ASML Holding Q2 F2026 Earnings Call Transcript

Good day and thank you for standing by. Welcome to the ASML 2026 Second Quarter Financial Results Conference Call on July 15th, 2026. At this time, all participants are in a listen-only mode. After the speaker's introduction, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To answer your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Jim Kavanagh. Please go ahead.

Thank you, operator. Welcome, everyone. This is Jim Kavanagh, Head of Investor Relations at ASML. Joining me today on the call are ASML CEO Christophe Fouquet and our CFO, Roger Dassen. The subject of today's call is ASML's 2026 Second Quarter Results. The length of the call will be 60 minutes and questions will be taken in the order they are received. This call is also being broadcast live over the internet on www.asml.com. 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 would 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 uncertainty. 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 www.asml.com, and on ASML's annual report on the Form 20F and other documents, as filed with the Securities and Exchange Commission. With that, I would like to turn the call over to Christophe Fouquet for a brief introduction.

Thank you, Jim. Welcome, everyone, and thank you for joining us for our second quarter of 2026 reserves conference call. Before we begin the Q&A session, Roger and I would like to provide an overview and some commentary on the second quarter of 2026 reserves, as well as provide some additional comments on the current business environment and on our future business outlook. Roger?

Thank you, Christophe, and welcome, everyone. I will first review the second quarter 2026 financial accomplishments and then provide guidance on the third quarter and the full year of 2026. Let me start with our second quarter accomplishments. In the second quarter of 2026, total net sales were 9.3 billion euros, which is above the high end of our guidance as a result of higher than expected install-based management sales. Net system sales were at €6.6 billion, which included €3.8 billion from EUV system sales, including sales of one high NA system, and €2.8 billion from non-EUV system sales. Net system sales were almost equally split between logic at 51% and memory at 49%. Install-based management sales for the quarter came in at €2.8 billion, almost €300 million above our guidance, a result driven primarily by additional upgrade business. Was margin for the quarter? Was above our guidance at 54%, primarily due to the contribution of very high margin components within our install-based management business. Our operating expenses were higher than guidance due to the recognition of estimated costs related to the technology and IT transformation in Q2, primarily in R&D. R&D expenses came in at 1.3 billion euros and FG&A expenses came in at around 0.3 billion euros. The effective tax rate for Q2 was 17.5%. For the full year 2026, we expected the annualized effective tax rate is around 17%. Net income in Q2 was 2.9 billion euros, representing 31.3% of total net sales. resulting in earnings per share of 7.59 euros. Turning to the balance sheet, we ended the second quarter with cash, cash equivalents and short-term investments at a level of 7.6 billion euros. Our fixed cash flow in Q2 was 1.3 billion euros. Moving to our cash return to our shareholders, in Q2, ASML paid the final dividend over 2025 of 2.70 per ordinary share. Together with the three interim dividends paid in 2025 and 2026, this resulted in a total dividend for 2025 of €7.50 per ordinary share. In the second quarter, we purchased around €1.1 billion worth of shares under the current 2026-2028 share buyback program. The first quarterly interim dividend over 2026 will be €1.88 per ordinary share, and will be made payable on August 5th, 2026. With that, I would like to turn to our expectations for the third quarter of 2026. We expect Q3 total net sales to be between 11 billion and 12 billion euros. We expect our Q3 installed base management sales to be around 2.9 billion euros, whereas margin for Q3 is expected to be between 55 and 57%. The expected R&D expenses for Q3 are around 1.2 billion euros, and FG&A is expected to be around 0.4 billion euros. Driven by continued strong demand, we are updating our full-year 2026 guidance. We now expect total net sales between 43 and 45 billion, with a gross margin between 54% and 56%, billion numbers in euros. With that, I would like to turn the call back over to Christophe.

