ASML Holding N.V. Price & Performance (ASML)

Thank you, operator. Welcome, everyone. This is Jim Cavanagh, vice president of investor relations at ASML. Joining me today on the call are ASML CEO, Christophe Fouquet and our CFO, Roger Dasser. The subject of today's call is ASML's twenty twenty five First Quarter Results. The length of this call will be sixty minutes, and questions will be taken in the order that they are received. This call is also being broadcast live over the Internet at 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 federal securities These forward looking statements involve material risks and uncertainties. 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 in ASML's annual report on Form 20 F. And other documents as filed with the Securities and Exchange Commission. With that, I would like to turn the call over to Christophe Bouquet for a brief introduction.

Thank you, Jim. Welcome, everyone, and thank you for joining us. For our first quarter twenty twenty five results conference call. Before we begin our Q and A session, Roger and I would like to provide an overview and some commentary on the first quarter results, as well as provide some additional comments on the current business environment and on our future business [indiscernible] You, Christophe, and welcome, everyone. Let me start with our first quarter accomplishments. In the first twenty twenty five, total net sales were €7,700,000,000 in line with our guidance. Net system sales were at €5,700,000,000 which includes €3,200,000,000 from EUV sales and €2,500,000,000 from non EUV sales. Net system sales were driven by Logic at 58%, the remaining 42% coming from memory. Installed base management sales for the quarter came in at €2,000,000,000 Gross margin for the quarter was above guidance at 54%, driven by achieving customer productivity milestones on already installed EUV systems, as well as a favorable EUV product mix and a rich configuration resulting in higher ASPs. Operating expenses were in line with guidance, with R and D expenses at €1,161,000,000 and SG and A expenses at €281,000,000 The effective tax rate for Q1 was 16.7%.

For 2025, we expect an annualized effective tax rate of around %. Net income in Q1 was €2,400,000,000 representing 30.4% of total net sales, and resulting in an earnings per share of €6 Turning to the balance sheet. We ended the first quarter with cash, cash equivalents and short term investments at a level of €9,100,000,000 After the very strong free cash flow generation in Q4, ended Q1 with a free cash flow of minus €475,000,000 due to a combination of customer payments and down payment dynamics and continued investments in fixed assets for future capacity.

Moving to the order book.

Q1 net system bookings came in at €3,900,000,000 which is made up of EUR 1,200,000,000.0 of EUV, and rounded to €2,800,000,000 of non UV. Net system bookings in the quarter were weighted towards logic, 60% of the bookings while memory accounted for the remaining 40%. In Q1, ASML paid the third quarterly interim dividend over 2024, of €1.52 per ordinary share. Recognizing the three interim dividends of €1.52 per ordinary share each, paid in 2024 and 2025 with a final dividend proposal to the annual general meeting of €1.84 per ordinary share. This would result in a total dividend for the year 2024 of €6.4 per ordinary share. In Q1 twenty twenty five, we purchased shares for an total amount of around €2,700,000,000 With that, I would like to turn the call back over to Christophe.

Thank you, Roger. As Roger has highlighted, we started 2025 with good first quarter financial Turning to the markets and consistent with our view from last quarter, growth in artificial intelligence remains the key driver for growth in our industry. If AI demand continues to be strong, and customer are successful in bringing on additional capacity to support the demand. There is a potential opportunity towards the upper end of our range. On the other hand, there is still quite some uncertainty for a number of our customers that can lead to the lower end of our We continue to see revenue from logic increasing, in comparison to 02/2024, with the ramp of leading edge nodes and we expect memory revenue to remain strong similar to 2024. Installed base management revenue is expected to grow in comparison to 2024. This is driven by increasing service levels, as our installed base grows, and increasing contribution from EUV and an increase in revenue from our upgrade business. Regarding recently announced tariff, discussion are just starting and are very dynamic. The end state will be unknown for a while, and until then the potential impact on our customers supplier and ASML continue to be unclear and will continue to evolve.

Roger will provide more details, but it is clear that uncertainty is increasing in the macro environment as reported by many experts and businesses. With that caveat, we continue to expect revenue of between EUR 30,000,000,000 and EUR 35,000,000,000. Thousand 25, and continue to expect 02/1926 to be a growth year. With that, I asked Rajiv to provide some insights about how we are looking at the recent brief announcements. Roger?

