Installed base management sales for the quarter came in above guidance at $1 54 billion euros due to higher service and upgrade revenues.

Roger Dassen: Gross margin for the quarter came in within guidance at 50.8%.

Jorge: Gross margin for the quarter came in within guidance at 50.8%.

Roger Dassen: An operating expenses, R&D expenses came in slightly below guidance at 1.06 billion euros, while FGNA expenses came in as guided at 1.297 euros. Net income in Q3 was 2.1 billion euros, representing 27.8% of total net sales and resulting in an EPS of 5.28 euros.

Jorge: And operating expenses R&D expenses came in slightly below guidance at one point over 6 billion euros, while SG&A expenses came in as guided at one 297 million euros.

Jorge: Net income in Q3 was $2 1 billion euros, representing 27, 8% of total net sales and resulting in an EPS of five point 28 euros.

Roger Dassen: 30 to the balance sheet, we ended the third quarter with cash, cash equivalents and short-term investments at a level of 5.0 billion euros, similar to last quarter. We ended Q3 with a free cash low of 534 million euros, which is somewhat improved relative to last quarter. However, as mentioned last quarter, there continue to be pressure on free cash low. This is primarily due to a relatively low level of order intake and therefore less down payments, as well as a higher inventory level. The higher inventory level is primarily attributable to EV, both high NA and low NA driven by longer lead times in the build cycle, as well as inventory in support of Futura.

Jorge: Turning to the balance sheet, we ended the third quarter with cash cash equivalents and short term investments at a level of 5.0 billing.

Jorge: Billion euros similar to last quarter.

Jorge: We ended Q3 with a free cash flow of 534 million euros, which is somewhat improved relative to last quarter.

Jorge: As mentioned last quarter, there continues to be pressure on free cash flow. This is primarily due to a relatively lower level of order and order intake and therefore less down payments as well as a higher inventory level.

The higher the higher inventory levels, primarily attributable to EV, both high and a low and a driven by longer lead times in the build cycle as well as inventory in support of future ramp.

Roger Dassen: Moving to the order book, Q3 net system bookings came in at 2.6 billion euros, which is made up of 1.4 billion euros of EV bookings and 1.2 billion euros of non-EV bookings. Net system bookings in the quarter was more or less balanced between memory at 4.54% and logic at 46% of bookings. The relatively low order intake, the reflection of the slow recovery in the traditional and markets as customers remain cautious in the current environment.

Jorge: Moving to the order book Q3 net system bookings came in at $2 6 billion euros, which is made up of $1 4 billion euros of EV bookings and $1 2 billion euros of non EV bookings.

Jorge: And that system bookings in the quarter was more or less balanced between memory at 54% and logic at 46% of bookings.

Jorge: The relatively low order intake is a reflection of the slow recovery in the traditional end markets as customers remain cautious in the current environment.

Roger Dassen: At the end of Q3 2024, we finished with a backlog of over 36 billion euros.

Jorge: At the end of Q3 2024, we finished with a backlog of over 36 billion euros.

Roger Dassen: With that, I would like to turn to our expectations for the fourth quarter of 2024. We expect Q4 total net sales to be between 8.8 billion euros and 9.2 billion euros. We expect our Q4 install base management sales to be around 1.9 billion euros. Growth margin for Q4 is expected to be between 49.50%.

Jorge: With that I would like to turn to our expectations for the fourth quarter of 2024.

Jorge: We expect Q4 total net sales to be between $8 8 billion euros and $9 2 billion euros.

Jorge: We expect our Q4 installed base management sales to be around $1 9 billion euros.

Jorge: Gross margin for Q4 is expected to be between 49 and 50%.

Roger Dassen: We would like to make a few comments on the Q4 guidance. Net sales include the expected revenue recognition of two high NA systems. Install base management revenue is hired in Q3 primarily as a result of achieving specific EV performance milestones and some EV productivity upgrades. Although Q4 revenue is higher in Q3, growth margin is expected to be slightly lower than Q3 as the positive impact from the higher upgrade revenue is more than offset by the dilute of growth margin impact from the expected revenue recognition of the two high NA systems. But in quarter, the dilute of effect thereof on the growth margin is approximately 3.5%.

Jorge: I would like to make a few comments on the Q4 guidance net sales include the expected revenue recognition of two <unk> systems installed.

Jorge: Installed base management revenue is higher than Q3, primarily as a result of achieving specific performance milestones and some easy productivity upgrades.

Jorge: Although Q4 revenue was higher than Q3 gross margin is expected to be slightly lower than Q3 as the positive impact from the higher upgrade revenue is more than offset by the dilutive gross margin impact from the expected revenue recognition of the two <unk> systems for the.

Jorge: Quarter, the dilutive effect there off on the gross margin is approximately three 5%.

Roger Dassen: Based on the Q4 guidance, we expect 2024 revenue at around 28 billion euros with a growth margin of around 50.6%, which is slightly lower than 2023, as expected.

Jorge: Based on the Q4 guidance, we expect 2020 for revenue at around 28 billion euros with a gross margin of around 56%, which is slightly lower than 2023 as expected.

Roger Dassen: The expected R&D expenses for Q4 are around 1 billion and 90 million euros, and SGNA is expected to be around 309 euros. Or estimated 2024 annualized effective text rate is expected to be between 16 percent and 17 percent.

Jorge: The expected R&D expenses for Q4 at around 1 billion and 990 million euros and SG&A is expected to be around 300 million euros.

Our estimated 2024 annualized effective tax rate is expected to be between 16% and 17%.

Roger Dassen: In Q3, ASML paid the first quarterly interim dividend over 2024 of 1.52 euro for ordinary share. Second quarterly interim dividend over 2024 will be 1.52 euro for ordinary share and will be made payable on November 7th, 2024. In Q3 2024, no shares were purchased.

Jorge: In Q3, ASML paid the first quarterly interim dividend over 2024 of 153 year old per ordinary share.

Jorge: The second quarterly interim dividend over 2024 will be $1 52, Europe ordinary share and will be made payable payable on November seven 2024.

Speaker Change: In Q3 2024, no shares were purchased with that I would like to turn the call back over to you Christophe.

Christophe Fouquet: With that, I would like to turn the call back over to you, Kristoff.

Christophe Fouquet: Thank you, Roger. As Roger highlighted, it was a solid financial quarter, but there were also a number of market dynamics in the quarter. Starting without technology, we continue to make good progress on both our new EUV products. On our low-end-a technology, we continue to ramp the NXE 3800E system this quarter, with EUV customers now rapidly shifting to this new model due to its higher performance, including over 37 percent improvement in throughput compared to the NXE 3630. We have now demonstrated the full 220-weather per hour throughput at the new record overlay in our factory, and we are on track to deliver a full specification system with new system assessment and upgrades from the beginning of next year.

Thank you Rajeev.

I liked it it was a solid financial quarter, but there were also a number of market dynamics in the quarter.

Christophe Okay: Starting with our technology, we continued to make good progress on both our new <unk> products.

Christophe Okay: Our LOE and <unk> technology, we continue to ramp the <unk> EC stem this quarter with EV customers no happy to shifting to this new model due to its performance, including over 37% improvement in fulfilled compare to the Nx E 4600 Jeep.

Christophe Okay: We have now demonstrated the full 220 with approvals throughput at the newly called overlay in our factory and we are on track to deliver our full specification system with new system. She spent and upgrades from the beginning of next year.

Christophe Fouquet: As customer transition to the NXE 3800E, the majority of shipments in Q4 are the NXE 3800E systems. Regarding INA, the two-ship system are now exposing wafers at our customer, and we expect to recognize the revenue from this system by the end of the year. A first system is in the process of being shipped to a second major customer. Momentum continues to grow with around 10,000 weifers now exposed for multiple logic and memory customers using the INA system in the joint SML I make INA lab and the systems in the field. At the recent lithographic conference, we published new INA data showing major performance benefits in imaging overlay and contrast.

Christophe Okay: Customer transition to the NXT 58 under the E. The majority of shipments in Q4.

Christophe Okay: <unk> Nx E 30th answered easy steps.

Christophe Okay: Regarding.

Christophe Okay: The two ships Sistema I'll now exposing wafers at our customer and we expect to recognize the revenue from the system by the end of the year.

Christophe Okay: Our first system is in the process of being shipped to a second major customer.

Christophe Okay: Momentum continues to grow with around 10000 wafers now expose for multiple logic and memory customers using the <unk> system into joined ASML I make any lab and the systems in the field.

Christophe Okay: At the recent photography conference, we published new data showing major performance benefits in imaging overlay and contrast.

Christophe Fouquet: Those benefits also indicate a significant cost reduction opportunities for both Logic and Iran customers. As a reminder of the value INA provides, we have demonstrated the system's ability to print features at a resolution of 8 nanometers. Compared to a low-end system, this represents an improvement to nearly three times in transistor density per exposure. So all in all, we have seen continued monitor on UV technology and we are progressing well relative to customer expectations. With regards to market conditions, while we continue to view AI as a key driver of the industry recovery with potential upside, we see other segments recovering more slowly than anticipated.

Christophe Okay: Those benefits also indicates a significant cost reduction opportunities for both logic and DRAM customers.

Christophe Okay: As a reminder of the value Anda provides we have demonstrated the system ability to print features at a resolution of eight nanometer.

Christophe Okay: Compared to a low NSE STAM. This represents an improvement nearly three times in transistor density per exposure.

Christophe Okay: So all in all we have seen continued monarch, Manitoba, <unk> technology, and we are progressing well relative to customer expectations.

Christophe Okay: With regards to market conditions, while we continue to view AI as a key driver of an industry recovery with potential upside we see all the segments recovering more slowly than anticipated.

Christophe Fouquet: The recovery will extend well into 2025, which is leading to customer cautiousness and some pushouts in their investment. In logic, the slow recovery of end-market, such as mobile and PC, together with specific competitive fund-re-dynamics, has resulted in a slower ramp of new nodes at certain customers who are, as a resource, pushing out some of their fabs and changing their lethal demand time. In memory, the slower market recovery is also resulting in limited capacity addition, with the focus still on technology transition, supporting the eye bandwidth memory and Didier 5 AI gelated demand. And finally, we expect the China business to go back to a more normalized percentage of our business, in line with the person tender of China business in our backlog.