Thank you, Roger. I will now provide some additional details on the dynamics that prompted us to raise our guidance for the full year. The combination of continued strong momentum in customer demand and our ability to respond to that by driving higher output to strength in our supply chain, our manufacturing and our install teams in the field are the primary drivers of our improved guidance. Strong end-market demand this year has motivated our customers to aggressively add capacity on their leading-edge nodes. A number of our customers have revised their capital expenditure plans, a port for the year, and our ability to increase output has allowed us to meet their requests for additional lithography systems. The dynamics are very similar in both Advanced Logic and D-RAM, and the plans to build up capacity are equally aggressive. Our customers in both segments are entering into long-term agreements with their customers, providing them with longer-term visibility and the confidence to add significant capacity to support demand. In logic, there is a continued investment not only to enable the expansion of three nanometer capacity in support of the latest generation of AI accelerators, but also at both the five and the four nanometer nodes to support the diverse set of chips required by AI products. At the same time, the two nanometer node continues to ramp rapidly to support next generation HPC and mobile applications. And our customers are already planning investments to support the development of the 1.4 nanometer nodes. These dynamics in the logic segments are driving both an increase in litho-intensity and greater demand for advanced lithography. We now expect advanced logic fund-related net system sales to grow over 25% this year. In DRAM, the supply challenges driving up both DDR and HBM prices have prompted significant investments in FAB expansions. Our customers are hiding meaningful capacity this year, while at the same time they plan further capacity expansion as indicated by the plans to build multiple megaFAPs. These additions will come online in phases over the coming years. In addition, DRAM lithography intensity is rising as customers migrate to advanced nodes. This includes both EUV and DQV immersions. with EUV low NA growth driven by the increased replacement of multi-patterning with more cost-effective single-exposed EUV. As a result, we anticipate our memory-related net system sales to grow by over 75% this year. I will now turn it back over to Roger to provide details on what that means for the different parts of our business and our plans to support this growing demand.

Thanks, Christophe. Starting first with our EUV business. We now expect to ship around 65 low-in-A EUV systems this year, resulting in year-over-year EUV net system sales growth of over 45%. This demand is being fueled by very strong momentum in both DRAM and advanced logic. Moving to the DPV business. For immersion DPV, we expect about 130 shipments this year, which is similar to the output level of these systems in 2025. This year, we have worked closely together with our supply chain partners to re-accelerate our output of these systems. Shipments of dry DPV systems have also increased markedly this year. Further, greater process control intensity at advanced nodes has led to major traction when it comes to adoption of our optical and VEV metrology products across all key customers. Given these trends in our DPV metrology and inspection business, we expect growth in non-EUV net system sales of around 25% this year. Install date management sales are expected to grow over 30% this year, Driven by service revenue from our expanding EUV install base and customer demand for performance and productivity upgrades to support their increasing capacity requirements. Turning to our China-related business, we continue to expect this to make up around 20% of our total net sales for the full year as it increases in line with the overall business, mainly related to an increased demand in mainstream objects. With regard to our capacity plans, we are continuing to have very constructive conversations with our customers to better understand their demand or assistance beyond 2026. With increasing visibility into their customers' plans, our customers have been able to share forecasts with us that extend out multiple years. You see this heightened visibility reflected in auto momentum that has remained extremely strong through the first half of the year. As a result, our backlog continues to increase with a broad mix of customers. For 2027, we are now close to being fully covered with orders for low NA EUV, and we are planning to increase our low NA EUV capacity by around 30%. Looking ahead to 2028, we have already received a significant number of low NA EUV orders. Strong demand forecasts from our customers have led us to investigate a further 30% capacity increase for that year. Similarly, for our immersion systems, we intend to increase capacity by 30% in 2027 and are investigating a potential further 30% expansion for 2028. With that, I would like to turn it back over to Christophe.

Thank you, Roger. Turning to our technology roadmap, we see INA EUV continue to make good progress. We are continuing to work very closely with our customers to prove the value of INA technology for their process technology roadmaps. In parallel, the maturity of the platform is improving towards the level required for insertion into high-volume manufacturing. We are also very pleased to announce in a press release earlier today that Intel Foundry is using ISML INA EUV technology on the Intel Thank you very much. We have responded effectively to the increasing demand and will continue investing to ensure our capacity and capability remains aligned with our customer needs. We also see that the rapid growth of AI-related demand in advanced logic and DRAM is accelerating the move toward more advanced lithography solution and increasing lithography intensity. At our next Capital Market Day, which will be held on June 10, 2027, We will update our longer term views to reflect the market and technology dynamics since our last capital market day. I look forward to seeing many of our investors there. With that, we will be happy to take your questions.

Thank you, Roger, and thank you, Christophe. The operator will instruct you momentarily on the protocol for the Q&A session. Before hand, I would like to ask that you kindly limit yourself to one question with one short follow-up, if necessary. This will allow us to get through as many callers as possible. Now, operator, can we have your final instructions and then the first question, please?

Thank you. 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 restore your question, please press star 1 and 1 again. We will now go to the first question. One moment, please. And your first question today comes from the line of François Bovigny from UBS. Please go ahead.

Thank you very much. My first question maybe is on ISML has often described its pricing approach as being based on the value delivered to customers. Although, of course, by definition, that requires assumptions about the economic benefits The customers can extract from your tools. So with that in mind, I just wanted to revisit TSMC's recent comments on high NA systems being too expensive. One interpretation could be that customers are finding more value in the low NA than maybe we previously expected, particularly if they can do some triple patterning at competitive costs versus high NA. So my question is, is there any scope for pricing adjustments for low NA Over Time to ensure that the system pricing remains aligned with the incremental value you give to customers. Does that make sense?