Thanks, Christoph. As Christoph highlighted, we are currently facing an elevated level of uncertainty surrounding tariffs, which may have both direct and indirect implications for our business. The total direct impact results from tariffs related to a number of areas, including new system sales and upgrades to our U. S. Customers the import of materials for our U. S. Manufacturing facilities, the import of parts and tools for our U. S. Seal operations, and finally, imports of parts from The U. S. Into other countries. To the extent tariffs apply to those parts. We are working with our customers and suppliers to try to achieve that any direct impact of tariffs on our results is limited. As Christophe said, the tariff discussion is still very dynamic, The potential indirect impact on end market demand is even more complex, and impossible to determine at this stage. With that, I would like to turn to our expectations for the second quarter of twenty twenty five. We expect Q2 total net sales to be between €7,200,000,000 and €7,700,000,000 We expect our Q2 installed base management sales to be around €2,000,000,000 Gross margin for Q2 is expected to be between 50,000,000 and three percent, The bandwidth for gross margin is larger than usual, given the uncertainty around the scope and size of the tariffs.

And the value chain absorption of tariffs for the quarter. The expected R and D expenses for Q2 are around EUR 1,100,000,000.0, and SG and A is expected to be around EUR 300,000,000. Gross margin in the second half of the year is expected to be lower than the first half. Primarily due to the expected margin dilutive effect of the revenue recognition of High NAE Systems in the second half of the year lower upgrade revenue as well as any potential impact of tariffs. For the full year, we continue to expect a gross margin between 5153% of course, with the caveat of the uncertainties. Around tariffs that we discussed before. With that, again, I turn it back over to Christophe.

You, Roger. Turning to technology. In EUV, we have achieved some important milestones. On both the low NA and the high NA platform. These are critical steps in providing a comprehensive EUV product portfolio, that offers the necessary flexibility to support our customers' roadmap requirements, and optimize their cost of technology. Let me first update you on our low NA NXE3800 We started to upgrade our systems in the field to its final two twenty wafers per hours configuration this quarter. And we continue to hold out on the installed base [indiscernible] We now ship all our new NX 3,800 E system at full specification. In addition, our NXT 1,300 E maturity is reaching the level needed to support high volume manufacturing and several logic and memory customers are ramping their most advanced nodes using this system. Again, in productivity supports the execution of our cost technology reduction roadmap. With our customer, enabling more opportunities for EUV single exposed adoption. This is especially relevant to DRAM as discussed at our Capital Market Day. Let me turn now to INA. At the SPA conference in February, there were a number of good results presented by our customers, who highlighted the achievements of some key performance and maturity milestone.

They also stress the benefit of the technology in term of process simplification, cost and cycle time reduction. Process simplification leading to a fewer process steps, shorter cycle time, lower cost and better yield, are the historical value driver of single exposed lithography versus multi patterning. These benefits drove the industry transition to [indiscernible] and will drive the transition to INA EUV over time. One paper showed that the INA system maturity is far ahead of what we experienced on low NA at the same stage of its introduction. Supporting a much lower risk of insertion and adoption for our customers. Intel reported the exposure more than 30,000 wafer in one quarter and a significant process improvement by reducing the number of process state from 40 to less than 10 on a given layer. With that comes a significant cycle time Samsung reported a 60% improvement in cycle time in one of their use cases as well. We shipped our fifth and final EXE 5,000 INS system in Q1. And now, I have system at three different customers. With the follow on on INA system model, the EX 5,200 shipping from q two this year. As we have described before, there are three phases of technology insertion our customer will follow with INA.

We are currently in phase one, where our customer take a system into their r and d facility, and work with us to understand the value and capability of RNA for their next node. In phase two, which we expect to take place in 02/1926, 2027, customer will start running the system on one, two layers, to test its readiness for volume manufacture. In Phase three, when customer design in INA on their most critical layers in their most advanced nodes and running volume manufacture. Looking longer term, the semiconductor market remains strong with artificial intelligence, creating growth in recent quarters. And we see some of the future demand for AI solidifying, which is encouraging. Our conversation so far with customer our conversation so far with our customers confirm our expectation that both two thousand twenty five and 02/1926 will be growth year. At the same time, as Roger and I have already explained, there is an increase uncertainty across the global economy, due to the ongoing discussion on tariffs. As discussed in our Capital Market Day, we expect that the end market dynamics will lead to a product mix shift more towards advanced logic and DRAM. The combination of our NXE 3800E product progress our strong productivity roadmap on low NA and the introduction of INA will support the cost of technology reduction and the conversion of more multipathing layers to a single EUV exports.

Leading to higher litho intensity. In line with our twenty twenty four Capital Market Day, we expect a 02/1930 revenue opportunity between €44,000,000,000 and EUR16 billion with gross margin expected to between 5660%. Finally, as a reminder, we all our annual general meeting on Wednesday, April 23, and we hope to welcome our shareholders again there. With that, would be happy to take your question.

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

Thank you. As a reminder, to ask a question, you will need to press 1 and one on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. We will now take the first question. And your first question comes from the line of Francois Bouvignet from UBS. Please go ahead.

