ASML Holding N.V. (ASML) Q2 2025 Earnings Call Transcript

ASML reported robust Q2 2025 results, with net sales of EUR 7.7 billion and gross margin of 53.7%, both exceeding guidance, driven by High NA system revenue recognition and strong installed base management sales. The company now projects full-year 2025 revenue growth of approximately 15%, with EUV revenue expected to increase 30%, a slight moderation from earlier forecasts due to a shift towards higher-margin upgrade business and enhanced NXE:3800E productivity enabling customer capacity expansion with fewer units. While AI continues to drive strong demand in Logic and Memory, ASML noted increased uncertainty for 2026 growth, citing macroeconomic and geopolitical factors, particularly tariffs, which are prompting customers to delay capital expenditure commitments.

Analysis

ASML delivered strong second-quarter 2025 results, with net sales of €7.7 billion and a gross margin of 53.7%, both exceeding the upper end of guidance. This performance was bolstered by a significant contribution from installed base management sales (€2.1 billion) and the revenue recognition of a High NA system. Consequently, the company has guided for full-year 2025 revenue growth of approximately 15%. However, the composition of this growth has shifted; expected EUV revenue growth has been moderated to ~30% from earlier expectations, which management attributes to the higher productivity of new NXE:3800E systems enabling customers to meet capacity targets with fewer units, and a reclassification of some activity to higher-margin upgrades. Concurrently, China's contribution to 2025 revenue is now forecast to be over 25%, indicating sustained strong demand for DUV systems.

The most critical takeaway from the call is the significant shift in the outlook for 2026. Management explicitly retracted prior confidence in growth for 2026, stating they "cannot confirm it at this stage" due to escalating macroeconomic and geopolitical uncertainties, primarily surrounding tariffs. This is reportedly causing customers to delay capital expenditure commitments. While Q2 net system bookings were solid at €5.5 billion, and the backlog remains substantial at €33 billion, the cautious forward commentary introduces a significant element of risk that overshadows the current operational strength. A €1.4 billion negative adjustment to the backlog due to past China export controls further underscores the tangible impact of these geopolitical tensions.

Key Decisions for Investors

• Investors should weigh the strong current performance and positive 2025 guidance against the newly introduced uncertainty for 2026, which is likely to introduce stock price volatility until there is more clarity on customer CapEx.
• Monitor future net bookings and management commentary on customer investment timing, as these will be the primary leading indicators for validating or further discounting the 2026 outlook.
• Acknowledge the increased near-term reliance on China, which is set to comprise over 25% of 2025 revenue, as both a source of DUV strength and a heightened geopolitical risk factor, evidenced by the recent €1.4 billion backlog adjustment.
• For long-term investors, the successful shipment of the first EXE:5200B system for high-volume manufacturing validates the High NA roadmap, but be prepared for a gross margin dilution in the second half of 2025 as more of these systems are recognized.