Well, I think, François, I understand maybe the question of the connection between INA and low NA. So let me start with INA. We discussed that in the past. And, you know, every... New generation of lithography system ISML ever brought to market was with a strong intention to reduce the cost of patterning. So when you look at INA single expose, the design of the tool, the performance of the tool will be such that it provides cost benefit to our customer. Now of course to reach that point you need to have the right maturity of the platform. I just mentioned that we are still basically working in bringing the INA platform to the level of maturity of low NA. And, you know, when you achieve that, this is practically the time where the cost of INA is going basically to provide an advantage versus the existing technology. So I think that logic is still true and, again, get implemented when the platform reaches the right maturity. Therefore, I think there is no real need to maybe look at one tool price versus the other because that logic I think was also true for low NA if you remember our discussion back in 2018-19. I think the key again for INA to be cost effective, to beat the cost of low NA plus immersion multi-patterning is to bring INA to the right maturity. In that sense, we are very happy with the press release this morning about Intel because This is, I would say, maybe the strongest sign so far that we're getting there.

So there is no discussion of low N.A. pricing. Sorry, go ahead, Roger.

So I would say, François, in addition to that, when it comes to low N.A. pricing, of course you know that we keep on increasing the productivity of the low N.A. tools, so of course that gives us a pretty strong runway for potential price improvements going forward. And you're right. I mean, value-based pricing is the concept that we follow within the ASML. And you're also right that in the current environment, of course, value for customers is higher than in other circumstances. So I would agree with you that the current environment provides More flexibility for pricing than what you would have had in different days. Of course, you will also appreciate, given the long order lead times that we have, that that doesn't translate into pricing effects tomorrow. But clearly, you know, the environment that we live in today, where the value that our products bring to customers is substantial, of course, gives us flexibility on pricing more so than what you would have seen in the past. And, of course, we're executing on that as well.

When could that happen, Roger? I mean, to your point, it's not tomorrow, after tomorrow, so when is it?

So that really depends on the order situation that you have with customers. As I said, it's obviously linked to order lead time, and of course that varies from one to the other, but the dynamic is clearly there, François.

Okay, and maybe the follow-up quick one is on the The 30% increase in 28, which implies 110 tools. And, I mean, Christophe, you mentioned investigating the world is precise. Do you need a new clean room for that, or are you contemplating maybe to add clean room to ISML capabilities?

I think all the capacity it creates, either planned or investigated, we're talking about based on our existing footprint. So we have been working extremely hard, as you may have noticed, in the last six, nine months to increase our output. We'll continue to work very hard in the next few months to do the same. and the number we are mentioning we can achieve basically by optimizing the existing clean room space in the right way. So this is also why we can create basically that improvement on the short term. Great.

Thank you both.

You're welcome.

Thank you. Our next question today comes from the line of Joe Katracki from Wells Fargo. Please go ahead.

Yeah, thanks for taking the question. You noted that you're close to receiving all the orders you need for 2027 to be covered on low N.A. And you're increasing the capacity, obviously, by, you know, 30%. So I guess the question is, is the implied kind of 85% is that the ceiling of what you think you can support and your supply chain can support next year? Or it sounds like maybe the existing footprint can support more. Is there a possibility that that can move higher as we move closer to 2027?

George, it's the balance as we see it today. The balance between demand and supply as we see it today gets us to the 30%, right? So that's the way we do it. If customers are going to come to ASML and say, ASML, we need considerably more, and just as we've been doing it in the past couple of months, we need to look ourselves in the eye, we need to look at all the supply chain and just see what can further be done. At this stage, given the conversations we have, we think the 85 is a nice representation of the balance between what customers are asking of us and what at this stage we've been asking ourselves in the supply chain to do. If more is needed, just as we've done it in the past couple of quarters, we're going to roll up our sleeves and see if more can be done.

And maybe Joe, to add to that, back to Francois' question. So, you know, I explained that the two times 30% is based on our existing footprint. So the question basically is really the speed at which we need to execute to support the customer demand and potentially at some point we can execute. But on that part, as you have noticed in the last few months, we have been very successful.

So we have the space.

We have, I would say, The recipe to get to those number. And as I said, we will continue to both stay in sync with our customer, ask them what they need, and continue to work very hard on output. And, you know, the first mission of ASML is to provide their customer what they need, basically.