The recovery will extend well into 2025, which is leading to customer cautiousness in some push outs in their investment.

Christophe Okay: In logic, the slow recovery of end markets, such as mobile and PC together was specific specific competitive foundry dynamics as resulted in a slower ramp of new nodes at certain customer.

Christophe Okay: As a result, pushing out some of their fabs and changing their litho demand timing.

Christophe Okay: In memory the slower market recoveries also resulting in limited capacity addition, with the focus still on technology transition supporting the bandwidth memory and DDR five AI related demand.

Christophe Okay: And finally, we expect the China business to go back to a more normalized percentage of our business in line with the Paris, The Tianjin, China business in our backlog.

Christophe Fouquet: In summary, while the long-term trends are still very strong and positive, the developments over the past few months combine with customer specific circumstances has led to reduce gross curve in 2025 and an overhaul reduction of our lithography demand.

Christophe Okay: In summary, while the long term trends are still very strong and positive developments over the past few months combined with customer specific zip competencies as led to a reduced growth curve in 2025, and an overall reduction of our lithography demand.

Christophe Fouquet: Due to these dynamics over the last quarter, we felt it would be appropriate to make some comments on 2025 at this time versus waiting until I'll invest in the next months.

Due to these dynamics over the last quarter, we felt it would be appropriate to make some comments on 2025 at this time versus waiting until our Investor day next months with that I will turn it back over to Wuxi.

Christophe Fouquet: With that, I will turn it back over to Roji. Thanks for the thought.

Roger Dassen: And as we discussed in our Investor Day in 2022, we provided market scenarios for 2025 of between 30 billion euros and 40 billion euros, with a gross margin of between 54-56%. Based on the recent market dynamics that Krasov just described, we now see 2025 revenue moving through the lower half of the range, so between 30 billion euros and 35 billion euros. To a larger extent, this is driven by a significant reduction in our expected low NA shipments for 2025 to fewer than 50. We also now expect our China sales to be around 20% of our total revenue next year, trending back towards our historical China percentage and in line with its share of the backlog.

Wuxi: Thanks herself and as we discussed in our Investor day in 2022, we provided market scenario for 2025 of between 30 billion euros, and 40 billion euros with a gross margin of between 50, 456%.

Wuxi: Based on the recent market dynamics that Christophe just described we now see 2025 revenue moving to the lower half of the range. So between 30 billion euros and 35 billion euros.

Wuxi: The large extent this is driven by a significant reduction in our expected <unk> shipments for 2025 to fewer than 50.

Wuxi: We also now expect our China sales to be around 20% of our total revenue and next year trending back towards our historical China percentage in line with its share of the backlog.

Roger Dassen: With regard to gross margin, one of the key drivers of the expected improvement was low NA driven by both an increase in a number of systems as well as a move to the higher margin 3800E system. While the improvement in gross margin for the 3800E has been achieved, the large reduction in EUV unit numbers for next year is significantly margin diluted in comparison to earlier expectations. Also, the reduction of our China sales, which typically contain a high percentage of immersion sales, is diluted to a gross margin.

Wuxi: With regard to gross margin one of the key drivers of the expected improvement was low in a driven by both an increase in the number of systems as well as a move to the higher margin 3800 E system.

While the improvement in gross margin for the 3800 E has been achieved the large reduction in easy unit numbers for next year is significantly margin dilutive in comparison to earlier expectations.

Wuxi: Also the reduction of our China sales, which typically contain a high percentage of immersion sales is dilutive to our gross margin.

Roger Dassen: Therefore, based on the current outlook of lower revenue and the less favorable mix, in comparison to the 2022 invested A, we now expect a gross margin of between 51 and 53% in 2025. In comparison to 2024, the 2025 gross margin is expected to benefit from the higher gross margin on the 3800E, gradual margin improvement on high NA, and the improvement in EUV service margin, but also see a diluted margin effect of recognizing more high NA tools in revenue.

Wuxi: Therefore based on the current outlook of lower revenue and a less favorable mix.

Wuxi: In comparison to the 2022 Investor day, we now expect a gross margin of between 51 and 53% in 2025.

Wuxi: In comparison to 2024 or 2025 gross margin is expected to benefit from the higher gross margin on the 3800 E gradual margin improvement on <unk> and the improvement in UV surface margin, but we'll also see a dilutive margin effect of recognizing more high need tools and revenue.

Roger Dassen: On operational expenses for 2025, we expect total upacts to be at the upper end of the bandwidth of 5.6 billion to 6.1 billion euros provided during the invested A in 2022. We will continue with our R&D roadmap as planned and have been able to absorb the significant wage inflation effect since 2022 within the bandwidth.

Wuxi: On operational expenses for 2025, we expect total opex to be at the upper at the upper end of the bandwidth of $5 6 billion to $6 1 billion euros provided during the Investor day in 2022.

Speaker Change: We will continue with our R&D roadmap as planned and have been able to absorb the significant wage inflation effect since 2022 within the bandwidth with that once again hand, it over to Chris. Thanks.

Christophe Fouquet: With that, I once again hand it over to Chris. Thank you, Roger. As we look out for longer term, consistent with what we have previously stated, the circular gross drivers in the semiconductor and market are still very much intact. AI, energy transition, electrification, among other applications, continue to provide a very strong and very positive perspective to our industry and SML business. The expanding application space, along with increasing lithography needs on future technology nodes, drives demands for both advanced and mainstream nodes. In line with most of our industry peers, we continue to see AI as an upside and continue to watch carefully all these real effectors on the short and unknown term.

Chris: Thank you Rajeev.

Chris: As we look out longer term consistent with what we have previously stated the secular growth drivers in the semiconductor end markets are still very much intact.

Chris: Energy transition electrification among other applications continue to provide a very strong and very positive perspectives to our industry and <unk> business.

Chris: The expanding application space, along with increasingly so graphene needs on future technology nodes drive demands for both advanced and mainstream notes.

Chris: In line with most of our industry peers, we continue to see AI as an upside and continue to watch carefully or this will affect us on the short and the long term.

Christophe Fouquet: Despite some of the pushouts we have discussed, we continue to prepare for a number of new facts that are being built across the gloves to address the future demand and needs of the industry. Those facts are spread geographically, are strategic for our customer, and are scheduled to take our system. We will therefore continue to build capacity in order to respond to the demand increase that we expect throughout the remainder of this decade.

Chris: Despite some of the push outs, we have discussed we continue to prepare for a number of new fabs that are being built at close the gloves to address the future demand and needs of the industry.

Chris: Those funds are spread geographically are strategic for our customer and are scheduled to take Alastair.

Chris: We will therefore continue to build capacity in order to respond to the demand increase that we expect fraud. The remainder of this decade.

Christophe Fouquet: We will provide a more detailed assessments together with the C9 viewers of 2030 at our investor day on November 14, 2024. We look forward to seeing you there.

We'll provide a more detailed assessments together with the C&I views of 2030 at our Investor Day on November 14, 2024, we look forward to seeing you there.

Skip Miller: With that, we would be happy to take your question.

Speaker Change: That would be happy to take your question.

Skip Miller: Thank you, Roger and Kristoff. The operator will instruct you momentarily on the protocol for the Q&A session. Beforehand, I'd like to ask that you kindly limit yourself to one question with one short follow-up if necessary. This will allow us to get to as many colours as possible.

Speaker Change: You wrote Shannon Christophe the operator will instruct you momentarily on the protocol for the Q&A session beforehand, I'd like to ask that you kindly limit yourself to one question with one short follow up if necessary. This.

Speaker Change: It will allow us to get to as many callers as possible.

Operator: Now, operator, could we have your final instructions in the first question, please?

Speaker Change: Now operator could we have your final instructions and the first question. Please.

Operator: Thank you.

Operator: 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 enjoy your question, please press Star 1 and 1 again.

Speaker Change: Thank you as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one on one again.

Operator: We will now take the first question. One moment, please.

Speaker Change: We will now take the first question.

Speaker Change: Well remember please Andrew.

Speaker Change: Your first question comes from the line of Joe <unk> from Wells Fargo. Please go ahead.

Joe Quatrochi: And yeah, thanks for taking the questions. I wanted to kind of understand the change that you're talking about in terms of the China demand. What are you seeing there that it's causing that normalization?

Joe <unk>: Yes, thanks for taking the questions.

Joe <unk>: I wanted to kind of understand the change that youre talking about in terms of the China demand. What are you seeing there that's causing that normalization and then if we were to try to think about what in your 2025 guide you are implying for non China <unk> revenue. It seems like you're embedding a pretty significant increase year over year, what's the underpinning.

Joe Quatrochi: And then if we were to try to think about what in your 2025 guide you're implying for not on China DUV revenue, it seems like you're embedding a pretty significant increase year over year. What's the underpinning driver of that?

Joe <unk>: Driver of that.

Roger Dassen: Thanks, Joe.

Christophe Fouquet: So when it comes to China, I think it's a combination of two things. As we've said before, in the past two years, we've been very much eating into our backlog for China. And that backlog has come to that level simply because, in the years before that, we had a fairly low autofill rate for China. So, as a result of that backlog built up in the past two years, because of the global market circumstances, we were able to deliver on that backlog. So that's why the China sales in 2023 and 2024 have been so high. So, as a result of that, we also indicated before that we expect at a certain point in time for that to normalize.

Speaker Change: Thanks, Joe So when it comes to.

Speaker Change: When it comes to China, I think it's a combination of two things and as we've said before in the past two years, we've been very much eating into our backlog for China.

Speaker Change: That backlog has come to that level simply because in the years before that we were we had a fairly low order fill rate order fill rate for China. So as a result of that backlog buildup in the past two years because of the global market circumstances, we were able to.

Speaker Change: To deliver on that on that backlog. So that's why the China sales in 2023 and 2024 have been so high so as a result of that we also indicated before that we expect at a certain point in time for that to normalize and that is I think what you'll now see in the numbers. So that's that's one driver secondly, I think we all read newspapers right.

Christophe Fouquet: And that is, I think, what you now see in the number.