Thank you very much. My first question would be on High NA. So you have been doing a lot of work and very promising in terms of breakthrough and technology developments like you described, Christophe.

So I know you are working on this common platform to help on the cost side. But obviously, like you described, it's a question of cost of ownership versus multipatterning. So cost performance, benefits, where are they going to make the decision? And with that in mind, I was wondering if you would consider some flexibility around the pricing of high NA to facilitate adoption, I mean, to help your customers decide more quickly quicker, if that makes sense. So was wondering if if it's something you consider at all at the moment, the pricing of I and A to help the adoption?

Well, Francois, thank you. It's good question. I think you you remind everyone that indeed, in general, single expose lithography will be better for customer than multi patterning. I mentioned that this typically lead to process simplification, the improvement, cost reduction. So when it comes to any new lithography system, I think of course we want to drive the adoption of those tool as quickly as possible, basically to get to single exposed. We are still working on that, as you know, for low NA, so that also typically takes some time. And of course, we're going to do the same for RNA. Now, the the main reason to not adopt very quickly, you know, the new system fully for single expose is not the tool price, to be honest, it's the tool maturity. And I think it's very important to get that maturity at the right level, Because if not, you will set basically you know, a cost of technology point that will be not very optimized. And this is why not only I refer to maturity in my introduction, but you also heard me quoting a customer also making the case that SPIE that the maturity of INA was by far ahead of, the maturity of LONA at a similar stage.

So this is still the work we have to do. Know, I mentioned the free phase, I think it's a major part of phase two. And and I think if you look at the the focus of ASML today with a customer on INA is we need to get this maturity in place as soon as possible. So that, the adoption is there. Lowering the price at low maturity will just create too much headache our customer because the tool will not be very reliable.

Makes sense. Thank you, Christophe. And maybe my follow-up would be on the comment on single exposed EUV that you start seeing I mean, the adoption on more single exposed versus multi patterning on, I guess, on low NA that you are referring. You help us on the timing? You mentioned DRAM specifically. That you see more adoption on single exposure I mean, what timing should we look at this opportunity? If you start seeing it, I would imagine, it's a two years view you are talking about? Or could it be quicker?

I think those six are happening, I would say, almost as we speak. So I think every new customer nodes where we bring basically a tool with a better cost of technology such as the 3800E is an opportunity for more adoption. So I think this is I would say, a permanent job. That's something we have been working with our customer for a bit. I think the the place we are today with low NAUV, the maturity of the tool, the the step we do on productivity, remember the 3,800 is 30% faster than the 3,600. I would say, really give us a chance to to be optimistic on that work with our customer in the coming years. But the work already started, Francois Francois.

Right. Thank you very much.

Thank you. Your next question comes from the line of Krish Sankar from TD Cowen. Please go ahead.

Yeah. Hi. Thanks for taking my question. First one I had for Roger, I'm just kind of curious, you talk about growth next year. What kind of bookings run rate should we expect in the current and next quarter to see that growth? And is calendar '25 ends up in the upper end of the range? Would calendar '26 still be a growth year?

And then I have a follow-up.

Yeah. So Chris, we're not gonna comment on on on on the magnitude of the growth as we already also said on the We still believe 26% to be a growth year based on our technology, based on the conversations we have with customers, based on the intrinsic market demand as we see it with the caveat that we also talked about, which which is that the the the general the general macro macro climate. In terms of what bookings do we need to get there, I'm not going to go into any detail there. Think you can easily figure out what the backlog is today. I think you can easily figure out that there is a very significant part in the backlog that actually pertains to the period beyond 2025. So there is already, you know, a a very you know, good booking level, I would say, next year. But of course, bookings still need to come in order to make the growth year indeed happen. I think that's what we should see in the next quarters. But I'm not going quantify it also in light of the comment that we made before. On the nature of the bookings and the extent to which it does not really reflect the business momentum always accurately or business.

Got it. Got it. Thank you, Rajeev. And then I think it's a quick follow-up, do you still expect China to land somewhere in the mid-twenty percent of sales spend you give any color on the backlog composition? How much is EUV, Deep UV and China in that mix?

Sorry.

You broke up in the first part of the question. I I couldn't understand it, Chris.

Maybe you can repeat it.

Yeah. Sorry, Roger. I was trying to figure out is China still gonna be around 25 mid 20 percentage of sales this year? And any color on the composition of the backlog?

Understood. So yes, China we believe China will be a little bit over 25% of sales this year As you know, on the previous call, we said it's low 20s. The way we look at it today, the demand in the demand within DPV is shifting a little bit. I think the right way to look at it today would be that it's a little over 25% of our total sales this year. And in terms of the composition of the backlog, what you're referring to is the the China part of the backlog, I guess that's what your question is. I think that the China part in the backlog is still in this around the same number. So it's still in that in that 20% to 25% range approximately.

