ASML Holding NV ADR(ASML.US) conference call: Customer inventory is sold out for the year, long-term orders support, non-EUV growth "cyclical turning point established."

The key points of the ASML conference call are as follows: The annual guidance has been raised, and export controls have been included. The company has raised its full-year net sales forecast to 36 billion to 40 billion. Management has explicitly stated that this guidance range already includes the potential impact of the uncertainty of export controls. Customer capacity is already sold out for 2026. Customers have clearly indicated that their capacity for 2026 has been completely sold out, and supply constraints will continue beyond 2026. The strong demand is supported by long-term commitments from downstream customers. Non-EUV business demand is reversing. Previous expectations for non-EUV business to be flat compared to last year have been revised to growth. Demand for immersion DUV has reversed after a significant weakening in 2025, and this year's sales are expected to be close to last year's level. On the technology front, High NA reduces mask steps. Customer reports show that High NA can reduce the number of EUV masks from 3 to 1, compress the process steps from 100 to 10, and cover future 3 to 4 process nodes. A 1000-watt light source ensures that Low NA can be extended to 2031. Clear capacity targets. At least 60 Low NA EUV shipments are expected for 2026, and at least 80 for 2027. On April 15th, ASML held an earnings call. The first quarter results exceeded expectations: net sales of 8.77 billion, net profit of 2.76 billion, gross margin of 53%, all higher than market expectations. Additionally, the company has raised its full-year net sales forecast to 36 billion to 40 billion. However, the second-quarter guidance has become a short-term pressure point for stock prices the midpoint of sales is around 8.7 billion, lower than market expectations of 9.07 billion, with a decline in gross margin quarter over quarter. This weak short-term guidance led to a more than 2% drop in stock price after hours. What the market is truly worried about are three longer-term issues: Is the improvement in non-EUV business a short-term reversal or a cyclical turning point? Can the forward movement of storage expansion be sustained? How much room for maneuver is there after the tightening of export restrictions? Management provided clear answers to these questions during the call. Regarding non-EUV business: Earlier expectations that it would be flat compared to last year have now been revised to growth. The core DRIVE immersion DUV demand that significantly weakened in 2025 has "reversed," and this year's sales are expected to be close to last year's level. The management's stance is optimistic: the reversal of non-EUV demand suggests a turning point rather than a short-term recovery. About storage expansion: The CEO explicitly stated that customers' 2026 capacity is "already sold out," and supply constraints will continue beyond 2026. More importantly, there is long-term support from downstream customers behind the strong demand this is not speculative stockpiling but an expansion moved by genuine demand. About export controls: The company stated that the 36 billion to 40 billion full-year guidance range already includes the potential impact of export control uncertainty and believes it has sufficient cushion. In addition, capacity targets and technological breakthroughs further strengthen confidence: at least 60 Low NA EUV shipments are expected for 2026, and at least 80 for 2027. Technologically, the 1000-watt light source ensures the extension of Low NA up to 2031; High NA can reduce the number of masks from 3 to 1, compress the process steps from 100 to 10, and cover 3 to 4 future nodes. Improvement in non-EUV business: From "flat" to "growth," a cyclical trough is established ASML significantly raised its full-year expectations for the non-EUV business in this earnings report. Previously, the company expected the business revenue to be basically flat compared to 2025, but this quarter, management clearly stated that there has been a substantial reversal in demand. CFO Roger Dassen pointed out in an interview, "We are now seeing actual demand for this business also increasing. Therefore, we expect revenue from the non-EUV business to increase." The core DRIVE is rebounding, with a significant turnaround in immersion DUV business demand in 2025 leading to a slow start this year. However, the demand trend has reversed. "Despite the slow start, for this year, in terms of unit count, we still expect sales of immersion DUV to be very close to last year," said Dassen. The dry DUV and application businesses are also performing well. Qualitatively, this improvement is not a short-term order fill but a structural turning point. The ongoing capacity crunch, overflow of AI infrastructure investments into mature processes, and the realization of long-term capacity construction plans have all supported the sustainability of non-EUV demand. Storage expansion moved up: Certainty for 2026, sustainability to be verified The demand from storage chip customers has been a key support for this quarter's better-than-expected performance. According to CEO Christophe Fouquet, the major storage customers' capacity is already extremely tight. He stated, "Our customers have informed us that their capacity for 2026 is already sold out, and supply constraints will continue beyond 2026." This means that customer expansion plans have been significantly moved up, forming a clear and urgent demand for ASML equipment delivery. In terms of demand structure, advanced storage (especially HBM related to AI) is the main driver of this expansion. Christophe Fouquet further noted that customers are not only increasing capital expenditure but also "trying to accelerate their capacity ramp-up for 2026 and beyond." More importantly, there is long-term commitment support from downstream customers, enhancing order visibility. However, the sustainability of the expansion beyond 2027 still needs to be observed. ASML has not disclosed specific coverage or signing progress of long-term commitments by customers. While the logic of AI infrastructure investments is sound in the medium