Joe Quatrochi: So that's one driver. Secondly, I think we all read newspapers, right? We all see that there is speculation around export to controls. And also, that is a driver for us to take a more cautious view on the China sales. So, with that combined, we've indicated that we believe the China sales for next year are going to go to, let's say, 20% of our expected sales level for next year. When it comes to DPV and the non-China part of the DPV business, if you do the math a little bit, or expectation is that the DPV business next year will be lower than Adithya's this year, so we believe DPV will go down a bit.

Speaker Change: We all see that said there is speculation around around export controls and also that as a driver for us to take a more cautious view on the on the China sale. So was that combines.

Speaker Change: We've indicated that we believe the China sales for next year are going to go to lets say, 20% of our expected sales level for next year.

Speaker Change: When it comes to deep UV and the non China part of the deep UV business. If you do the math a little bit our expectation is that the deep UV business next year will be lower than it is this year. So we believe DP will go that will go down a bit, but youre right I mean with it with that.

Roger Dassen: But you're right, I mean with the China business going down, as we've indicated, that means the non-China part of the DPV business will go up. And the main reason is that, you know, if you look at the more advanced nodes, and if you do the math on the growth that you might anticipate in the EUV business for next year, you will see that there is quite some growth there. In the combination of low and high NA, you will see quite some growth there. And I think what you're going to see is that the non-China part of the DPV business is sort of following that trend, so the effect rate, if you want to call it like that, of the DPV business to the EUV business will be kind of similar.

Speaker Change: China business going down as we've indicated that that means that the non China part of the of the DPP deep UV business will go up.

Speaker Change: And then the main reason is that if you look at the if you look at the the more advanced nodes and if you do the math on the growth that you might anticipate in the <unk> business for next year, you will see that there is quite some growth there and the combination of <unk>.

Speaker Change: <unk>.

Speaker Change: And I know you will see quite some growth there and I think what youre going to see is that the non China part of the deep UV business and sort of following that trend and so did the etc. If you want to call. It like that of the deep UV business to the <unk> business will be it will be will be kind of similar so the growth rate you will see an easy it will sort of see back also in the growth rates for the non <unk>.

Joe Quatrochi: So the growth rate you will see in EUV, you will sort of see back also in the growth rates for the non-China part of the DPV business. Got it, that's helpful.

Speaker Change: China part of the deep UV business.

Joe Quatrochi: And then, as a follow-up, I wanted to try to understand a little bit better than the 2025 growth margin guidance and the commentary. I can certainly appreciate the lower mix of low and A, but for total revenue to still be kind of within the low end of the target range, I think it would still imply that, you know, your immersion shipments, maybe being down year or year, it sounds like, still better than what you're thinking about from the target model, which I think would be a positive for in terms of offsetting to some of the mix.

Speaker Change: Got it that's helpful and then as a follow up I wanted to try to understand a little bit better than the 2025 gross margin guidance in the commentary I can certainly appreciate the lower mix of low and a.

Speaker Change: But for total revenue to still be kind of within the low end of the target range I think it would still imply that.

Speaker Change: Your immersion shipments, maybe being down year over year, it sounds like still better than what youre thinking about from the target model.

Speaker Change: Which I think would be a positive for in terms of offsetting some of the mix. So maybe can you help us unpack that a little bit of just how do we think about like the inversion relative to what you were thinking about.

Roger Dassen: So maybe can you help us unpack that a little bit of just how do we think about like the immersion relative to what you're thinking about, you know, at the analyst day in 2022 in that mix effect. Yeah, so Joe immersion in comparison to the investor day in 2022, I think there, you will see that immersion is not dramatically different from the expectations that we had in 2022. So I think the immersion expectation has gone up a bit, but with everything I just told you, including our view on China, I think immersion has come down a bit.

Speaker Change: At the analyst day in 2022 and that mix effect.

Speaker Change: Yes.

Joe <unk>: Joe immersion.

Speaker Change: In comparison to the <unk> Investor day in 2022, I think there you will see that the margin is not dramatically different from the expectations that we had in 2022 so.

Speaker Change: I think the immersion expectation has gone up a bit with everything I, just told you, including our view on China I think immersion has come down has come down a bit and all in all I think our emerging views not dramatically different from what we held out at the at the Investor Day. So the line if you.

Roger Dassen: And all in all, I think our immersion view is not dramatically different from what we held out at the end of the day. So the line, if you simply contrast the gross margin that we have that we now articulate for 2025 and compare that to the gross margin that we articulated three years ago, it really is, to a very large extent, that is driven by UV. And there are two elements in EV that do this one. One element is volume, so that the volume that we have on UV now in our model with below 50 is substantially below the numbers that you saw in the investor day of November 22.

Speaker Change: If he simply contrast, the gross margin that we have that we know articulated for 2025 and compare that to the gross margin that we articulated three years ago. It really is a very large extent it is driven by EV and there are two elements and easy to do this one one element is volume so the volume that we have on easy now.

Speaker Change: And our model with a low 50 is substantially below the numbers that you saw in the <unk>.

Speaker Change: <unk> Investor Day of November 'twenty, two but there was also a mix effect in there because in 2022. We were we were looking at are at the high end of the next I E 3800 is going to dominate and in fact, we were expecting a few four thousands and as a result of the dynamics in the in the market you will actually see.

Roger Dassen: But there was also a mix effect in there because in 2022, we were we were looking at the high end of the mix, i.e. 3800 was going to dominate in the fact we were expecting a few 4000 in the as a result of, you know, the dynamics in the in the market. You will actually see, you know, quite quite quite a few 3600 in there in in 2025 as well. The 3800 will dominate, but it will clearly be 3600 in there as well. So there is also an ASP and gross margin mix effect in there.

Speaker Change: Quite a quite a few 36 hundreds in there.

Speaker Change: In 2025 as well the 3800 will dominate but it will clearly be 36 hundreds in there as well. So there is also an ASP and gross margin mix effect in there it's that combination of particularly a significantly lower number of UV units and also the mix effect in the in the EV units that is prime.

Roger Dassen: It's that combination of, you know, particularly a significantly lower number of UV units and also the mix effect in the UV units. That is primarily driving down the gross margin expectation in comparison to what we were looking at in November of the 22, and the unit effect is by far, you know, the biggest effect in that in that in that extent.

Speaker Change: Barry driving down the gross margin expectation in comparison to what we were looking at in November of 'twenty, two and the unit effect is by far.

Speaker Change: The biggest effect and thats and Thats and that explanation.

Unknown Executive: Thank you. You're welcome.

Speaker Change: Helpful. Thank you.

Unknown Executive: Thank you.

Speaker Change: Youre welcome.

Didier Scemama: Your next question comes from the line of Didier Scemama from Bank of America. Please go ahead. Yes, good. Good afternoon. Thank you so much for taking my question. Roger or Christophe, I don't know.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of DSA Mama from Bank of America. Please go ahead.

Speaker Change: Yes, good afternoon, and thank you so much for taking my question.

Roget or Christoph I don't know when you look at the cuts you have made to UV shipments for next year call. It 20 to 25 Luna systems, how much of that do you think spilled over to 2006 and I've got a follow up thank you.

Didier Scemama: When you look at the cut you've made to EUV shipments for next year, call it, you know, 20 to 25 low-end systems. How much of that do you think spilled over to 26? And I've got to follow up. Thank you. I think it's a difficult question, as you can imagine, because I think the feedback we have got from our customer in the last few months was about pushing out those tools. So I think you could say mathematically this moving to 2026. I think that's the simple way to look at that. I think that we have to, of course, all the time reconfirm the dynamic of the market.

Speaker Change: Yeah.

Speaker Change: I think it's a difficult question as you can imagine because I think.

Speaker Change: The feedback we've got from our customer in the last few months was about pushing out those two so.

Speaker Change: You could say mathematically this moving through 2026, I think thats too.

Speaker Change: Simple way to look at that.

Speaker Change: Debt.

Speaker Change: We have to of course, all the time reconfirm the dynamic of the market I would say for the second half of 'twenty five 'twenty six. So if you think about mathematically we have talked about push out because we really see our customers delaying basically their fabs, we don't see customer.

Christophe Fouquet: I will say for the second half of 25 and 26. So if you think about mathematically, we have talked about push out because we really see our customer delaying basically their fabs. We don't see a customer basically changing their mind on those fabs. So that's why we refer to push out. Of course, 26 is an opportunity to steal those tools back. But like I say, you know, there's still a long way until 2026, and we will continue to watch the market dynamic there.

Speaker Change: Basically changing their mind on those fab, so thats why we refer to push outs.

Speaker Change: Of course 2000 <unk>.

Speaker Change: <unk> is.

Speaker Change: An opportunity to see those tool back.

Speaker Change: But like I say you know there is still a long way into 2026, and we will continue to watch the market dynamic there.

Didier Scemama: Excellent.

Christophe Fouquet: And then follow up to that would be how much of the push out is a reflection of just the end demand being poor versus maybe several of your customers struggling with process technology and attracting effectively customers to justify the construction of the factories. I think it's both a mix of that. I think that we mentioned the slow recovery first because I think this affects every single customer. So we are still quite optimistic about AI. I think today, without AI, the market would be very sad if you ask me. But for the rest, I think our customer continues to confirm that when it comes to mobile, when it comes to PC, PC, sorry, when it comes to automotive, the recovery is not what I think everyone had wished for.

Speaker Change: Excellent and then follow up to that would be how much of the push outs is a reflection of just the end demand being pool versus maybe several of your customers struggling with process technology and attracting effectivity customers to justify the construction of the factories.

Speaker Change: I think it's it's both so it makes all of that I think that we mentioned the.

Speaker Change: The slower recovery first because I think this effect.

Speaker Change: Every single customer. So we are still quite optimistic about AI is <unk>.

Speaker Change: Today without AI the market would be very sad if you ask me.

Speaker Change: But for the rest of <unk> customer continues to confirm that when it comes to mobile when it comes to PC PC serene when it comes to automotive.

Speaker Change: The recovery is not what it was.

Christophe Fouquet: And that affect I will say a large part of our customer on all segment and application. I think we also indeed mention as well some competitive dynamic on logic. I think that also has been expressed at length in the press in the last three months. I think that's not really new for you. And this also contribute to some of the push out.

Speaker Change: One had wished for.