Got it. Thank you very much, Jose.

You're welcome.

Thank you.

Next question comes from the line of Joe Katraki from Wells Fargo. Please go ahead.

Yeah. Thanks for taking the questions.

One on the tariff front, can you talk about just what customer conversations have been like over the last couple of weeks?

Is there any interest in altering delivery schedules and just kinda how do we think about your times in the context of the ability to, like, pull shipments in to to kind of elute some of the tariffs?

Well, maybe I can start, and then what you will will have. But, I think the the short summary of our customer conversation so far, I think that you know, the announcement of tariff have not changed the the the business conversation we we have with our customers. That's the first point. The second point is, the level of uncertainty we shared in the introduction, which of course as a result of the many announcements we have seen in a very short time, I think that uncertainty is also with customer and with our suppliers. So a lot of people are still trying to understand exactly what it means for them, And I think in some way, we we start to try to do that together. But that's extremely preliminary. And I will say again once more that, so far, those discussions have not changed fundamentally the business planning or the business discussion we have been having with our customers.

Because fundamentally, I mean, it's even impossible for for a number of customers to to to do what you're what we're suggesting here. Because, of course, to a very large extent, what is gating for customers is space, right? So they need to have fabs to put, you know, to put it put tools into. So and and at least for a number of customers, that is the number one gating item. So it would even be impossible to, you know, opportunistically just you know, pull in pull in pull in system. That that's not the way it works.

Yep. No. That makes sense. I appreciate the color. And then you talked about the the 3,800 loan a know, becoming the main tool for for your system shipments now. You remind us that did you, you know, how many of the 36 hundreds are still left that prebuilt, I think, last year in inventory? Is there anything that we should think about, like, in terms of the sellability of those tools? Or can you upgrade some of those tools you know, to be closer to the productivity of the 3,800 to to sell?

Yeah. We we have no concerns actually on on on the ability sell the 3,600. So that's the 3,600, the number of prebuilds, you will see that come down. This year. There is no concern around the ability for us to sell remaining 3,600 that we even built that we built or are in the process of building. There's no concern there.

Perfect. Thank you.

Thank you. Your next question comes from the line of Didya Simamah from Bank of America. Please go ahead.

Good afternoon. Thank you for taking my I just wanted to make sure I get I get everything right. So I think if you look at the blended ASML, ASPs of your low end AUV, think they came in at about €230,000,000. If I do the math correctly also on your gross margin, looks like your EUV gross margins were at about 55%. So my question is, is that correct? And I've got a quick follow-up especially if you could talk about whether there are any one off or exceptional Stephanie, you talked about upgrades, whether that came into the ASP, the gross margin, or in IBM or in in all elements? Thank you.

So you're right on the on your calculation of the ASP. It is indeed close to 2.3. I think it's 2.27 is the number on the ASP. That's as we said, that's a little on the high side given composition of 3,800, 3,600 also a configuration, etcetera. But I do believe on a go forward basis, I think a blended rate a little bit below that point, so a blended rate of around two twenty is probably the right number to have in your models as a blended rate for low NA. When it comes to the gross margin, we don't disclose that on a product by product basis. But I think we've said in the past, that the gross margin on low NA is clearly now above the corporate gross margin. So that's clearly the case, but we're not separately disclosing that.

Got it.

And and on China, I just wanted to also get a bit of color. So you said that from the previous guide of the low 20 of group revenues, think China is going to be a bit above 25%. So can you talk about what's changed there? And also if you could maybe within that give us a sense of what's your directional guidance would be on China IBM revenues because, obviously, there's been restriction on maintenance and services on these sporting fabs. So just wanted to understand what you've provisioned for for that IBM revenues in 2025? Thank you.

Yeah. DJ, you know, when when it comes to a few [indiscernible] points changes, I think we should recognize that you're looking at a couple hundred million, right? So we're not looking at huge shifts. We're looking at couple of hundred million shifts, which I think is normal business dynamic that you have a shift like that. So I think what you notice is that the demand in China is still strong. And if you then look at where is the demand strong, it is still strong, particularly in the mainstream business. That's where the demand continues to be very strong, and that is on the back of the, you know, the demand for mainstream chips in in China, both for domestic consumption, but also for what China exports to the rest of the rest of the world. So that demand is still resilient. And, in fact, a bit better than what we anticipated three months ago or six months six months ago.

Got it.

Thank you so much.

You're welcome.

Thank you.

Your next question comes from the line of Alexander Duvall from Goldman Sachs. Please go ahead.

