ASML Holding N.V. (ASML) | The Buildout — AI Infrastructure
The Verdict
ASML builds the lithography systems that print circuit patterns onto silicon wafers, and it is the sole supplier of EUV lithography — the tools every leading-edge logic and DRAM fab needs. It also sells DUV immersion and dry systems, metrology and inspection products, and service and upgrades on the tools already installed. That places ASML at the upstream bottleneck of the AI-compute supply chain in one specific and non-substitutable respect: without an EUV system, no fab can print the leading-edge logic or high-density memory that AI accelerators depend on. Because there is no competing EUV supply, a demand surge can only be met by ASML's own output.
| Market Cap | — |
| Revenue (TTM) | $41.0B |
| Revenue Growth | +16.0% |
| EBITDA Margin (TTM) | 38.4% |
| Net Cash | $6.4B |
| Earnings Beats | 5 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Guidance rose twice in one fiscal year: FY2026 revenue went to €43–45B from €36–40B, and gross margin to 54–56% from 51–53%, between the April and July 2026 calls.
- Order coverage reaches years out — 2027 Low-NA EUV is close to being fully covered with orders, and significant 2028 Low-NA EUV orders have already been received, a situation management says the company has not enjoyed in many years.
- Remaining performance obligations were €46.5B at December 31, 2025, up from €43.3B a year earlier, with 65% expected to convert within twelve months, up from 59%.
- Growth is broad by segment in 2026: memory net system sales guided above 75%, EUV above 45%, Installed Base Management above 30% and advanced-logic foundry above 25%.
- ASML is the sole EUV supplier; Canon and Nikon compete in DUV and Applied Materials and KLA-Tencor are cited in patterning-support applications, per the 20-F.
What We’re Watching
- Concentration: four customers each exceeded 10% of FY2025 net sales, together 61.2%, and the largest alone was 23.9%.
- Supply: Carl Zeiss SMT is the sole supplier of lenses, mirrors, illuminators and collectors, ASML is its single customer for optical columns, and there is no High-NA/Low-NA optics fungibility.
- High-NA is still early — 4 to 5 systems are expected to be revenue-recognized in 2026, and its cost-of-patterning advantage over Low-NA plus immersion multi-patterning is not yet proven.
- The 2028 capacity step is under investigation, not committed: management said it does not have orders for 110 Low-NA EUV units at this stage and that demand for 2027 and 2028 has not reached a stable state.
The thesis looks stronger than a quarter ago. Guidance was raised on both revenue and margin, 2027 Low-NA EUV is close to fully order-covered, 2028 orders are arriving early, and management acknowledged more pricing flexibility than in past cycles. The offsetting facts are structural rather than cyclical: four customers produced 61.2% of 2025 revenue, output is capped by a sole-source optics supplier, and the 2028 capacity step remains an investigation. The open question is whether ASML can convert a multi-year demand signal into shipped and qualified tools fast enough while High-NA remains gated by maturity.
Earnings Beat
ASML reported $10.65B of revenue for the quarter ended June 30, 2026, above the high end of its guidance, at a 54.0% gross margin. Net income was $3.33B and free cash flow $1.64B. The standout was Installed Base Management: €2.8B of sales, roughly €300M above guidance and upgrade-led, whose high-margin components lifted gross margin above the guided range.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $10.7B | $10.1B | $9.1B | +17.5% |
| Gross margin | 54.0% | 53.0% | 53.7% | +30bps |
| EBITDA | $4.2B | $3.9B | $3.4B | +23.1% |
| EPS | $8.66 | $8.26 | $6.95 | +24.6% |
| Installed Base Management | €2.8B | €2.5B | n/a | — |
Driven by continued strong demand, we are updating our full year 2026 guidance. We now expect total net sales between EUR 43 billion and EUR 45 billion, with a gross margin between 54% and 56%.— Roger Dassen, CFO, 2026-07-15
Management tone: Management raised guidance on both revenue and margin, described customer demand as very strong and said visibility now extends several years into the future. The CFO volunteered specifics beyond what was asked, including pricing flexibility, the distinction between unit growth and delivered wafer capacity, and that ASML does not have orders for 110 Low-NA EUV units at this stage. Management declined to guide 2027 gross margin or quantify 2028 order coverage, describing that as policy. The 1,700-role reduction referenced in the prior quarter's materials was not mentioned on this call.