Speaker Change: That effect I would say a large part of our customer on all.

Speaker Change: Segment and application.

Speaker Change: I think we also indeed mentioned as were some competitive dynamic.

Speaker Change: On logic I think that also has been express at plants in the press in the last three months I think that's not really new for you.

Speaker Change: This also contribute to some of the of the push outs. So I think those two things are really the two dynamics that have come up.

Christophe Fouquet: So I think those two things are really the two dynamics that have come up in the last few months. To a level where our customer basically started to really make our decision that we're in line with their expectation both on the total market, but also maybe in some cases on the share they may end up having in some of the logic market.

Speaker Change: In the last few months.

Speaker Change: To elaborate on where our customer base is starting to really make a decision.

Speaker Change: We're in line with their expectations both on the total market, but also maybe in some cases on the share they may end up having in some of the logic market.

Didier Scemama: Make sense.

Roger Dassen: And just a tiny follow-up to Roger, if I may, when you look at. Your IBM revenues in Q4, there is a big step up. Can you give us a sense as to whether that's sort of a new, a new, new normal? And especially I'm thinking about 25 in your guidance and coming back to the point that was raised earlier on the DUV revenues, which are, you know, look up to Mystic. So is the install based management going to grow a lot in 25 and effectively picks up the bat on a little bit from the UV.

That makes sense and just a tiny follow up to <unk> if I may.

Speaker Change: When you look at.

Speaker Change: Your IBM revenues in Q4, there is a big step up can you give us a sense as to whether that's the sort of a new a new normal.

Speaker Change: And especially I'm thinking about 25 in your guidance and coming back to the point that was raised earlier on the <unk> revenues, which are look optimistic. So is the installed base management going to grow a lot in 'twenty, five and effectively picks up the bottom a little bit from DSV. Thank you.

Roger Dassen: Thank you.

Roger Dassen: Yes, DJ, I wouldn't say that it's the new norm. Well, as we also explained, you know, today in the earlier, and also as we explained in the video, there is clearly also one of the fact in there, meeting a certain performance targets. So that was one reason that we expect that's a one of the fact, if you like, in the, in what we see for Q4. That said, we do believe that the install based business, both on the service side and also on the upgrade side, is going to grow.

Speaker Change: Yes C J.

Speaker Change: I wouldn't say that it's the new normal as we also explained.

Speaker Change: Today in the in the earlier and also as we exited in the video there is clearly also a one off effect in their meeting certain performance targets. So that was one reason.

Speaker Change: We expect.

Speaker Change: That's a one off effect if you like in the.

Speaker Change: And what we see for Q4.

Speaker Change: We do believe that the installed base business both on the service side and also on the upgrade side is going to grow.

Roger Dassen: So, you know, in a quite healthy way to to in 2025. So yes, we do project that there will be, you know, quite healthy growth and that there will be healthy double-digit growth as we currently see it in the install based management in 25 in comparison to 20.

Speaker Change: And it quite healthy way too.

Speaker Change: In 2025, so yes, we do project that said that it will there will be quite healthy growth in and that said there will be.

Speaker Change: Healthy double digit growth as we currently see it and the installed base management in 2005 and comparisons it for me.

Speaker Change: Thank you.

Operator: Your next question. One moment, please.

Speaker Change: Thank you.

Speaker Change: Your next question.

Speaker Change: Well, maybe then please.

Operator: Your next question comes from the line of "One moment, please." Okay, I will go to the question after I think there's a technical issue on that line. One moment.

Speaker Change: Your next question comes from the.

Speaker Change: The line of.

Speaker Change: <unk>.

Speaker Change: One moment please.

Speaker Change: Okay I will go to the question. After I think that's a technical issue I'm not lying well maintenance.

Alexander Duval: Okay, your next question comes from the line of "Maybe you see me from Susquehanna." Please go ahead. Yes, thanks for taking my question. Excuse me.

Speaker Change: Okay. Your next question comes from the line of Matthew <unk> from Susquehanna. Please go ahead.

Speaker Change: Thanks for taking my question excuse me.

Alexander Duval: First one, for Christoph, I want to be to understand the momentum with high and A. I think at the SPI conference a couple of weeks ago, there was increased interest by your key customers for changes to the radical going to larger, radical size. And I want to better understand how you see that evolving or impacting book for high and A or with the radical or changes to radical would cause any push out as you try to book 52 hundreds and I have a follow up. Yeah, so I think the interest you said it is increasing.

Speaker Change: First one for Christophe.

Speaker Change: I want to better understand the momentum with Hyatt I think.

Speaker Change: The <unk> conference a couple of weeks ago, there was increased interest by your key customers.

Speaker Change: No.

Speaker Change: Churches to the radical going to larger reticle size and I wanted to better understand how you see that evolving or impacting.

Speaker Change: Booked for Hyatt.

Speaker Change: With a radical changes to radical would cause any push outs as you try to book 52, hundreds and then I have a follow up.

Speaker Change: Yes, so I think the interest you have said it is increasing and I think what you have seen that the confirms is that.

Christophe Fouquet: And I think what you have seen at the conference is that the initial data that have been shared online by SMS, but also by some customers, have been received very positively because it shows significant performance improvement when it comes to imaging. And some good very good cost to put you here on some of the layer for the RIM and logic. So I think the interest is high; indeed, an increasing. The discussion on the 12-age critical is a bit a discussion about what else could we do in the future to further improve the productivity of INA first and potentially on the tool.

Speaker Change: The initial data that have been shared online.

Speaker Change: By ASML, but also by some customers have been received very positively because it shows.

Speaker Change: Significant performance improvement when it comes to imaging.

Speaker Change: And some good very good cost support energy on some of the layer for DRAM and logic. So I think the interest is high indeed, increasing the.

Speaker Change: The discussion on the on the <unk> <unk> is a bit of discussion about.

Speaker Change: What else could we do in the future to further improve the productivity.

Speaker Change: Ferrous and potentially other tools so the RF the.

Christophe Fouquet: So the conference referred to as a bit of a technical conference. So people like to discuss basically what could come next. It was a good engagement. This was a sign indeed, also of the fact that more customers start to count. Really on INA into the future and that time frame is not at all aligned with the 52500. So I think there's absolutely no connection between what we do with INA and what we may do in the future with the 12-age critical to give you an idea that discussion may become more concrete towards the end of the decade or the beginning of the next one.

Speaker Change: The conference you refer to as a bit of a technical conference. So people likes to discuss basically what could come next.

Speaker Change: It was a good engagement this was assigned indeed or so of the fact that more customer start to count.

Speaker Change: Really on <unk> into the future.

Speaker Change: And that time frame.

Speaker Change: Is not at all align with the $5 under 5200, So I think there's absolutely no connection between what we do is and then what we may do in the future with the 12 inch Rancho and.

Speaker Change: To give you an idea of that discussion may become more concrete towards the end of the decade or the beginning of the next one so it's really a long term technical discussion we are engaged with our customer and we are happy to have this discussion with them. Because these can provide a significant productivity implement foreign aid, but 44 graphene genome.

Christophe Fouquet: So it's a really a long-term technical discussion we have engaged with our customer, and we are happy to have this discussion with them because this can provide a significant productivity improvement for INA but for the photography in general. But that's not for too long. And therefore, this will in no way impact our current discussion and business on INA.

Speaker Change: But that's not for two more and therefore, this really no impact to our current discussion in business on <unk>.

Alexander Duval: Okay, thank you.

Roger Dassen: I'm in a quick follow-up for you and Roger. Where are we with internal capacity targets, and given the updated 25 target, how do you see the capacity targets that you put out in 22 evolving? What are we doing? What are we doing today with DOV and DOV manufacturing capacity, and how are you managing the targets for additional capacity that you put out back in 22? Yeah, so you know if you realize today we have a lot of focus, of course, on 2025. I think what we say is that for next year with a slower recovery the number of tools will be had a shipping to our customer is mostly less than what we expected.

Speaker Change: Thank you and then a quick follow up for you and Roger where are we with internal capacity targets.

Speaker Change: And given the.

Speaker Change: The updated 25 target how do you see that.

Speaker Change: Capacity targets that you put out in 'twenty two.

Speaker Change: Evolving so where are we today with <unk> manufacturing capacity.

How are you managing the targets for.

Speaker Change: The additional capacity that you put out back in 'twenty two.

Speaker Change: Yeah. So you know.

You realize today, we have a lot of focus of course on 2025, ASIC, which we say is that for next year.

Speaker Change: With a slower recovery.

Speaker Change: Number of tools, we would be head of shipping to our customer is most probably less than what we expected.

Roger Dassen: Both in Capital Market Day 2022 but also a few months ago. Now what I've also said in the introduction is when we look at the long term, when we listen to our peers, I think that the bullishness about the long term opportunity of this market is strong. We share that which means that at some point of time the need for more capacity will be there. So what we do we continue to execute on the long lead time items, seems like building some equipment. On the other hand, because the short term market is a bit, I would say, softer than what we expected previously.

Speaker Change: Both in capital market day, 2022, but also a few months ago.

Speaker Change: Now what I've also said in the introduction is when we look at the long term.

Speaker Change: When we listen to our peers are saying that the bullishness about the long term opportunity.

Speaker Change: This market is strong.

We share that which means that at some point of time the need for more capacity will be there.

Speaker Change: So what we do we continue to execute on the long lead.

Speaker Change: Time items things like building.

Speaker Change: Some equipment.

Speaker Change: On the other hand, because the short term market is a bit.

Speaker Change: I'd say softer than what we expected previously.

Roger Dassen: We are also slowing down basically any short term investment, so when it comes to people, material, etc., etc., we don't have to do that today; we will do that when we have again visibility for a larger demand.

Speaker Change: Also slowing down basically any short term investments so when it comes to people material et cetera et cetera.

Speaker Change: Don't have to do that today, we would do that when we have again visibility for a larger demand.

Roger Dassen: But the structure of our capability we want to still drive because I would say you know when a recovery take more times to happen if you believe on the long term trajectory of the market there is always a point where you have to deliver more tools and we want to be ready for that as well.

Speaker Change: But the structure of our capability, we want to still drive because I would say when the recovery takes more times to happen. If you believe in the long term trajectory of the market. There is always a point, where you have to deliver more tools and we want to be ready for that as well.