Yes. Hi, everyone. Thanks very much for the question. Firstly, there were some reports mid quarter talking about China being close to develop. Its own alternative to EUV lithography tools. I wondered if you could share your latest view on those and to what extent those really have sufficient scalability, reliability and so on. And secondly, you talked today about AI demand solidifying, if I heard well in your prepared remarks. We saw NVIDIA at its GTC event talk about increasing inferencing and reasoning models driving more semis demand. I wondered if that could be something that could impact your long term TAM in a positive way? Many thanks.

Okay. I'll take the easy question on the UV China. I I think there is nothing really new there. I I think that [indiscernible] we expect to continue to see news here and there on some progress. With regards to EUV in China. And I think this is mostly driven by a strong wish, I think, from China to have this tool and to to display some progress. If you look at the fundamental, even if you look at what has been shown with since some picture, I think that I would consider that as research news more than product news. And therefore, you know, of course, it's always possible to generate some UV light may even be possible to have an EUV mirror here and there. But in no way this is enough proof that there is a serious product on the way. So I think we are still on the same view that it will take many, many years for China be able to, to make an EUV machine. And again, you should expect some more news because I think that's just what you do when you you want to show progress.

And on the Alexander, on the on the AI demand, a comment in general. So what we hear from customers both on the logic side and on the memory side that that they still see, you know, strong demand there. I think the the point that you make is right. I think there has been a lot of emphasis in the in the in the past quarters on on the training side of life. I think more and more, which I think is is that you will see more and more emphasis being being being put on the inferencing side of the of the equation. So I think you will see the interesting entrancing part becoming a larger component of AI demand on on a go forward basis. So I think you will continue to see that develop.

You very much.

Thank you.

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

Yes. Thank you. Good morning. I guess first question would be on gross margins. And you have provided a wider range for Q2 taking in consideration some of the tariff impact But speaking for the full year, what are the expectations there What sort of direct tariff impact are you expecting in the gross margins And what goes into the thinking regards to the gross margin for the full year? Yeah. Chris, as well said on the video, it's it's very hard given that the dynamics around tariffs to put any meaningful number, on there. Right? Because on the one hand, the question is what tariff will eventually what tariffs are we eventually going to look at. In general, from one region to the other. But then more specifically, when it comes to semiconductors, pretty clear that, that is still under review. By the U. S. Government. So it's impossible to see what, as I mentioned before, what the size of the tariff is actually gonna be. And then the second question, you know, to the extent that that is clear, the question is how will that ultimately be absorbed in the entire value chain. Now we've made it clear also in the video that we're working very closely with everyone involved to try and minimize the total exposure of the ecosystem to tariffs.

So we we we try to see what we can do to minimize the overall impact. But we also believe that once that has been minimized, that the burden of that should not be with ASML. And that the burden of the of the the tariff and that the lion's share of the tariff burden should be borne by the next by the element in the value chain. I think that's that's the way we approach it. But there is still so much uncertainty out there that to make any judgment what impact that is going to have on the full year absolutely impossible. The reason that we that we put it into the quarter and that we said in the quarter, we have a wider bandwidth. Is that obviously, the time frame there is a bit shorter and that allows you to try and include the impact into the quarter. But for the full year, it's impossible to put a number on. Understood. That's helpful. If I could ask as my follow-up a bit of a of a bigger picture question, and and there's been a school of thought that if you we need to diversify the geographic location of fabs, going forward.

You know, if we're gonna produce, you know, more in The US, if if produce more in China, then know, that's ultimately good for WFE spending. And it would seem that you know, the the current tariff situation would at least advance that narrative. I I just interested in your latest thinking with regard to that and sort of geographic diversity and and, you know, the effect on your business and perhaps some of the the the conversations you may have had with customers with that regard.

I I think that notion, on the one hand still holds. So I think the notion that having dispersed fabs across the globe in all likelihood, will drive ultimately to more capacity having to be in installed in order to still be able to drive the same number of wafers. So there will be a heightened level of inefficiency in there. I think you actually see that now in the entire value chain. You see it in semiconductor manufacturing. You see it in discussions on data centers being spread across multiple continents, more so than has been has been considered so far. So I think this whole notion of having a more dispersed nature within our ecosystem you see that on multiple basis. Eventually, I think that will drive up the demand you know, for for semiconductors for wafers. And then to the extent that those wafers are made in different places, I think that will drive that up. So there is a potentially positive element in that, but as Christoph very clearly said it in the video and also in the the call at the beginning, the uncertainty that we currently have on tariffs is a dimension that we also have to consider there.

So I think it's a story of puts and takes.

Alright. Thank you.

Thank you. Your next question comes from the line of Mehdi Hosseini from Susquehanna. Please go ahead.