Management Guidance
For FY2026 management guides total net sales of €43–45B and a gross margin of 54–56%, raised from €36–40B and 51–53% a quarter earlier, with an effective tax rate of about 17%. The guided build is EUV net system sales up over 45%, non-EUV up about 25%, Installed Base Management up over 30%, advanced-logic foundry up over 25% and memory up over 75%, on roughly 65 Low-NA EUV units, about 130 immersion DUV shipments and 4 to 5 High-NA systems recognized in revenue; China is guided at about 20% of total net sales. For Q3 2026 the guide is €11–12B of revenue, 55–57% gross margin, about €2.9B of Installed Base Management, about €1.2B of R&D and about €0.4B of SG&A, and management pointed to a second-half gross margin of approximately 56%. Capacity plans call for about +30% Low-NA EUV and +30% immersion in 2027, with a further ~30% on each under investigation for 2028. Management declined to guide 2027 gross margin.
Trajectory
Revenue has moved in steps: $8.82B in the quarter ended September 2025, $11.41B in December 2025, $10.13B in March 2026 and $10.65B in June 2026. The direction read is decelerating, with trailing four-quarter average growth of 19.2%, while margins expand: gross margin reached 54.0% in the June 2026 quarter from 52.2% in December 2025, and EBITDA margin was 39.7%. Management attributes the second-half lift to more immersion and Low-NA EUV volume, an EUV mix shift from D to E tools with better average selling prices, continued Installed Base Management strength and better fixed-cost coverage on higher volume.
The Model
The model projects FY+1 revenue of $50,950M and EBITDA of $21,934M, a 43.05% margin, rising to FY+2 revenue of $63,900M and EBITDA of $29,330M, a 45.9% margin. The near term is anchored on the disclosed order book — 2027 Low-NA EUV close to being fully covered with orders, and significant 2028 Low-NA EUV orders already received. FY+2 depends on the capacity steps now under investigation for 2028, the EUV mix shift toward E and F tools, and an Installed Base Management line management guides to grow over 30%.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $37.7B | $51.0B | $63.9B |
| YoY Growth | — | +35.3% | +25.4% |
| EBITDA | $14.2B | $21.9B | $29.3B |
| EBITDA Margin | 37.7% | 43.0% | 45.9% |
Projections are the median of 4 independent model runs. The model’s revenue sits 12.7% above analyst consensus.
For FY2026 management guides total net sales of €43–45B and a gross margin of 54–56%, raised from €36–40B and 51–53% a quarter earlier, with an effective tax rate of about 17%. The guided build is EUV net system sales up over 45%, non-EUV up about 25%, Installed Base Management up over 30%, advanced-logic foundry up over 25% and memory up over 75%, on roughly 65 Low-NA EUV units, about 130 immersion DUV shipments and 4 to 5 High-NA systems recognized in revenue; China is guided at about 20% of total net sales. For Q3 2026 the guide is €11–12B of revenue, 55–57% gross margin, about €2.9B of Installed Base Management, about €1.2B of R&D and about €0.4B of SG&A, and management pointed to a second-half gross margin of approximately 56%. Capacity plans call for about +30% Low-NA EUV and +30% immersion in 2027, with a further ~30% on each under investigation for 2028. Management declined to guide 2027 gross margin.
What Could Go Right — and Wrong
- 2027 Low-NA EUV moves from close to fully covered to fully covered, locking in the next year's system revenue.
- The 2028 Low-NA EUV and immersion steps convert from investigation to committed capacity as demand signals turn into purchase orders.
- High-NA reaches Low-NA maturity and becomes a capacity option for logic and DRAM, lifting the demand ceiling beyond what Low-NA output alone can serve.
- The pricing flexibility the CFO described shows up in reported average selling prices alongside the D to E/F mix shift, though management says long order lead times delay the effect.
- Installed Base Management keeps compounding with the EUV installed base, and upgrade products planned for 2027 and 2028 hold the high-margin mix.
- A capex reduction at any of the four customers above 10% of FY2025 revenue — 61.2% combined — hits system revenue and mix, and the mix move lands on gross margin.
- A Zeiss optics capacity shortfall or quality event flows directly into shipment plans, since there is no substitute supplier and no High-NA/Low-NA fungibility.
- High-NA adoption stalls at cost-of-patterning review and stays a niche capability at 4 to 5 systems of 2026 revenue.