Unknown Executive: Thank you. I love what you're seeing on CMD.

Speaker Change: Thank you and look forward to seeing you at CMT.

Unknown Executive: I'm here.

Operator: Thank you.

Tim: Tim here.

Speaker Change: Thank you.

Operator: We will now go to the next question. One moment, please.

Speaker Change: We will now go to the next question.

Speaker Change: One minute please.

Chris Caso: And your next question comes from the line of Chris Caso, Wolf Research. Please go ahead. Yes, thank you. Good morning. My first question, I'd like to dig in through a little bit more of what more specifically may have changed over the last 90 days, because some of the things you referred to in China, on the memory spending, some logic spending, some of it, I think was sort of known 90 days ago and some may be incremental. If I take each of those three, and some of the fat pushouts that have come about that, how would you characterize the change in your calendar 25 guidance among those three areas?

And your next question comes from the line of Chris Caso Wolfe Research. Please go ahead.

Speaker Change: Yes. Thank you good morning.

Chris Caso: My first question I'd like to dig into a little bit more of what more specifically may have changed over the last 90 days because some of the things you referred to in China on the memory spending some logic spending some of it.

Chris Caso: I think was sort of known 90 days ago, and some may be incremental if I take each of those three.

Chris Caso: And some of the fab push outs that have come about that how would you characterize the change in.

Chris Caso: In your calendar 'twenty five guidance among those three areas basically what was new deal as compared to when we had the last earnings call.

Chris Caso: You know, basically, what was new to you as compared to when we had the last earnings call?

Christophe Fouquet: Well, I think if you take the different to different pieces, I think when it comes to China, we already started to indicate in the last call that over time we do see China trending towards a more normalized percentage. I think the intensity also of the discussions in the press, including discussions on more export restrictions, I think have driven to more cautiousness when it comes to China. So that, I think, is really driven by developments in the past couple of months.

Chris Caso: Well I think if you take the different to different pieces I think when it comes to China. We already started to indicate in the last in the last call that over time, we do see China trending towards a more normalized percentage I think the intensity also of the discussions in the press including discussions on.

Chris Caso: On more export restrictions I think has driven us to two more two more cautiousness when it comes to China. So that I think is is really driven by by developments in the past and the past couple of months.

Christophe Fouquet: I think when it comes to other customers, on previous calls, we've indicated that there was uncertainty. And I think what we see, to a large extent, is that part of that uncertainty has really materialised. So what became a question mark, maybe a number of quarters ago, has now become quite clear that a certain level of demand from certain customers was in all likelihood not going to happen. So that was the reason why we decided to, you know, that we could no longer hold a large window of 30 to 40 billion at the, you know, in the world, and that has resulted that we needed to reduce that window to the lower half.

Chris Caso: I think when it comes to other to other customers on previous calls we've indicated that.

Chris Caso: Yeah.

Chris Caso: There was uncertainty and I think what we see to a large extent is that part of that uncertainty has really materialized. So what became a quest was a question Mark maybe a number of quarters ago.

Chris Caso: <unk> has now become quite clear that that is certain that the search.

Chris Caso: And level of demand from certain customers for us is in all likelihood not going to happen. So that was the reason why we decided to.

Chris Caso: We no longer hold a large window of $30 billion to $40 billion.

Speaker Change: In the World and that is a result of that we needed to reduce that window to the lower half I think that's that's Chris I think the background of it and Thats, what really changed so.

Christophe Fouquet: I think that's the risk; I think the background of it, and that's what really changed. So it's the materialisation of certain risks and uncertainties that we talked about before that have driven us to this lower expectation.

Speaker Change: It's the materialization of certain risks and uncertainties that we've talked about before that have driven us to to distort the slower expectation.

Chris Caso: God, that's helpful. And just as a follow-on with your comments on China, of course, there haven't been, you know, new export restrictions announced. So, you know, it is a correct interpret your comment because you're making some judgment on what you think some of those restrictions, how that made effect revenue in 25, you know, prior to those, you know, being fully implemented. Is that the correct interpretation?

Speaker Change: Okay got it that's helpful and just as a follow on with your comments on China of course, there haven't been.

Speaker Change: New export restrictions announced so.

Speaker Change: Is it correct to interpret your comments is that you are making some judgments on what you think some of those restrictions how that may affect revenue in 'twenty five prior to those being being fully implemented is that the correct interpretation yes.

Christophe Fouquet: Yeah, Chris, as you, we were newspapers, and we see continued speculation on things that might happen. And as a result of that, we've decided to take a more cautious, cautious view. And that that indeed has resulted in is one of the drivers. I mentioned the other driver as well, but the combination of, you know, China being us eating less and less into the backlog of China and speculation around more export control restrictions. And it has led us to the conclusion that it is prudent to go back to this funny percent for China, as funny as the sense of totalism.

Chris Caso: Yes, Chris.

Chris Caso: As we read newspapers, we see continued speculation on things that might happen and as a result of that we've decided to take a more cautious are cautious view.

Chris Caso: That indeed has resulted in is one of the drivers I mentioned, the other driver as well, but the combination of.

Chris Caso: It kind of being.

Chris Caso: Us eating less and less into the backlog of of China and speculation around more export control restrictions that has led us to the conclusion that it is prudent to go back to the 20% for us or China.

And as a percentage of total business.

Unknown Executive: Thank you.

Understood. Thank you.

Operator: We will now go to our next question.

Speaker Change: Thank you we will now go to our next question.

François Savia: One moment, please. And your next question comes from the line of François Savia, Bobin Yee from UBS. Please go ahead. Thanks a lot for letting me in. My first question is on the comment that you mentioned on the smartphone market and PCs, and the market is a bit slower. You know, versus three months ago, the smartphone market and PCs indeed, it's slower.

Speaker Change: One moment please.

Speaker Change: And your next question comes from the line of Francois <unk> from UBS. Please go ahead.

Speaker Change: Thanks for letting me in.

Speaker Change: My first question is on the.

Speaker Change: The comment that you mentioned.

Speaker Change: The smartphone market in Pcs and the market is a bit slower.

Speaker Change: Versus three months ago with the smartphone market NPC indeed.

François Savia: But the magnitude of the revision of EUV of 15 to 20 is still quite big compared to the weakness of the market. So I was just coming back, and it seems to be really two customers that will be well in the press having some issues. So we would have thought that you would see some swap out in the orders, you know, in terms of customers. Did you see any sign, you know, of like upside risk into some orders, you know, at least a bit of setting or interest related to these customer issues? Or is it, you know, a scenario that your customers gave you some too optimistic forecast, you know, in the light of a big shortage of EUV you had in recent years.

Speaker Change: Slower, but the magnitude of the revision of the UV of 15 to 20 is still.

Quite be compared to the weakness of the market.

Speaker Change: So I was just coming back and it seems to be really.

Speaker Change: Two customers have been willing to price having some issues. So we would have thought that you would see some swap out in the orders.

In terms of customers did you see any sign of like upside risk into some more of this.

Speaker Change: At least a bit offsetting our interest.

Speaker Change: Related to this.

Speaker Change: Some of the issues.

Speaker Change: Or is it.

Speaker Change: Do you have a scenario that your customers give you some too optimistic forecast.

Speaker Change: In light of a big shortage of UV, you had the Sanchez and therefore, the swap our treaty.

François Savia: And therefore the swap out will, you know, the swap will take much longer than expected. I'm sorry for the long question, as usual.

Speaker Change: The swap with taking much stronger than expected.

Speaker Change: Im sorry for the long question as usual.

Unknown Executive: No, it's okay.

Christophe Fouquet: First of all, I think those are good questions. And I think you touch again on the two to drivers that we have seen changing our, I would say, man expectation for next year. So the combination of the two again is important. And the first one, I think you see yourself as you mentioned, you know, the recovery on mobile PC to be weaker than expected initially. This has an impact, I would say, on the capacity planning, but also maybe on the expectation of capacity planning. So I think we use the word cautiousness a few times in the call.

Speaker Change: No. It's okay first of all I'd say those are good question and I think you touch again on the two.

Speaker Change: The drivers that we have seen changing at all.

Speaker Change: C met.

Speaker Change: <unk> for next year.

Speaker Change: So the combination of the two again is important I know the first one I think.

You see yourself as you mentioned.

Speaker Change: The recovery on mobile PC to be.

Speaker Change: Weaker than expected initially this.

Speaker Change: This has an impact I will say on the capacity pending but also maybe on the expectation of kept capacity planning. So I think we use the world Cautiousness, a few times in the call.

Christophe Fouquet: When you become cautious, I think this means you are careful on the short term, but also a bit on the midterm. So you have a bit of a double double hit if you want with the cautiousness.

Speaker Change: When you become cautious I think this means you are careful on the short term, but also a bit on the midterm. So you have a bit of a double a devoted heat if you want with cautiousness. So thats the first one.

Christophe Fouquet: So that the first one on the second one, I think we also mentioned, you know, some upside on AI because we still believe that the overall demand for those applications is there, continue to increase. So if we look at the server demand, we see there a very nice recovery. A lot of that has to do with AI application. So we talk about upside, which also means that the overall dynamic of the market is still is still playing. And you know, we felt the need to provide an update for next year based on some of the developments we have seen.

Speaker Change: On the second one I think.

Speaker Change: We also mentioned.

Speaker Change: Some upside on AI, because we still believe that the overall demand full dose.

Speaker Change: Application is there continued to increase so if we look at the server demand we see there a very nice recovery. There are a lot of that has to do with AI application. So we talk about upside, which also means that the overall dynamic of the market is still is still playing in.

Speaker Change: We felt the need to provide an update for next year based on some of the development we have seen.

Christophe Fouquet: I think in no way we are also saying that there is a complete understanding of how the entire market will continue to play out in the next few months.

Speaker Change: In no way, we are also saying that there is a complete understanding of our the entire market will continue to play out in the next in the next few months. So I think on the second part of your question I would say maybe this has not played out fully yet.

Christophe Fouquet: So I think on the second part of your question, I would say maybe this has not played out fully yet.