to long term, the inherent cyclic fluctuations of storage chips mean that if end-demand growth slows down, the pace of expansion may need adjustments. Capacity planning: At least 60 Low NA EUV shipments by 2026 To meet the accelerated customer demand, ASML is actively expanding its own capacity. Roger Dassen stated, "For 2026, our target is to achieve a minimum of 60 Low NA EUV system shipments; looking ahead to 2027, if customer demand continues to support this, we believe we can increase the number of Low NA EUV system shipments to at least 80." In terms of the non-EUV product line, the company also plans to align business with customer demand at various nodes. Christophe Fouquet added that the company will continue to work closely with customers to help them expand capacity through a combination of new system shipments, existing system performance upgrades, and installation infrastructure products. Technological roadmap: Low NA EUV extendable to 2031, High NA accelerating towards mass production In terms of technological progress, Christophe Fouquet stated that at the SPIE lithography technology conference, ASML showcased a 1000-watt light source, a breakthrough that ensures the long-term scalability of Low NA EUV - it is expected that by 2031, the equipment can process 330 wafers per hour, a significant increase compared to the current level. In the short term, ASML has increased the throughput of the NXE:3800E system from 220 wafers per hour to 230 wafers; the specifications of the next-generation NXE:3800F system have also been increased from 250 wafers per hour to 260 wafers, expected to boost capacity by around 2028. Regarding the High NA EUV, Fouquet mentioned that customers have begun openly discussing the progress of High NA at the SPIE conference. Customer reports show that High NA can reduce the number of required EUV masks from 3 to 1 and compress the process steps from 100 to 10. At the ecosystem level, research from lithography glue partners indicates that High NA can extend to 18nm line spacing in logic chips and 28nm hole size in storage chips and cover 3 to 4 process nodes. Fouquet stated that as customers begin testing High NA on real products, equipment maturity continues to improve, and daily wafer output data continues to improve. Export restriction risk: Current guidance already provides buffer space Against the backdrop of escalating geopolitical uncertainties, the impact of export controls on ASML's business has garnered significant attention. In this earnings report, management took the unusual step of proactively addressing this issue. Roger Dassen stated, "Within the guidance range of 36 billion to 40 billion that we provide, we believe that we can manage the potential effects of the ongoing export control discussions." This statement conveys two important signals. First, that ASML has confidence in the geographical structure and product portfolio of its business, believing that even with tighter restrictions, it can offset negative impacts through resource allocation and prioritizing other market demands. Dassen also emphasized earlier that the company is "fully aligned with customers, providing them what they need," highlighting the flexibility necessary to deal with geopolitical uncertainties. Secondly, the company does not view export restrictions as a disruptive risk but has factored in a conservative estimate at the guidance level. Of course, the evolution path of export controls still holds a high degree of uncertainty. If the scope of restrictions exceeds current expectations or involves more advanced equipment models, the actual maneuvering space of ASML still needs to be dynamically assessed. However, at present, the company has clearly conveyed a message of "manageability." Below is the full text of the performance video (translated with the help of AI) from Wall Street View. Hello, welcome to the ASML 2026 first-quarter performance video. Welcome Christophe and Roger. Roger, can you please start by summarizing the performance of the first quarter of 2026 for us? The total net sales for the quarter were 8.7 billion, in line with guidance. Of this, installation basics revenue was 2.5 billion, slightly higher than expected. The gross margin for the first quarter was 53%, at the upper end of our guidance range. As I mentioned, the installation basics sector has exceeded our expectations. Some parts of this business have actually delivered quite strong margins. Therefore, we achieved a high gross margin of 53%. The net profit for the quarter was 2.76 billion. 2026 second-quarter guidance Could you also provide some guidance for the second quarter of 2026? For the second quarter, we expect total net sales to be between 8.4 billion and 9 billion. Installation basics revenue is expected to remain at 2.5 billion. We expect the gross margin to be between 51% and 52%. Market dynamics Now, over to you, Christophe. Can you talk about the market outlook and your current perception of the situation? We see continued steady growth in the semiconductor industry. This is primarily driven by investments in artificial intelligence infrastructure. This translates into high demand for advanced storage chips and advanced logic chips. We anticipate that supply will not be able to meet demand in the foreseeable future. This has led to severe supply constraints in the end markets, from artificial intelligence to mobile devices and personal computers. Therefore, our customers are strongly urged to create more capacity. Regarding storage chips, our customers have informed us that their capacity for 2026 is already sold out, and supply constraints will continue beyond 2026. For advanced logic chips, we see customers building capacity for multiple nodes and continuing to upgrade their capacity for the 2nm process to meet the demand for artificial intelligence products. So, I think it's fair to say that much of this capacity increase has had a positive impact on our own prospects? Absolutely. We see that both storage chip customers (DRAM customers) and advanced logic chip customers are increasing capital expenditure and "trying to accelerate their capacity ramp-up for 2026 and beyond." What is also very interesting is that a large part of this demand is being supported by long-term