- The memory cycle reverses: memory net system sales are guided up over 75% in 2026 and are the fastest-growing segment.
- Export controls tighten beyond the case management said it could accommodate; China is guided to about 20% in 2026.
Looking Ahead
Over the next twelve months the work is delivery: roughly 65 Low-NA EUV systems, about 130 immersion DUV systems and 4 to 5 High-NA systems, against FY2026 guidance of €43–45B and 54–56% gross margin. Beyond that, management says 2027 Low-NA EUV capacity rises about 30% and is close to fully covered with orders, while a further ~30% step for 2028 is being investigated rather than committed. The company also plans to break ground on a new campus in 2026, with effect beyond 2028, and to refresh its longer-term views at a Capital Markets Day on 2027-06-10.
- Q3 2026Q3 2026 results — Guided to €11–12B revenue and 55–57% gross margin.
- 2026New campus groundbreaking — Planned for this year; the effect is beyond 2028.
- 20272027 Low-NA order coverage — Management expects 2027 Low-NA EUV close to fully covered with orders.
- 2027-06-10Capital Markets Day — Formal refresh of longer-term views since the prior CMD.
- 20282028 capacity decision — Investigated +30% Low-NA step depends on demand signals becoming orders.
- by 203112-inch photomask pilot — ASML and TSMC target a pilot line, with system readiness by 2033.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $30.3B | $37.7B | $41.0B | +24.3% |
| Gross Margin | 51.2% | 52.9% | 52.7% | +162bps |
| EBITDA | $10.6B | $14.2B | $15.7B | +33.5% |
| EBITDA Margin | 35.1% | 37.7% | 38.4% | +259bps |
| Net Income | $8.1B | $11.1B | $12.3B | +36.5% |
| Free Cash Flow | $9.9B | $12.4B | $11.8B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)52.7%
- EBITDA Margin (TTM)38.4%
- Net Margin (TTM)30.1%
- ROIC61.9%
- FCF Conversion75.0%
- SBC / Revenue0.4%
The Company
ASML builds lithography systems — the machines that print circuit patterns onto silicon wafers — along with the metrology and inspection tools that check what has been printed. Its own business summary describes 'holistic lithography solutions, software and services that help microchip manufacturers achieve their highest yields and best performance.' For the AI buildout the position is specific: every leading-edge logic or DRAM fab that wants the smallest geometries needs EUV, and ASML is the sole supplier. AI reaches ASML as customer capex and order backlog rather than as a product it sells.
All manufacturing runs in cleanroom facilities the 20-F names: Veldhoven, Eindhoven and Oirschot in the Netherlands; Berlin in Germany; Wilton and San Diego in the US; Pyeongtaek in South Korea for the Cymer light-source site; and Linkou and Tainan in Taiwan. Named campus sizes include Berlin at 53k m² across 10 buildings, Wilton at 89k m² across five, San Diego at 50k m² and Tainan at 26k m². ASML reports one segment and listed more than 44,000 total employees at the time of the filing.
Business Segments
Competitive Landscape
The 20-F describes ASML's competition as concentrated in DUV, where Canon and Nikon are named as the primary competitors; Applied Materials and KLA-Tencor are cited in 'applications that support or enhance complex patterning solutions.' In EUV there is no competitor. Intel's filing language, carried in the relationship graph, calls ASML 'currently the sole supplier of EUV lithography tools' being deployed at Intel 4, Intel 3, Intel 18A and planned nodes. The relationship graph also lists Shanghai Micro Electronics as a low-end 90nm DUV competitor and Nova in metrology.
- CanonNamed in the 20-F as one of the primary competitors in DUV systems; not discussed further in the source.
- NikonNamed in the 20-F as one of the primary competitors in DUV systems; not discussed further in the source.
- Applied MaterialsCited in the 20-F as a competitor in 'applications that support or enhance complex patterning solutions.'
- KLA-TencorCited in the 20-F as a competitor in 'applications that support or enhance complex patterning solutions.'
- Shanghai Micro Electronics (SMEE)Appears in the supply-chain relationship graph as a low-end competitor at 90nm DUV.
Supply Chain
ASML buys critical optics from a single supplier and sells completed lithography systems to a small set of very large chipmakers. Its 20-F does not name those customers, though the relationship graph maps them.
More on ASML: Earnings recap