Christophe Fouquet: Okay, thank you, and you would expect to happen then, I guess, to, at some point, to happen? Well, I think, you know, if everyone, and I think a lot of us still believe in the strong AI demand in the coming years, I think that demand has to be fulfilled. Therefore, you know, yes, I will say mostly we will see some development also on that front in the coming months.

Speaker Change: Okay. Thank you.

Speaker Change: Expect to happen then I guess to at some point.

Speaker Change: It will happen.

Speaker Change: Well I think.

Speaker Change: If everyone and I think a lot of our still believe in the strong demand in the coming.

Speaker Change: Years, I think that demand has to be fulfilled.

Speaker Change: Therefore, you know, yes, I would say most of it you will see some development also on that front in the coming in coming months.

Christophe Fouquet: Okay, thank you, Christophe, and maybe my follow-up would be on the hyenae. I don't want you to spoil the capital market, but, you know, could you maybe give us an update on the hyenae now, you know, in terms of years of adoption, maybe logic memories, anything happening here versus maybe three months ago, you know, six months ago since you passed away with us? Well, I think I said a few months ago that, you know, the, the period we are in, the months we are in will be important for the data generation, generating data to our customer, our customer that have placed many older already on INA for R&D, and you know, when you did generate data, you have two options: the data are bad, and customer kind of like it lays; all the data are good, and they like it more.

Speaker Change: Thank you Christopher and maybe my follow up would be on the <unk>.

Speaker Change: Don't want you to support the capital market day, but could.

Speaker Change: Could you maybe give us an update on the on the high and then in terms of Joseph adoption, maybe logic memories.

Speaker Change: Anything happening here versus maybe three months ago six months ago since Q2, plus the wafers.

Speaker Change: Well I think I said, a few months ago that you know.

Speaker Change: The period, we are in the months, we are and will be important for us.

Speaker Change: The data generation.

Speaker Change: Generating data to our customer our customer that have placed many order already on 90 day for R&D.

Speaker Change: And you know when you did generate data you have two options the data all bad and customer kind of like it plays.

Speaker Change: The data are good.

Christophe Fouquet: And I think we are more in the second situation today. We continue to generate data; we talked about 10,000 with our expose. These are all to demonstrate basically the performance of the tool. All logic, memory, and all of that is helping our customer to, I would say, to make their plan of insertion and adoption a bit more concrete and start to define some very specific milestones. So this is a bit where we are. We are very happy with the progress on INA. We are very happy with the performance, we are happy with the data, and we will continue next few months to, to walk with our customer to translate basically those initial good results into, into real, I would say plan in their manufacturing facts.

Speaker Change: And they like it more and I think we are more in the second situation today.

Speaker Change: Continuing to generate data we'd talked about 10000 wafer expose these are hold to demonstrate basically the performance of the tool on logic memory and all of that is helping our customer to I would say two to make their plan of insertion and adoption with more concrete and start to define some very.

Speaker Change: Specific milestones. So this is a bit where we are.

Speaker Change: We are very happy with the progress on <unk>, we are very happy with the performance.

Speaker Change: We're happy with the data and we'll continue the next few months to to work with our customer to translate basically those initial good reserves into into real I would say plan, India manufacturing fabs.

Speaker Change: Alright, Thank you very much.

Unknown Executive: Thank you.

Speaker Change: Youre welcome.

Alexander Duval: Your next question comes from the line of Alexander DuVile from Goldman Sachs. Please go ahead. Yes, many thanks for the question. I wonder if you could talk about what level of orders you need in the coming quarters to hit the new midpoint of guidance. I think previously you talked about 6 billion euro of orders in the second half of this year to hit the primary midpoint, and now we've obviously seen two and a half in the quarter, but a lower target. So how should we be thinking about this and to what degree is there some wiggle room in the first quarter given lead times potentially to still get orders which could benefit 20, 25.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Alexander Duval from Goldman Sachs. Please go ahead.

Speaker Change: Okay.

Alexander Duval: Yes. Many thanks for the question I wondered if you could talk about what level of orders you need in the coming quarters to hit the midpoint of guidance I think previously you talked about 6 billion euro of orders in.

Alexander Duval: In the second half this year to hit the prime midpoint.

Alexander Duval: And now we've obviously seen a two and a half in the quarter below target.

Alexander Duval: How should we be thinking about this and to what degree.

Or is there some wiggle room in the first quarter.

Alexander Duval: Given lead times potentially to still get orders, which could benefit two.

Alexander Duval: That's my first question.

Alexander Duval: 1025, Thats My first question.

Roger Dassen: Alexander, so you're right. And I would say that, in addition to what you observed in terms of the overall order intake, it's also clear that obviously there has been some push outs into 20, 26. So that's also something that you should recognize, right? That's orders that originally were provided to us as 20, 25 orders in the mix that we just discussed have been shifted into to beyond 20, 25. So that dynamic should also be considered.

Speaker Change: Is that a gartner so youre right.

Speaker Change: And I would say that in addition to what you observed in terms of the overall.

Order intake. It's also clear that obviously there has been some push outs into 2026. So that's also something that you should recognize Ryan that's orders that originally were provided to US is plenty plenty five orders in the mix that we just discussed have been shifted into two beyond 2025, so that dynamic should also be considered.

Roger Dassen: What we're looking at today, I would say I think where when it comes to EUV because obviously that is relevant. I think in this conversation, I think DTV given the significantly low order lead times is less relevant here, but when it comes to EUV. At this stage, I think it's fair to say that we're that we're sort of fully booked for the low end of the guidance that we've that we've provided. In order to get to the midpoint of the guidance, I would say that we need another, let's say, 2 billion in order to hit the midpoint of the guidance before the end of the year.

Speaker Change: What we're looking at today I would say.

Speaker Change: I think when it comes to EV, because obviously that is relevant I think in this conversation I think <unk> given the significantly lower order lead times is less relevant here, but when it comes to <unk>.

At this stage I think it's fair to say that we're that we're sort of fully booked.

Speaker Change: Sure.

Speaker Change: For the low end of the guidance that we've that we've provided.

Speaker Change: To get to the midpoint of the guidance I would say that we need another let's say $2 billion in order to hit the midpoint of the guidance.

Roger Dassen: So, you know, 2 billion should then come in this quarter. When it comes to flexibility, I think there is some flexibility, so to the extent that orders would come in Inky one, I think we would still probably be able to, you know, to cater to those orders in 2025. I think we've built in sufficient flexibility to create that.

Speaker Change: For the end of before the end of the year. So $2 billion should then come in this in this quarter.

Speaker Change: When it comes to flexibility.

Speaker Change: There is some flexibility so to the extent that orders would come in in Q1, I think we would still probably be able to.

Speaker Change: Cater to the to those orders in 2025, I think we build in sufficient flexibility to create it.

Roger Dassen: Be helpful and maybe it's a quick follow up. We've had a number of investor questions about sort of lithography intensity in the context of areas ramping like advanced packaging, advanced deposition, for example. Just curious to what degree you see that as having a structural impact on litho intensity, to what degree does that matter in 2026 and beyond on the assumption that the semi market continues to grow over time.

Speaker Change: Helpful and maybe it's a quick follow up we've had a number of investor questions about sort of lithography intensity in the context of areas ramping like advanced packaging advanced deposition for example.

Speaker Change: Just curious to what degree you see that as having a structural impact on litho intensity.

To what degree does that matter in 2026.

Speaker Change: And beyond on the assumption that the semi market continues to grow over time.

Roger Dassen: So I think we would talk about that in the Capital Market Day, you know, in a few weeks from now because those are more longer term considerations. So anything we discuss today, I think, is in no way related to those kind of, I will say, considerations. The whole discussion is really around the market dynamic.

Speaker Change: Yes, so I think we.

Speaker Change: We would talk about that in the capital market day.

Speaker Change: In a few weeks from now because those are more longer term consideration. So anything we discussed today.

Speaker Change: It is in no way related to those kind of.

Speaker Change: I would say considerations to the whole discussion is really around the market dynamic.

Roger Dassen: I think those questions are very good for our longer term opportunities, and we will be spending quite some time discussing that in the, again, in the November meeting together.

Speaker Change: I think those question a very good for our longer term.

Speaker Change: Opportunities and we will.

Speaker Change: We will be spending quite some time discussing that in the again in the November meeting together.

Alexander Duval: Thank you for seeing you that many thanks.

Speaker Change: Foreseeing that many thanks.

Speaker Change: Thank you.

Alexander Duval: Your next question comes from the line of Tammy Q from Bamberg. Please go ahead. Thank you for taking my question. So the first one is on China. You mentioned that China is going to normalize from here because of different reasons. Is it right to understand that the 2025 level of Chinese business will be the new baseline of China? Are you wishing to see another 20% or 30% decrease from here into 2026? I think the 20% is what we consider to be a normal percentage of our business for China. So we would assume that, you know, that that is a number that also on the go for basis.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Tommy can you from buying back. Please go ahead.

Speaker Change: Thank you for taking my question.

Speaker Change: One is on China, you mentioned that China is going to normalize from here because of different reasons.

Speaker Change: On the fund.

Speaker Change: The 2025 megawatts Chinese business will be the new baseline of China, all your wishes and see another 20% or 30% decrease.

Speaker Change: From here into 2026.

Speaker Change: I think the 20% is what we consider to be normal percentage of our business for China. So we would assume that said that that is a number. That's also on a go forward basis, we believe would be realistic for China of course subject to.

Tammy Qiu: We believe would be realistic for China. Of course, subject to, you know, to anything related to export control that would have you, which is beyond our control, but simply looking at the market, we believe, you know, that the China market structurally would be able to, you know, to accommodate about 20% of our revenue.

Speaker Change: To anything related to export controls and with heavy which is beyond our control, but simply looking at the market. We believe that the China market structurally would be able to to to accommodate about 20% of our revenue.

Tammy Qiu: Okay, amazing. Thank you.

Tammy Qiu: And for what I have is on the two large customers, which push out their order in this quarter. So, in your 2025 number on those two big customers, did you actually budget it more cream in there when you estimate your 2025 revenue, or basically you have taken the push out from this quarter come out with the 2025 number. So therefore we may actually subject to further push out if they do it another round in the next lecture to quarter.

Speaker Change: Okay. Thank you and a follow up on the.