And Joe, to further build on that, we should also remind ourselves that we shouldn't just be looking at unit percent increases, right? So, We're looking at 30%, which is, you know, boxes, if you like, so 30% more tools. But you should also recognize that the tool mix that we're going to ship next year is a different tool mix from the tool mix that we shipped this year. So when it comes to EUV in particular, right, the tool mix that we're going to ship next year will be E's and S, while this year it's a combination of E's and E's, and if you If you recognize the difference in output, then in essence what you're looking at is not 30% improvement of weight or capacity that we're adding, but approximately 45%. And in addition to that, as you also know, You know, we're offering a whole slew of upgrade packages to the install base to customers, which gives them another significant uptake. So it's in the combination of improving the number of, the capacity that we have internally to crank out unit numbers and the productivity of the tools and the upgrades of the install base, and in that combination, as Christophe said, We think, you know, that we're, you know, very successful in meeting the objectives and the demands of our customers.

That's really helpful, Colin. I appreciate all the detail. Maybe just as a follow-up, you know, you talked about, like, optimizing the existing clean room space for capacity. Does that change at all what you think you could do from a capacity standpoint for high N.A.? Can you remind us what the high N.A. capacity is for looking into 2728?

Well, I think for INA, we follow the exact same principle, which is to match our supply with our customer demand. So I think, you know, we optimize across all the products. And, you know, there's also, of course, some discussion around INA, as we mentioned. There is some discussion about insertion. So we keep also, of course, the flexibility to be able to respond to that when the time comes. So the optimization I was referring to before Thank you. Thank you. Our next question today

comes from the line of Krish Sankar from TD Cowen. Please go ahead.

Thanks for taking my question. I told them the capacity increased to 8,510 units. You are meeting the demand, not undershipping. Is that correct? And if so, for you to increase, are you waiting for purchase orders from customers before you start adding more capacity? I'm going to add a follow-up.

Well, I think, you know, on the first question, I think that, as you have noticed in the last few months, I don't think we have reached yet a stable state on what the demand will be for 27, certainly not for 28. So, we keep on revising, basically, with our customer what that demand is. And, again, the whole goal of our supply is to follow that demand. So, you know, I will not say that we are done with this discussion. I think you see the dynamic on the market. This is still pretty strong. So this is also, you know, bringing some, of course, I would say, always tension to make sure that the two numbers match. But that's, again, something we'll continue to do. So short answer is yes, the capacity is there to meet the demand. But the demand is still fluctuating. We get nicer visibility for short for 27, even 28s. but we also mostly are not at the end of the discussion with our customer.

And clearly, Chris, we're not waiting until we get the orders, right? Because we said we're investigating, you know, the 110 scenario for EUV in low N.A. by 2028. Of course, we don't have, you know, orders for 410 EUV low N.A. at this stage. So we're not waiting. We're preempting. But we are doing this because the demand signals that we're getting from customers, that have not yet translated into full B.O., but the demand signals we're getting from customers are quite strong. So that's why we're investigating this and preparing as best as we can at this stage.

Gotcha. Very helpful. Another quick follow-up. It seems like the three nanometer node is actually being more of a longer and stronger node than people thought. So I would assume that you would still be shipping 3600Ds. But Roger, you mentioned that next year there won't be any D in the mix. I just want to clarify, is that true? And if so, is it fair to assume that gross margin next year should grow versus this year because if your mix is shifting to more volumes of E and eventually S?

At a certain point in time, we're simply sold out when it comes to D models, right? So the D uses a specific QB from ZEISS and at a certain point in time, we're just dunked. and we expect to be done, or maybe virtually done, but done this year. There might be one or two slipping into next year, but essentially, we're done with it this year. And then, you know, from that moment onwards, there is no DOB left anymore, and therefore, we'll build the E and S next year. And of course, that mix will come with a better ASB than the mix that we have this year. because it also will come with higher productivity as we just laid out and also comes with a better gross margin profile. Of course, I'm not going to guide you to gross margin for next year, Chris, but it is true that the mixed effect on EUV next year will be more positive than it is this year.

Thanks a lot, Rudy.

Thank you. Your next question today comes from the line of Stefan, Ori, from ODB, please go ahead.

Yes, good afternoon. So my question is for 28, where you say you have already large order volumes, but not fully booked yet. Can you help us understand where you stand in terms of visibility out of the 110 units targeted? How is it covered today? And can you talk about the lead times as we speak? And I have a follow-up. Thank you.

Well, the fact that we say that we investigate 110, we wouldn't investigate 110 if customers were telling us that that would be a ridiculous number, right? So we're investigating this simply because customers are signaling to us that the demand is very, very strong. But the fact that we now start talking about having significant order intake for 28 already like two years in advance, is pretty strong, right? So that is something that we haven't – that situation we haven't enjoyed in many, many years. So I think that is a very good underpinning of the strong market dynamics that are currently going on. We're not sharing order intakes. I'm not going to give you the coverage number, but I will tell you that the demand signals that we're getting from customers also when it comes to 28 – are sufficiently strong for us to seriously investigate this 110 number and the related number on immersion that we signal to you.