commitments from the customers' own customers. Most importantly, we see that storage chip customers and advanced logic chip customers are continuing to increase their adoption of extreme ultraviolet lithography (EUV) and immersion lithography at ASML. This essentially translates into higher lithographic intensity and higher demand for ASML lithography. So, we will continue to work closely with customers to increase our capacity through lithography. We are doing this in 2026 and will continue to do so in 2027. Roger, perhaps you can add something. Could you please give more details on what measures we will actually take to increase capacity to support market demand? I agree with Christophe. We are working very closely with customers, completely in line with customers, to provide them with what they need. This includes increasing capacity through new system shipments, doing our best to upgrade system performance, and providing installation basics products. Through this combination, we strive to meet customer demand. Specifically, in terms of our own capacity, we believe that for this year (2026), we can achieve a minimum of 60 Low NA EUV system outputs. This is where we are currently focusing our efforts. Additionally, we have been looking at deep ultraviolet lithography (DUV) for 2026. As I mentioned a few months ago, in the immersion DUV field, we actually started a bit slowly because we saw a significant reduction in immersion DUV demand in 2025. This situation has now reversed. I would say that despite the slow start, this year, in terms of unit count, we still expect immersion DUV sales to be very close to last year. This is the situation for 2026. Looking ahead to 2027 capacity, we are gradually increasing our production pace quarter by quarter. Specifically for Low NA EUV, we expect again, if customer demand truly supports this we believe we can achieve a minimum of 80 Low NA EUV system outputs by 2027. We are also working to harmonize the non-EUV business with the demand for all nodes by customers. Full-year guidance for 2026 Specifically for 2026, can you provide an update on our own business for the full year? Clearly, the development trend for 2026 is very good. It is a very strong year. We are expecting strong growth this year. Based on all the customer dynamics that Christophe mentioned, we are actually narrowing and simultaneously raising our expectations for the year to 36 billion to 40 billion. Looking at the different components, as expected, the EUV business is expected to perform strongly this year. So, the EUV business (including Low NA EUV and High NA EUV) is expected to perform strongly this year. In the non-EUV business, we had previously expected this business to be flat compared to last year. But now, we see that the demand for this business is actually increasing. Therefore, we expect revenue from the non-EUV business to increase. I have already mentioned our efforts in the immersion DUV field; dry DUV business is also performing quite well. The application business is also doing well. So, we believe that, compared to the situation a few months ago, we expect the non-EUV business to achieve growth. In the installation basics business as well, we expect strong growth. This is because it is evident that this is a very rapid way for our customers to increase capacity to meet the demands that Christophe mentioned. What I would like to emphasize is that within the guidance range of 36 billion to 40 billion that we provide, we believe that we can manage the potential effects of the ongoing export control discussions. What about the gross margin for 2026? For the gross margin, we maintain the expected range of 51% to 53%. Technological updates Now, transitioning to a different topic, let's discuss technology. Christophe, can you provide some insights into the progress of our technology and roadmap? We continue to execute our technology roadmap very well. Every year, we briefly present our achievements to the world at the SPIE (International Society for Optics and Photonics) conference. There are several important pieces of news this year. The first is that we showcased a 1,000-watt light source. This is very important because it ensures the long-term scalability of Low NA EUV we expect that by 2031, the equipment will be able to run at a speed of 330 wafers per hour, significantly higher than our current level. In the short term, our advancements in EUV have also had a positive impact. We have successfully increased the throughput of the NXE:3800E system from 220 wafers per hour to 230 wafers. This will also be helpful for short-term capacity. Our customers are happy to obtain more wafers per equipment. We have also increased the specifications of the next-generation NXE:3800F system to 260 wafers per hour, up from 250 wafers. This will also enhance our capacity around 2028. Regarding the High NA EUV, can you share some insights from the SPIE conference? The benefit of the SPIE conference is that our customers have started discussing High NA. They have reported on some developments. The first thing, of course, is that High NA enables them to significantly reduce the number of masks. The customers in DRAM and logic chips have mentioned that using High NA can reduce the number of EUV masks from 3 to 1. They also mentioned that this can reduce the process steps from 100 to 10. This is significant. This is the reason we are developing High NA. We also saw significant progress in the ecosystem. Some of our lithography glue partners have done fantastic demonstrations, pointing out that High NA can extend to 18nm line width and spacing in logic chips and 28nm hole size in storage chips. This basically means that High NA is not only ready to enter a golden age, but we already know that High NA can mainly be extended to 3 to 4 nodes. This is very, very important for our customers. Finally, the maturity of the equipment is crucial. We continue to see better availability data. More wafers are produced daily, and total output is increasing. As we see customers start testing High NA on real products, this becomes increasingly important. Thank you both for joining our interview today. Thank you. You're welcome. This article was translated from "Wall Street View" and edited by GMTEight: Qiu Yi Feng.