Speaker Change: Two large customer which pushed out there.

Speaker Change: This quarter.

Speaker Change: 2025.

Speaker Change: The two big customer.

Speaker Change: Did you actually budgeted more train in that when you have to make sure 2025 revenue basically you have taken b.

Speaker Change: The push off on this quarter come out with for 2025 number. So therefore, when they actually subject to further push out.

Roger Dassen: Hey, Tammy, real quick to clarify: you said in 2025 we budgeted. What was that? So basically I said, well, your budgeting or 2025 revenue when you give this new guidance range and midpoint 32.5. Did you actually budget additional cut from those two big customers, or did you only reflect the cut you have seen in this? Quatro. We've essentially, Tammy, we've essentially taken the latest view that we've developed with that customer. So you will appreciate with those customers. So you will agree. And by the way, you talk about two customers. I think it's fair to say it's more than two customers, right?

Speaker Change: In the next let's say two quarter.

Speaker Change: Hey, Tammy real quick to clarify you said in 2025, we budgeted what was that.

Speaker Change: So basically I said what are you budgeting for 2025 revenue when you gave it.

Speaker Change: Your guidance range.

Speaker Change: 32, five did you actually budget additional cost from those two big customers.

Speaker Change: Only reflected the cut you Hudson in next quarter.

Speaker Change: We've essentially Tommy we've essentially.

Taken the latest view that we've developed with that with that customer. So you will appreciate with those customers. So you will agree by the way you talk about two customers I think it's fair to say, it's more than two customers right.

Roger Dassen: But but what we've reflected in what we have now is the latest status of the conversations with those with those with those customers. And that's what is; that's what is in here. But you will also appreciate that the closer you get to the year, the more firm those customers will be on their demand. So I think what we're looking at for now, you know, is a pretty, a pretty current. And I would say an accurate view of those customers of what they need for next year as a baseline.

Speaker Change: What we've reflected in what we have now is the latest status of the conversations with those so with those sit with those customers and Thats what is it thats what is in here, but you would also appreciate that the closer you get to the year the more firm at those customers will be on their on their demand. So I think what we're looking at.

Speaker Change: Pulling out.

Speaker Change: Is it pretty.

Speaker Change: Pretty current and I would say accurate view of those customers of what they need for next year.

Operator: Okay, thank you.

Speaker Change: As a baseline.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Operator: We will now take the next question.

Speaker Change: Thank Keith.

Speaker Change: We will now take the next question.

CJ: And the question comes from the line of "See them use" from Council Fitzgerald. Please go ahead. Yeah, good morning. Good afternoon. Thank you for taking the question.

Speaker Change: And the question comes from the line of C. J Muse from Cantor Fitzgerald. Please go ahead.

CJ: I guess the first question was trying to dig a little bit deeper into China. You are guiding the 20% of revenues, which basically suggests down 30% year on year. I'm curious, does that 20% reflect just normalization? Or are you, you know, taking certain precautions in terms of anticipated regulatory pressure? And if so, you know, what kind of dollar amount or percentage is reflected by, you know, maybe more cautious behavior, as opposed to a change in demand trends? Yeah, I think CJA said it. The cautious view is for the two reasons; the cautious view is because we, as we said before, believe at a certain point in time, China will go to a more normalized level.

Speaker Change: Yes. Good morning, good afternoon, and thank you for taking the question I guess first question Im just trying to dig a little bit deeper into.

Speaker Change: China.

Speaker Change: You are guiding to 20% of revenues, which basically suggests down 30% year on year I'm curious does that 20% reflect just normalization or are you taking certain precautions in terms of anticipated regulatory pressure and if so what kind of dollar amount or percentage.

Speaker Change: As reflected by maybe more cautious behavior as opposed to a change in demand trends.

Speaker Change: Yes, I think C J S.

Speaker Change: The cautious view is for two reasons the cautious view is because as we said before we believe at a certain point in time, China will go into a more normalized level because we're not over.

Christophe Fouquet: Just were not over, you know, over delivering on their backlog. That's one. And second, I said, you know, given the discussions that we also read in the press, we've become a bit more cautious; to dissect that is impossible to do. So it's that combination that has given rise to our expectation of China being 20%, which is not too far away indeed from your 30% decline.

Speaker Change: Over delivering on their on their backlog, that's one and second I said given the discussions that we also read in the press, we've become a bit more cautious.

Speaker Change: To dissect that is impossible to do so it's that combination that has given rise to our expectation of China being 20%, which is not too far away. Indeed from your 30% decline.

Christophe Fouquet: But, but I guess I'm trying to decipher why it's impossible. I mean, obviously you have a vision for end of man, and then you're taking a haircut to reflect maybe more conservatism. Is there a way to understand that haircut? It's related, CJ. So the two go hand in hand, so you cannot, you cannot dissect that, and I will not dissect that.

But I guess I'm trying to.

Speaker Change: Sorry for why it's impossible I mean, obviously you have a vision for end demand and then youre, taking a haircut to reflect maybe more conservatism is there a way to understand that haircut.

Speaker Change: It's related C J so.

Speaker Change: The two go hand in hand, so you can you kind of dissect that and I will know dissect that.

Christophe Fouquet: Okay, maybe a bigger picture question. You know, in a world where, you know, two leading logic players are floundering, you really kind of have three big EUV customers in TSMC, Heinrichs, and Micron. And just curious, you know, as you think about kind of monopoly versus monopsinist.

Speaker Change: Okay, maybe a bigger picture question.

Speaker Change: The world, where two leading logic players are floundering yeah.

Speaker Change: You really kind of have three big <unk> customers and TSMC Hynix and micron.

Speaker Change: And just curious as you think about kind of monopoly versus Manav soonest.

Christophe Fouquet: Are you thinking about, you know, changing your plan to pre-build? I would think that, you know, pricing power and pre-building, you know, don't go hand in hand. So I would love to hear your kind of philosophy around that? Well, I think, you know, the one priority for us is to serve our customers, which means that whatever total demand our customer will give us, we want to be able to honor that. And that's especially important to do that when you are the single supplier of EUV2. So I think that's the responsibility we have. I think the discussion on Priebeeld started when we saw a situation where we may not be able to meet the demand with the output of one year.

Speaker Change #100: Are you thinking about changing your plan to pre build I would think that pricing power in pre building.

Don't go hand in hand, so would love to hear your kind of philosophy around that.

Speaker Change #101: Well I think.

Speaker Change #102: The one priority for us is to serve our customers, which means that whatever total demand our customer will give us we want to be able to honor that and that is especially important to do that when you have a single supplier of UV tools I think that's a responsibility we have.

I think the discussion on pre build stuff.

Speaker Change #103: Got it.

Speaker Change #103: When we saw a situation, where we may not be able to meet the demand with the output of one year and then to be consistent with my previous point pre build in the lower <unk> as a way to do that so.

Christophe Fouquet: And then, to be consistent with my previous point, Priebeeld in a lower year is the way to do that. So, this means also that this number of Priebeeld tools will of course evolve with the market situation. And if we are in a situation where the market is low, we don't need to do that, except a specific request of our customer. But you know, what we have seen also in the past is that things tend to change, and I think the mix between our customer is also evolving back and forth over time. So I think that's also something we keep in mind.

Speaker Change #103: So this means also that this number of Pbms tune will of course evolve with the market situation and if we are in a situation where the market is low we don't see the need to do that except specific request of our customer.

Speaker Change #103: But.

Speaker Change #103: You know what we have seen also in the past is that.

Speaker Change #103: Things tend to change and I think the mix between our customer is also evolving back and forth over time. So I think thats also something we keep in mind.

Speaker Change #104: Thank you.

Speaker Change #104: Thank you.

Sandeep Deshpande: Your next question. Because from the line of Sunday, if Despande, from JP Morgan, please go ahead. Yeah, hi, thanks for letting me on. I want to go back to one of the early questions again. I mean, in terms of your guidance for next year, I mean, when we look at the numbers, it looks like your growth in the view outside China is going to be incredibly strong. I mean, and also when I've looked at SML for so many years, I mean, the view is at SML when you give one year guidance, you tend to be within that ballpark; you don't tend to be wrong in that in those terms. So, I mean, how confident do you feel that the DOV outside China is going to see significant growth next year, given that DOV does tend to have shortly times an EUV.

Speaker Change #104: Next question.

Speaker Change #105: Comes from the line of Sandeep Deshpande from Jpmorgan. Please go ahead.

Yeah, Hi, Thanks for letting me on I want to go back to one of the earlier questions again.

Speaker Change #106: In terms of your guidance for next year I mean, when we look at the numbers it looks like your growth in <unk> outside China is going to be incredibly strong.

I mean.

Speaker Change #105: And also that I've looked at ASML for so many years.

Speaker Change #105: The view is that ASML when you give one year guidance you tend to be within that ballpark you don't tend to be wrong in that in those terms. So I mean, how confident do you feel that the D. We outside China is going to see significant growth next year, given that does tend to have shorter lead times than EV and I have one follow up.

Sandeep Deshpande: And I have one follow-up afternoon. Yeah, so, as I say, well, you caught up in incredible growth. As I mentioned before, I think you're looking for the non-Chinese part of the DPV business. We're looking at about similar growth as we see it for EUV. So, leave it to you. Your own imagination, now you want to qualify that. But the two things go hand in hand. We see quite a bit of DPV demand, or particularly, I would say, on the leading notes. So, therefore, I think assumptions on a strong correlation between capacity build on EV and capacity build on the non-Chinese part of the DPV.

Speaker Change #107: Got it.

Speaker Change #108: Yes, so as I may well you call of an incredible growth as I mentioned before I think youre looking for the non non Chinese part of the deep UV business. We're looking at about similar growth as we see it for <unk>. So.

Speaker Change #108: Leave it to your own imagination, how you want to quantify that but it is the two things go hand in hand, we see quite a bit of deep UV demand also particularly I would say on the on the leading nodes. So therefore, I think our assumptions on.

Speaker Change #108: On a strong correlation between capacity build on EV and capacity build on the non Chinese part of the deal I think that that is a realistic irina realistic assumption. So therefore with that very strong correlation as we see it.