Thank you. And about the 75% memory growth in 2026, can you share with us how much is coming from HBM-driven lithography intensity versus volume addition, i.e. what I'm trying to know is also if with this investment, you know, the memory manufacturer, your clients are Thank you.

I think the demand is really a combination of a lot more volume, both for HVM and DDR. I think we have seen some shift between one product to the other recently because The price point of DDR, I think, is extremely strong right now. So there's some optimization at our customers. It's hard to know the exact, I would say, ratio between the two. It doesn't matter that much in terms of technology for us because the DRAM, the array itself is the same. You know, HBM will require more wafers, so there is a volume effect again. So that's one element. The second element is, of course, the number of EUV and immersion layer, which has increased basically on the nodes that are ramping very, very strongly right now. So the 1C node, for example, which is going to be an enormous node, or even 1B, are using more EUV layers. So this is really this... This combination which created the perfect storm for ISML on DRAM this year and most probably the next few years to come.

Okay, thank you very much.

Thank you. Your next question today comes from the line of Didier Simama from Bank of America. Please go ahead.

Good afternoon. Thank you for taking my questions. So my first question is on 26. When I look at your guidance on units for immersion and EUV as well as your guidance for IBM, you know, I struggle a little bit to get even to the midpoint. So, sorry, I'm struggling to not get above the upper end, I apologize. So I'm trying to understand if your ASPs are going higher in Q3, Q4 because of your holistic lethal attach rate on software, or is there any mixed impact that is particularly meaningful? And associated with it, when I look at your full year guide on gross margin, you're essentially saying that your gross margin exit rate Q4. is around 56 to 58%, which again would suggest that your mix, your volumes, your software upgrades, etc. are very strong. So just trying to understand what's going on with those ASPs and systems in particular in Q3, Q4.

It's very hard to validate your number on the phone, but let me tell you that If you look at the guidance that we have provided that, of course, there is a little bit of a mixed effect in there. I would say for EUV, we had quite some demodels in the first half. The mixed effect will be a bit more positive in the second half. We'll also have in the second half We'll have all the 230 configurations in there, so that's going to help a little bit on the ASB side for sure. Of course, the immersion number in the second half will be substantially higher than in the first half. As you know, in the first half, immersion was Low because we had decided in 2025 we were having ZEISS prep for a substantially lower immersion number than what we're currently facing. So we started the year rather weak. We will make up for that quite substantially in the second half of the year. So I would say the guidance, to get to the guidance, is around 65 EUV tools. with a slightly better ASP mix because of what I just mentioned. And, of course, immersion will be quite strong in there. And, of course, the installed base business, as I also indicated, will grow over 30%. I think if you take all those elements into the mix, you should be able to get to the midpoint that I just talked about. In terms of the gross margin, if you do the analysis and if you take midpoint by midpoint, then I think you're looking for the second half at a gross margin of 56% approximately. So, you know, we tied at 55 to 57 for Q3. So you should be, you know, looking midpoint at approximately the same number there for Q4. And why is that? Again, it's the mix because we have quite a bit more immersion and low NA UV in there, one. Two, because we have better priced UV in there for the second tasks. because of the insult-based business, which remains quite strong. Four, of course, we have volume effect, and the fact that we have so much more volume in the second half than in the first half obviously gives you a positive fixed cost coverage. So it's the combination of those four as a result of which you see an improvement of the growth margin in the second half versus the first half.

Yeah, I got it very clear. And if I take the things that you mentioned in previous questions, you know, the mix of UV tools, et cetera, et cetera, is there any reason why your gross margin should not go higher, in fact, in 27 than the exit rate of 26? And I guess related to that, any color you can give us on the mix of low NA tools next year, whether you have permanently the E tool or the F tool capturing more than 50% of the value?