Yes. Thanks for taking my question. And I do have two Starting with EXC platform, Christophe, can you remind us what are the key milestones as we we go from r and d, EXC 5,000 to production, which is EXC 5,200. And those milestones, it could be in terms of the throughput, or any other factors that we can share with us. Yeah. I tried to to to do it again. Quickly. So I think we usually talk about three phases. And the first phase is a finding for our customer is to receive the first tool or use the tool we have in the lab here in, in ASML. To test the technology. It's a completely new technology, new imaging, new performance, So they they use basically this this time to really validate in some way that the design of the the technology deliver what they they had in mind. And this is done with R and D tools. So this is why we had the EX 5,000. This was a tool that we really basically sought through in order to support this r and d war. And this is a bit where our customer are today. This is why we are usually happy when they they share results because they show basically that this phase is progressing well.

The next phase is basically when they were really start to test the tool in what I will call early production. They will select a limited amount of layer, a limited amount of [indiscernible] And then they will really run the tool in production. But this is also where our EXE 5,200 become important. This is a tool with a higher productivity. More maturity, basically a tool that enable customers to really start this second phase. And, as you heard, we're starting to ship this tool now. And once this is done, typically, customer would be convinced that the tool can do the job, the tool is mature, and then they will use it fully for any future node in high volume manufacture. Manufacturing. And that I think we have said will come mostly '27, '28. So that that's a bit the sequence. And it can seem a bit long, but of course, you know, you you need to do that across a couple of nodes. And and so far, I think that's the the progress we are witnessing with our other customer.

I see. And given that your earlier comment that focused on key key takeaways, I'm sorry.

During your earlier comment that has to do with the key takeaways from SPIE conference in February, It it seems like Advanced Logic would be the first adopter and then then there's a debate as to what happens to Foundry versus DRAM as the second type of adapter for this [indiscernible] Well, I I think, you know, it's hard to say because to to be honest, we said it in the past The timing is very close. And when we refer to the to the free customers, when we refer in the past customer having access to our lab this is really covering both logic and memory customer. And I would say both logic and memory customer have good reason to use INA as soon as the maturity of the tool and therefore the cost of technology of the tool will be there. So to be honest, yeah, you know, historically, we always expect logic to be first. It could be the case that it's a very close call. So I will not make a bet to But both memory and logic customer are already working hard to qualify the tool.

Got it. Thank you.

You're welcome.

Thank you. Your question comes from the line of Tommy Q from Berenberg. Please go ahead. Hi. Thank you for taking my question. So first one is on China. So my understanding is your customer list has been keep expanding in China. Can you share if your percentage of China revenue from the big four chip makers has been decreasing over time or not really changed?

The percentage of the [indiscernible] [indiscernible] Over time, that has decreased. Over time, that has decreased. But when you when it well, big you mean the sorry. You mean the the the domestic ones? Sorry. Sorry. Sorry. Domestic ones.

Yeah. Domestic ones.

You know, the the tail in China has definitely longer. Right? So the number of players has has become has become longer. That that's for sure. But still a significant part of the of the, you know, of the shipments into China. Go to the large players. The tail has definitely become longer, but the number of tools that a tail takes is, you know, is obviously is obviously smaller. So there is still a a, you know, quite a big part of the of the China sales going to the large players.

Okay. I see. Okay. That's clear. And also, currently, your best CPU retools with China is nineteen seventy ninety eighty I. So assuming you can only ship nineteen fifty or below, can China still make 28 nanometer from a technical perspective using multipathermine based on nineteen fifty or nineteen forty?

Yeah. 28 nanometer sure. I think that know, this has been done in the past by by other customers. So I think, yes. You know, if you go back in history, when 28 nanometer was run by some of the non Chinese customer, this were the tool basically we were looking at. So it's definitely possible, I would say, even even smaller technology can be run with those two.

Okay. Thank you.

Thank you.

Your next question comes from the line of Tim Schulzan Milanda from Redburn Atlantic. Please go ahead.

Hi. Thanks very much for taking my questions.

Maybe just two quick ones. You commented on the gross margin guide for the coming quarter. Just in terms of the order backlog, could you give us us some color what proportion is priced ex works? And maybe what proportion of the backlog is ASML responsible for for customs fees, delivery duty paid, etcetera?

In in general well, depends from one country to the other, right, exactly how it works. But in general, we are the importers into the country. But of course, that is actually a bit irrelevant. Because at the end of the day, it depends on the contractual agreement agreements that we have with the customers how you pass on how you pass on tariff increases there. And as I mentioned before, we believe that the cost tariffs are going to give we believe that we should not be the bearer of that There should be a fair allocation of that burden within the value chain.