Roger Dassen: I think that is realistic, realistic assumption. So, therefore, with that very strong correlation as we see it, we believe that the underpinning for that demand for that demand increase. So, we believe this is robust.

Speaker Change #108: That's the underpinning for that demand that demand increase.

Speaker Change #108: Something we believe is robust.

Roger Dassen: Roger, I mean, just you don't guess on the same question. I mean, in terms of your forecasting for 25, this is in line with how you forecast in prior years, correct? So, there's nothing different, or do you think that this year is 25 looking something very dramatically different. And so, you may have to change later, or something like that. No, I think it's essentially, it's essentially the same. You could argue something that we're a bit early. And the reason that we're a bit early is because we believe, given the dynamics that Christoph talked about at the beginning.

Speaker Change #109: And Rajeev I mean, just.

Speaker Change #110: I guess on the same question in terms of your forecasting for 25. This is in line with how you forecast in prior yes, correct. So it is nothing different or do you think that this year is 25 looking something very dramatically different and so you may have to change later or something like that.

Speaker Change #111: No I think it's essentially it's essentially the same.

Speaker Change #111: Could argue sandy that were a bit early and the reason that we're a bit early is because we believe given the dynamics that <unk> talked about at the beginning we believe that said that the second or the high end of the bandwidth is not realistically in reach based on what we know today. So that's the reason why we believed it was prudent to say we should be looking at.

Roger Dassen: We believe that the second or the high end of the bandwidth is not realistically in reach based on what we know today. So, that's the reason why we believe this was put into, say, you know, we should be looking at the lower end. Of course, in the next couple of months, you know, we're going to once again talk to customers and listen to their plans, et cetera, et cetera. But I think the way we're looking at next year and the work that we've done on that is not dramatically different for what we've done in the previous year.

Speaker Change #111: At the lower end of course in the next couple of months.

Speaker Change #111: We're going to once again talk to customers and listened to their plans et cetera et cetera.

Speaker Change #111: The way, we're looking at next year and the work that we've done on that is not dramatically different from what we've done in previous years.

Sandeep Deshpande: Okay, thanks.

Christophe Fouquet: And one for my second question is on high NE, Christophe. I mean, they're having public, you know, comments by one of your customers on high NE. Clearly, the data which has been available at large conference at high NE seems to be pretty good. So my question is, are your top three customers all going to sign up for high NE quickly, or is this some of them going to delay like one of them date with EUV, and we know the consequences of that, of course. I think, you know, we've been consistent in the last few quarters mentioning that all our EUV customers had order and INA tools. All our EUV customers have been engaged with us in the INA lab.

Speaker Change #112: Okay. Okay. Thanks, and one for my second question is on high any Christoph I mean, there have been public comp.

Speaker Change #113: Comment by one of your customers on high any clearly the data which has been available at the last conference at Hyatt <unk> seems to be pretty good. So my question is are your top three customers all going to sign up for high any quickly or is this some of them going to.

Speaker Change #113: Daily like one of them did with <unk> and we know.

Speaker Change #113: No the consequences of that of course.

Speaker Change #114: Well I think.

Speaker Change #114: Been consistent in the last few quarter mentioning that.

Speaker Change #115: All of our EV customer had order and <unk> twos.

Speaker Change #115: All of our <unk> customers have been engaged with us in the <unk>.

Christophe Fouquet: So everyone is really using this time to collect the data. So the data you may have had a chance to see, the one you refer to. I think I'll also look at seeing by all customers. I think the engagement today on INA is really coming from all of our EUV customers. And the timing they have in mind for insertion for adoption is still pretty much in line with what we're discussing in the past. I think the good data we've been able to generate on the very first tools are just, if anything, supporting. That's the approach.

Speaker Change #115: In the lab. So everyone is really using this time to collect the data. So the data you may have had a chance to see that one.

Speaker Change #115: You referred to.

I think also looked at seen by all customers I think the engagement today on M&A is really coming from all of our <unk> customer.

Speaker Change #115: And.

Speaker Change #115: The timing do you have in mind for insertion for adoption is still pretty much in line with what we have discussed in the past I think the the good data we have been able to generate on the very first tools.

Speaker Change #115: Just.

Speaker Change #115: If anything supporting that that's.

Speaker Change #115: <unk>.

Unknown Executive: Thank you, Chris.

Speaker Change #116: Thank you Christoph.

Unknown Executive: You would come.

Operator: All right, we have time for one last question. If you were unable to get through on this call and still have questions, please feel free to contact the SML and Best Relations department with your question.

Christoph: Youre welcome.

Speaker Change #116: Alright.

Speaker Change #118: For one last question. If you were unable to get through on this call and still have questions. Please feel free to contact ASML Investor Relations Department with your question now operator may we have the last caller. Please.

Operator: Now operator, may we have the last caller, please.

Adita Matuku: Thank you. We will now take our final question for today. And your final question comes from the line of Adita Matuku from HSBC. Please go ahead. Yeah, good afternoon, guys. Thank you for taking my questions. So firstly, just a clarification. If I heard you correctly, you said the competitive dynamics between the logic players. You pointed out earlier, you're saying that the problem is that some of these customers have led to downside risks, crystallising for 2025. But the upside risks from the share shifts between these logic customers haven't yet crystallised, and that's not yet a new assumption for 2025.

Speaker Change #118: Thank you.

Speaker Change #119: We will now take our final question for today.

Speaker Change #120: And Youll final question comes from the line of detail, Matt <unk> from HSBC. Please go ahead.

Speaker Change #121: Yeah. Good afternoon, guys. Thank you for taking my questions.

Speaker Change #122: Firstly, just a clarification if I heard you correctly, you said the competitive dynamics between the logic players.

Speaker Change #122: Pointed out earlier, you were saying that the problems that these some of these customers have led to downside risks crystallizing for 2025, but the upside risks from the share shifts between this logic customers haven't yet crystallized and are not yet in your assumptions for 2025 is that right did I hear that correctly.

Adita Matuku: Is that right? Did I hear that correctly? Well, I think it was a short answer: yes. It is again why we refer to some upside on some part of the market. But it's essentially you're saying you're priced in caution for China, even though we have no clarity on export controls and how they're developed. And then there could be upside risk from share shifts between logic customers in 2025.

Speaker Change #122: Well I think.

Speaker Change #123: Short answer is yes.

Speaker Change #123: And Thats again, why we referred to some upside on some part of the market.

Speaker Change #124: Got it so essentially youre, saying youre priced and caution for China, even though the.

Speaker Change #124: We have no clarity on export controls on how those develop and then there could be upside risk from.

Speaker Change #125: Share shifts between logic customers into 2025, and then maybe just as a follow up on <unk> Asps for Russia.

Roger Dassen: And then maybe just as a follow-up on low and AUV ASBs for Rojay. When I take the numbers you're giving, less than 50 low and 8 tools, and 5 high and 8 tools, and the growth and the UV declining. So essentially your AUV has the growth quite significantly, but with the ASBs you've given for the 3800.

But when I take the numbers, you're giving less than 50 eliminate tools and <unk> twos and.

Speaker Change #125: And the growth and do you be declining so essentially your <unk> has to grow quite significantly but with the.

Speaker Change #125: With the Asp's, you've given for the 3800 machine and the mix shifts you're still talking about for 2025 between that 600 3800 E. It sounds like.

Speaker Change #125: U S.

Speaker Change #125: <unk> has to be something like 240 million euros and I'm not sure how we get to that number I don't know if you can help me reconcile those.

Speaker Change #125:

Speaker Change #125: If possible I apologize if the question is unclear.

Well the question is clear, but you are modeling.

Speaker Change #126: That's why that's why it's difficult to reconcile that.

Speaker Change #127: On this call are JJ.

Speaker Change #127: But.

Speaker Change #128: By and large I think you mentioned 240 that would be that would definitely be too high and that is also not what we have in our numbers. So if we look at the Asps that I recognize that we recognized in our model.

Speaker Change #129: Got you to the midpoint of the guidance there isn't an ASP that is.

Speaker Change #128: That is above 200.

Speaker Change #128: Definitely not at the 240 added 240 level so.

Speaker Change #130: And I think you might run revisit that I don't know exactly what you have on <unk>. So it's a matter of really taking a thorough look at your at your model.

Speaker Change #130: On high and then you should have at least for the 5200 issued have an ASP of over $3 50.

Speaker Change #130: So I don't know if you have that in there, but the asps to work on <unk> would be would.

Speaker Change #130: It would be north of 200, and the mix, but would be would definitely be lower than the $2 40 that you just quoted.

Speaker Change #131: Understood. Thank you.

Speaker Change #132: Youre welcome.

Speaker Change #133: Alright, now on behalf of ASML I would like to thank you all for joining us today.

Speaker Change #133: Operator, if you could formally conclude the call I'd appreciate it thank you.

Speaker Change #134: Thank you. This concludes the ASML 'twenty to 'twenty four third quarter financial results Conference call. Thank you for participating you may now disconnect.

Okay.

Speaker Change #134: [music].

Speaker Change #134: Okay.

Speaker Change #134: [music].

Speaker Change #134: Okay.

Speaker Change #134: Uh huh.

Speaker Change #134: Okay.

Speaker Change #134: [music].

Speaker Change #134: Sure.

Speaker Change #134: Yes.

Speaker Change #134: [music].

Speaker Change #134: Okay.

Speaker Change #134: Okay.

Speaker Change #134: Yeah.

Speaker Change #134: Okay.

Speaker Change #134: Okay.

Speaker Change #134: Yes.

Speaker Change #134: Okay.

Speaker Change #134: [music].

Speaker Change #134: Yes.

Speaker Change #134: Mhm.

Speaker Change #134: [music].

Speaker Change #134: Yes.

Speaker Change #134: [music].

Speaker Change #134: Okay.

Speaker Change #134: [music].

Speaker Change #134: <unk>.

Speaker Change #134: [music].

Speaker Change #134: Okay.

Speaker Change #134: [music].

Roger Dassen: Thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time.

Speaker Change #134: Yeah.

Speaker Change #134: Okay.

Speaker Change #134: Okay.

Speaker Change #134: [music].

Speaker Change #134: Okay.

Speaker Change #134: Okay.

Speaker Change #134: Yes.

Speaker Change #134: Okay.