So you would appreciate I'm not going to give you guidance on the 27 gross margin, but if you look at the main drivers that I just gave you for why the second half is better than the first half, on the mixed effect within EUV, of course, that should only be better, because as I mentioned, you know, next year we're going to get a mix of Es and Fs. I think it will primarily be JBEs. There will be A number of F's in there, but the lion's share of the tools next year are going to be E's. Nonetheless, the mix next year will be better than the mix this year and will be better than the mix even in the second half of the year. If you look at immersion and EUV, well, given that we're talking about, you know, planning for 30% more immersion, 30% EUV, you know, then I would argue that that shouldn't disappoint, right, if indeed we're able to get those done. then clearly our high margin scanner products with the 30% increase that we just talked about should be positive in there. The volume effect, of course, the fixed cost coverage, you should get that effect, right, if indeed we're going up 30% in those two businesses. And then the swing factor, of course, is the in-sole base business, which, of course, The service component of the install base business should be strong, right? Because that simply grows with the install base, almost by definition. So that part should be strong. And then the question is, how strong will the upgrade business be? Which in the current climate is very, very strong because customers are looking for productivity. So in the current market dynamics, you could realistically assume that. That's a qualitative description of the different components. Again, we're not going to guide gross margin, but if your perspective on 27 is that, yes, again, that will be a bullish market where customers are looking for capacity expansion, then you could argue that the drivers of the gross margin that I just gave you should also be strong in next year.

Absolutely. Thank you so much.

You're welcome.

Thank you. Our next question today comes from the line of Nigel Van Putten from Morgan Stanley. Please go ahead.

Hi. Thanks a lot. Got a follow-up question on the difference between boxes and productivity. Super helpful that you laid that out, 30% unit growth but 45% on the actual productivity that you are shipping to customers. Now, beyond productivity, I think 3800F is also providing, you know, overlay improvements. I think in the past, those were a little bit more difficult in discussions with customers, but I'm assuming that if you look at, you know, the outlook today and given your previous comments, that maybe 45% productivity is really, you know, the lower end of what we should model for revenue in terms of EUV over that period. That's my first question.

Yeah, I'm not going to guide in any way the business for next year. I think we've said what we wanted to say about what we plan for in next year, and we're not going to translate that into your amounts yet. I think you're very well capable of putting that into your model.

No, no. Percentage is great. I think you're implying 3,800 apps pretty much only in 2038, which makes sense. I mean, high productivity. It's just that, you know, given the commentary, I think in the past it was sort of a straightforward math almost that, you know, productivity gains are shared. I'm just trying to get a better sense of, you know, there's more than just the productivity. In terms of throughput, there's overlay improvements, etc. And just, you know, thinking of that is what we should think about when you say there's more flexibility in pricing.

No, Nigel, the only thing is Of course, we've always been able to show customers not just productivity upgrades, but also the value from better imaging, the value of better overlay, et cetera. And then, as you know, we've always shared the value with the customer in an equitable way and in a certain way. that resulted was that you got this very strong correlation between throughput improvement and ASP. I mean, that's just the way things panned out, which, you know, put in another way, customers were paying for the productivity upgrade, and the value that we gave them for free was the value associated with, let's say, overlay improvement, imaging quality, and what have you. That's sort of the way things historically panned out, and, you know, there's no reason to believe that that's going to be dramatically different Other than what we said earlier on, which, you know, that in the current environment with the value that we bring, we obviously are also having conversations with customers on how we get rewarded for that additional value.

Very clear. Maybe a quick follow-up on install base. Thank you for quantifying the outlook for the year. It certainly feels like another upgrade. And this business, I think, has been trending better for a while now, also last year. So, I mean, we know the productivity increase of the tools, very helpful, the data you provide, but what I can kind of is lacking is in terms of some, or which maybe help us with is in terms of the current configurations that you see as you sort of look at, you know, current fleet configurations at customers, how big is that opportunity in terms of upgrading? And given there's a strong need from customers to increase capacity of the tools, given limited clean room, like is there, I mean, perhaps perhaps a plan in place to make this more of a you know agreement of sorts in terms of getting you know better planned in some base upgrades and some more visibility also for you guys to be able to service that demand well I think that you said it so the key element today is that

Customer wants to get more capacity on their existing fab as quickly as possible. So this creates really strong condition for system upgrade. That's true this year. I think we see that in our number. This will be still true next year and mostly beyond that. So, you know, the need for capacity on very successful advanced node is there. The upgrade product we are developing is are covering all the different versions of our EUV low NA or immersion system. So we are really capable basically to provide product to our customer that can be implemented to every single version of our EUV or immersion tool. And today we see a very strong acceptance of those products. to the point that there were many discussions where we are being requested to try to accelerate that and create new product, which we plan to do in 27 and even 28. So I will say as long as we continue to experience this huge demand, existing nodes on the constraints of their existing fab, I think we would expect that the demand for those products would be very strong.

Understood. Thank you.

Thank you. We will now take the next question. And the question comes from the line of Tammy Kew from Barenburg. Please go ahead.

Hi, thank you for taking my question. So the first one is, based on my feedback, investors usually compare your growth to the people's economic spending growth. And based on my understanding, this year you have a lot of upgrades because some customers were lack of clean room, etc., and in 2027 and 2028, in theory, we are having more kingdoms coming out of the states. So, therefore, there will be more greenfield investment. Do you think you will be, therefore, in a better position to grow comparing to WFP, comparing to what we are seeing in 2026?