Very clear. Very clear. And then just a follow-up. You talked about the EXE 5,200. I think, Christophe, you just mentioned that ASML is starting to ship this tool now. Maybe just looking at at at 2025, will we expect any of those tools to rev rec this year, or is the high NA rev rec entirely fifth you know, five thousands? Thank you.

So we we we also expect 5,000 rev rec in the in the year.

Because remember, we said we're expecting five rev rec this year, We had two rev recs last year. And in total, as you know, we have five tools 5,000 that we ship to customers. So that's tells you that in the five that we talked about before for rev rec this year, there's also 5,200 in Thank you very much.

Thank you.

Our next question comes from the line of C. J. Muse from Cantor Fitzgerald. Please go ahead.

Yes. Good morning. Good afternoon. Thank you for taking the question. You know, I I guess there's obviously, greater uncertainty around geopolitics. But you know, in q one, NVIDIA will surpass Apple as the number one customer TSMC, and it is a very important milestone for HPC. You surpassing mobility. So with that as the backdrop, would love to hear you know, the visibility you have today, the conversations you're having with your customers today as it pertains to 2026, 2027?

Well, I I think [indiscernible] I'll answer the the the first part on on your comment. I think we just said it already. I I mostly said it as well. I think the the demand on AI is still very strong. And think this has been confirmed by some of our customers I think by some of our customer customer. [indiscernible] when it comes to AI, at least in the next couple of years, you're looking at major investment. Basically. And that's why reference to HPC is is the right one. So because you are looking at major investment, investment has been committed, investment that a lot company believe they have to make in order to basically enter this AIRAS, I think the the threshold to change his behavior is is pretty high. This is why this is what our customers are telling us. And that's also why, you know, we mentioned that based on those conversations, [indiscernible] largely driven by AI and by that dynamic. Now '27 start to be a bit further away, so you're asking us too much, I think, to be able to answer basically what AI may look like in '20 But if you look at the next couple of year, so far, the commitment to the AI investment and their therefore the commitment also to deliver the chips for AI has been has been very solid.

Very, very helpful. I I guess as a follow-up and I and I guess to follow-up on a prior question, at Capital Markets Day, the theme of replacing double pattern with a single EUV step was was a major focus. But my impression then was that there was real work to be done in terms of the through on EUV to do that. But given your commentary today in the video and on this call, It certainly sounds like that progression is happening sooner. So, can you kinda speak to when you see that occurring? I believe you're talking about it happening first in DRAM, would love to hear kind of how you see that playing out this year, next and how we should be thinking about the overall implications to litho intensity. Thanks so much.

Yes. I think I've tried to explain that to Francois before. I think we will see that gradually. So I think, yes, it's a lot of work. But every step we make on productivity, every step we make also on the would say, maturity, the efficiency of the tool of our customer bring basically the cost of technology of low and AUV down. And as I said a few times already today, single exposed is so much better for our customer than multi patterning when it comes to complexity, cycle time, etcetera.

That the minute we are going to match basically the cost of multipatterning with single expose most of it, the customer will move. So we'll see that gradually. That's also why Capital Market Day we show basically that we expect every node, both for DRAM and LOGIC to bring more EUV layers. I think it's a bit more [indiscernible] spectacular on DRAM just because the number of multi patterning in DRAM today is still, higher than it is for LOGI. So this is where we see on the short term, the maybe the fastest progress. But this is something that we will experience for the few years to come.

Thanks so much. Thank you. You're welcome.

Your next question comes from the line of Stephane Urie from ODDO BHF. Please go ahead.

Yes. Good afternoon, everyone. I have a first question about the order volatility and maybe to understand better from you if you think that the uncertainty around tariffs in Q1 already had an impact on your orders or not at all? And the the the second question is about the the coverage of the middle of the range for 2025. Basically, last quarter, you said that your middle of the range was covered for for EUV. So the follow-up question is what about the EUV, which is supposed to grow pretty strongly notably out of China? Thank you.

So let's start with that question. So you're right. We said last time that for the midpoint of the range, we are fully covered with EUV. For the midpoint of the range, when it comes to deep UV, we're covered approximately 90%. So so so nearly there, which, you know, given all the lead times I think, a very good place to be in. Back to your first question, auto volatility. I think we go back to what we said about that before. I think auto volatility and the lumpiness of order intake is is what we've seen, not just in this environment, but what we've seen the past couple of years. And that is, I think, first and foremost, driven by the fact that a customer that puts in a very, very significant order in one quarter has to go through a lot of governance steps in order to get that order approved, and is therefore unlikely to then deposit thereafter come back. So to the extent that you have major order intake as we had it, for instance, in Q4, that has a bearing on the order intake in the quarter graph I think that erratic pattern, I think, you've seen in past couple of years.