Yeah, the term is not very good. I don't think we understood your question. I apologize. Can you try again? Maybe make it a bit shorter or so.

Yeah, yeah, sure, sorry. So basically, 2026 has a lot of clean room constraints, and 2027 and 2028 will be more clean room space-based greenfield expansion. And in my view, that puts you in a better position to outgrow WFE or at least grow it in line with WFE. Do you think coming into 2027 and 2028, you'll be able to outgrow or grow more than WFE for your business compared to 2026?

I mean, as you know, we never comment on WFE. We comment on our own plans, on the demand as we see it, and I think we give you all the parameters on our end, what we're working towards, and I'm sure you have your own expectation of where WFE is going, and just compare that. But we think that with the 30% numbers that we just indicated, we think we're contributing to the demand that our customers are having, so...

Yeah, the only little detail I will stress again maybe to help you is when it comes to advanced DRAM, when it comes to advanced logic, we see our lethal intensity increase. So the demand for more EUV, for more immersion, so maybe that helps you a bit to answer the question. Every time you convert multi-patterning to single-exposed EUV, for example, there is a shift, of course, from you know, non-lethal to lethal. So I think that's maybe one element to help you in your calculations.

Okay, thank you. And the second question is on high NA. So for the time being, Intel seems to be the main high NA customer for Logic and we've been hearing more from DRAM customers. Do you think there is a chance that DRAM group will be a bigger customer for high NA earlier than Logic?

Well, you know, I don't know if there will be Thank you very much. Thank you. Next question today.

from the line of Chris Cathay from Wolf Research. Please go ahead.

Yes, thank you. Good morning. The first question is about the capacity additions and basically how long does it take to affect the capacity additions if you were to take a decision? You know, now to add more capacity, when would that capacity be effective for shipment? And if you can go through some of the steps that you would need to take, I suppose that would suppose that the supply chain would be a big part of any decisions to add capacity.

Yeah, it's a combination, right? So, we have, as Christophe said, obviously we're doing work here. So, you know, we're freeing up cabins, so making sure that cabins are fully dedicated to output. Right now, we also have prototypes and R&D tools in cabins, so we're finding another home for those tools, such that all the cabins that we have here are fully dedicated to output. We're looking at reducing cycle time, so those are the key things that we're doing here within ASML, and of course, were working with our supply chain to, in essence, you know, make sure that they do the same things. Christophe said they've made, as we did, they've made big investments in the past on what we call the long lead time items. So now it's just leveraging those investments from the past and making sure that we get the maximum, you know, out of that capacity. And in terms of how long does it take, well, you know, I think the 30% that we talked about gives you good proxy for that. You will... In essence, you know, as we've said before, every year you will see us end with a move rate that is higher than the move rate that we enter the year. And so we're continuously building up move rate quarter on quarter. And the end result of the plans as we currently have it is Thank you. As a follow-up of a question on pricing and a clarification from some of your prior comments, and I think you were very clear about the mixed effect of low NA EUV on the higher throughput tools where you get

proportionally higher ASPs. Is there also any potential for higher ASPs on a like-for-like basis? And the reason why I ask is because you are taking steps to add capacity. You know, you're rolling up your sleeves, as you say. Would that potentially result in higher like-for-like ASPs as you increase your cost to do what the customers are asking?

Well, as I mentioned before, in the current environment where there is a lot of value for customers for what we bring them, we believe the potential to capture a larger share of that value, or at least to capture our share of that larger value, gives you better pricing power. So those are the conversations that we're currently having with customers. So as I mentioned, not tomorrow. But over time, you should be able to see the improvement there. Understood. Thank you. You're welcome.

Thank you. Next question today comes from the line of Mehdi Husseini from Susquehanna. Please go ahead.

Yes. Thank you for squeezing me in. I have a two-follower question, and this is for the team, Christophe, Roger. As we think about this migration from E to F, which seems to be accelerating the second half of 27, how your customers are deciding between upgrading an existing E platform versus purchasing an F system? And I'm asking this question because both of these have a similar configuration. The base system is very much similar. And I just want to understand how customers would prefer upgrade or just go for a complete new system purchase. And I have a follow-up.

Well, I think the answer to this question today is very simple. It's really an end. So I think that our customer wants to buy the fastest possible tool. This is why we had a pretty fast migration towards the 3800E. I think this has become, you know, today the tool the customer really wants. They also want to upgrade the existing system because typically they sit on different technologies. So the new tool moving forward, you know, are going to 2 nanometer and then we go to 1.4. A lot of the upgrade will be for the nodes that come before that. So we are really in the end situation today. and, you know, the appetite for both upgrade but also for faster tool is high. So what we define the transition from E to F is going to be, again, the maturity of the platform and then our ability to RAM going from E to F. But that's very, I would say, you know, very normal. That's what we have done with the E. Today our customer, I think short answer, they want both and they want as much as both as possible.

Let me rephrase the question. Would it be fair to say that F is more geared towards 1.4 or below 2 nanometer? And assuming that the 2 nanometer remains strong, your customers don't want to bring the line down and would prefer to actually purchase a new tool, especially if it's for below 2 nanometer?

Well, I think the F will certainly be used for 1.4 nanometer because the timing is matching basically the timing of the F. For 2 nanometer, I think what we also allow between the E and the F is to what we call mix and match the product. So when it comes to imaging overlay, the customer won't see a difference. They were just here faster tools, so that also means that when the tool is ready, if there's need for more capacity for two nanometers, then the AF would definitely be an option as well.

Okay. And what's the update assumption for high NA UV system and RAP recognized this year, 2026?

You mean the number of tools that we RAP registered this year? We've set 45. Thank you. You're welcome.

Thank you. Our next question today comes from the line of CJ Muse from Cantor Fitzgerald. Please go ahead.

Good morning, good afternoon, and thank you for taking the question. Operating leverage has been, I think, an increasing focus in terms of how you've been talking to the street, and we're clearly seeing in the numbers here with top line 35% growth and OpEx implicitly growing only about 6%. And so I'm curious, you know, as you think about looking into 27 and beyond, should we be kind of thinking that this 60% incremental op margin is kind of the target that you're going after? And we'd love to hear your thoughts on that.

Yes, TJ, we're not going to quantify that guidance, but you are right that we have been managing our OPEX quite nicely, so FG&A and R&D. You also know that we said that we believe that if we look at the R&D team that we have today, we believe that also with the reorganization that we talked about before, that we can get even more value out of the team than what we enjoyed so far. So we believe that with the current team that we have in R&D, there is a lot of value and a lot of innovation roadmap that we can still pursue. So, you know, if you contrast the way we've done it in the past, in the past, you know, we increased the headcount of R&D quite substantially. I would say that today we believe that with the team that we have today, we can really entertain a very aggressive roadmap going forward. So, all in all, I think you will continue to see us manage both R&D and SG&A quite nicely, and as a result of that, the Operating leverage that you imply, I think the operating leverage will indeed become better in the quarters and the years to come.

Very helpful. And then I guess on your manufacturing footprint, I guess a couple quick questions. Number one, what would it take for you to actually look to add there? And then I guess number two, what's the fungibility around mirrors and other optics between low N.A. and high N.A.? And just curious, if you are kind of sold out on low N.A., does that create the situation where customers, you know, really desperate for supply might adopt high N.A. sooner? Thanks so much.

Well, I think maybe starting with the second question, I think that, you know, as the maturity of the INA platform improves, then of course INA becomes a potential option also for capacity and I think that's an option that will become more and more valid over time because the tool at some point of time will cross this maturity threshold and if it does, It can do the job and, as I explained before, can even provide some benefits. So I think that's, I would say, potentially another opportunity moving forward, assuming that we continue the good progress we have seen on maturity. One of the reasons also our customers are testing the tool on product, as you have seen with the press release about Intel today.

So that's maybe for the second question. The first question, so in terms of our own footprint, as Christophe said, you know, the way we try to increase our capacity is primarily within the current parameter. So we are building, we are breaking ground in this year. We expect to break ground this year on a new campus that many of you are aware of, but that really is, I would say, beyond 2028, right? So that is not, you know, what we're doing in order to get to the The numbers that we share. So, in essence, the capability improvement that we were talking about, we want to achieve that within the current set parameter. In terms of the fungibility of equipment for high NA and low NA, particularly when it comes to Zeiss, because that's the way, CJ, I interpreted your question, that really isn't there. It's totally different tools that you need, that Zeiss needs to produce a high NA optic versus a low NA optic. So it's not that there is fungibility that you can use high NA tools to get more low NA output. That's not going to work.

Okay, then thank you, Christophe. Thank you, Roger. Thank you for everybody participating and asking the questions. If you are unable to get through on the call and still have questions, please feel free to contact ASML Investor Relations with your question.

So, again, thank you all for joining us.

And if I could ask the operator to formally conclude the call, I would appreciate it. Thank you very much.

Thank you. This concludes the ASML 2026 Second Quarter Financial Results Conference call. Thank you for participating, you may now disconnect