So that's why we said, you know, it is not necessarily a good proxy for the business momentum. And so therefore, I think that's what you're looking at here. Much rather than customers taking already a view on what tariffs mean for their business. I don't think you can read that from this from this order book.

Okay. Understood. Thank you very much.

Welcome.

Thank you. Your next question comes from the line of Andrew Gardner from Citi. Please go ahead.

Thank you very much for taking the question. Another one on tariffs. So, Ola, wanted to take the conversation in a slightly different direction. You know, on one hand, you know, the US government trying to encourage reshoring of semiconductor manufacturing, in The US.

And yet, you know, in achieving some of those goals, particularly with TSMC and a quite high profile announcement earlier this year, you know, they're now turning around and saying, well, we'd like you to do that, but we're also gonna slap tariffs on some of the tools that you need in order to make that happen. Does strike me as at least a little bit inconsistent. I was wondering about your position on that in Washington, perhaps even more importantly, the position of your customers. I can imagine that they're not too pleased by it. I was just wondering whether, you know, how how can the industry sort of push back or explain that there is no US litho industry that ship sailed over forty years ago? And, really, you know, we need these tools, and we need some relief under this. It just doesn't make sense. Are those arguments being made? Is it too sensitive a topic to be made? You know, where are we on that? Thank you.

Well, I think, Andrew, we understand your comments. It's not the first time we hear it. And that might be the reason why, as you know, since a couple of days, this industry or a significant part of the products within this industry are now not put on are now exempt from tariffs. But at the same time, U. Administration has also said we're reviewing the entire ecosystem to figure out how to deal with this. I think it is this complexity is being recognized. I think it's being recognized by players such as ourselves. I think it's being recognized by customers. And I think it's being recognized by the US administration. And that's why I think they said they need a bit more time to understand how to do this. And how they, you know, can achieve the objective with more onshoring of chip manufacturing in The United States. And how they can reconcile that with this. I think that's the background of the delay that we now see and of the anticipated and announced review of this ecosystem.

Okay.

Understood. And just a quick follow-up on the high NA commentary, Christophe, you've talked about the different phases Clearly, you're you're booked. You you've had sort of long term backlog to achieve phase one. Would you say that, you know, phase two is also represented in the backlog, and therefore, really you know, incremental orders that come are only necessary for the phase three sort of 27, 28 production ramp.

Yeah. I think we discussed that last quarter. I think we mentioned several times that we we have double digit booking for for RNA. So that's definitely enough to cover basically both phase one and phase two. And the order for phase three, I would say, come, will come when the level of confidence has achieved a place where, you know, the tool will be for sure used in HVM. So, you know, that, by the way, can also happen during phase one. But mostly, we we still have a few months to go before we see that happening.

Thank you very much. You're welcome.

Okay. So we have time for one last question. If you were unable to get through on this call, instead of questions, please feel free to contact ASML Investor Relations, with your question. Now, operator, may we have the last caller, please?

Thank you.

Your final question for today comes from the line of Sandeep Despande from JPMorgan. Please go ahead. Yeah. Hi. Thanks for squeezing me in. My question is, at this time in April 2024, how was your order book and backlog looking for 2025? And how does the order book and backlog for 2026 look at this time of the year versus 2024?

Goodness me, Sandy.

I'm not into the history lesson history lesson here. I I think I made the comment at at at sort of one of the earlier questions. I I think it it's not too difficult, I think, to figure out where our order book is for this total order book is. I also believe it's not too difficult to figure out what the component is at the midpoint of demand beyond 2026. I think you're able to figure that out, and then you will see that, you know, there's quite some orders already in there for for the period beyond 2020 to 2025. So I think there is a really good start for for, you know, for the for the for the year '26. But we refrain from making any further comments on what we think 2026 looks like. And we also refrain from saying, and therefore, this is exactly the number that you need next year. I think we've indicated you know, how we look at how we look at bookings, and therefore, I think it would not be appropriate for us to to give further commentary on what bookings you still need in order to get to the whatever midpoint is for 2026.

Thank you. And my quick follow-up to Christophe, on high NA, you talked about this Phase III. Do you expect to start getting these Phase three high NA orders by the end of this year or the second half of this year?

Not too many.

We could have a few, but I think that's still too early. Because remember, we're still mostly in phase one. We're still installing some of the tools. So no, this will mostly take some more time.

Okay. Thank you.

You're welcome. Okay. On behalf of ASML, I would like to thank you all for joining us today. Operator, if you could formally conclude the call, I would much appreciate it. Thank you.

Thank you. This concludes the ASML twenty twenty five first quarter financial results conference call. Thank you for participating. You may now disconnect.