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ASML Holding Q2 2026 earnings conference call

Key Takeaways (AI-Generated)

Financial Performance

- EUV shipment guidance of approximately 65 tools for 2026 with improved ASP from better tool mix

- Immersion shipments expected substantially higher in second half after weak first half

- Installed base business projected to grow over 30% in 2026

- Gross margin guidance of 55-57% for Q3, second half around 56%

Business Highlights

- Intel press release signals strong progress in high NA EUV maturity and production readiness

- Memory business showing 75% growth in 2026 driven by HBM and DDR demand

- Successfully optimizing existing clean room space for 30% capacity increases without new facilities

- Tool mix shifting to higher productivity E and S models, eliminating D models

Financial Guidance

- 2027: Planning 30% increase in both EUV (85 tools) and immersion capacity

- 2028: Investigating 110 EUV low NA tools (30% increase from 2027)

- High NA EUV: 4-5 tools expected for revenue recognition in 2026

- Tool mix improvement expected with primarily E models and some F models

Opportunities

- High NA EUV platform reaching maturity threshold, enabling broader customer adoption

- Strong demand signals from logic and DRAM customers for advanced lithography solutions

- Operational efficiency gains enabling 30% capacity increases without major facility expansion

- Current market environment provides more flexibility for pricing strategies

Full Transcript (AI-Generated)

Operator

And increasing lithography intensity at our next capital market day, which will be held on June 10th, 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 question.

Speaker

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 1 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?

Operator

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 *1 and one again. We will now go to the first question. One moment, please. And your first question today comes from the line of Francois Beauvigny from UBS. Please go ahead.

Francois Beauvigny

Thank you very much. My first question maybe is an ISML has often described it's pricing approach as being based on the value delivered to 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, you know, TSMC recent comments on high NS 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, you know, competitive cost 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 customers, I mean the incremental value you give to customers, if that makes sense.

Speaker

Well, I think first I think I understand maybe the question of the connection between the INA and the low NA. So let me start with with INA, we discussed that in 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 provided 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 walking in bringing the INA platform to the level of maturity of of low NA. And you know when you achieve that, this is practically the time where the cost of INA is going basically to to to provide an advantage versus the the existing technology.

So I think that logic is still true and again get implemented when the platform reached the the right maturity. Therefore, I think there's no real need to maybe look at one cool price versus the other because that logic I think was also true for low NA. If you remember our discussion back in 2018, nineteen, 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.

And you know 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 function of low in a pricing. Yeah, sorry, go ahead, Raji.

Raji

So I would say, Francois, in addition to that when it comes to low in a pricing, of course, you know that we keep on increasing the productivity of the low in a tool. So that of course that gives us. A pretty strong runway for for, you know, potential price prices. And improvements going forward. And you're right, I mean, value based pricing is the concept that that we that, that we that we follow within the SML.

And you're also right that in the current environment, of course, you know, the the value for customers is, is higher than than in other circumstances. So I would agree with you that the current environment, you know, provides more flexibility for for pricing than what you would have had in in different in different days. Of course you will also appreciate given the long all the 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 with the value that our products bring to customer is substantial. Of course, gives us gives us flexibility on pricing more so than what you would have seen in in the past and of course we're executing on that as well.

Francois Beauvigny

When could that happen? I mean to your point, it's not tomorrow after tomorrow. So when when you did

Raji

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

Francois Beauvigny

OK. And maybe the, the follow up quick one is on the 100, I mean 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 to ICML capabilities?

Christophe

I think all the the the capacity it creates either plan or investigated. We're talking about our based on our existing footprints. So we have, we have been working extremely hard as you may have noticed in the last 6-9 months to increase our output. We'll continue to work very hard in the next few months to, to do the same. And the number we are mentioning we, we can achieve basically by optimizing the existing clean room space in the right way.

So this is also why we, we, we can create basically that improvement on the short term.

Francois Beauvigny

Great, thank you both.

Speaker

You're welcome. Thank you.

Operator

Your next question today comes from the line of Joe Kotraki from Wells Fargo. Please go ahead.

Joe Kotraki

Yeah, thanks for taking the questions. You noted that you're close to receiving all the orders you needs for 2027 to be covered on low in A and you're increasing capacity obviously by, you know, 30%. So I guess the question is, is the implied kind of 85 tools for next year? Is that the ceiling of what you can think you can support and your supply chain can support next year or it sounds like maybe the existing footprint could could support more.

Is the, is there a possibility that that could move, you know, higher as we move closer to 2027?

Speaker

Joe, it's, it's the balance as we see it today, the balance between demand and supplies. We see it today gets us to the, to the 30%, right. So that that's the way we do it. If customers are going to come to ASML and say ASML, we need considerably more than just as we've been doing it in the in the past couple of months. You know, we need to look ourselves in the eye. We need to look at all the supply chain and just see what's, what's, what's, what can further be, what can further be done.

But at this stage, given the conversations we have, we think the 85 is is a nice representation 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. Because if more is needed, you know, 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.

Christophe

And, and maybe Joe to add to that, back to, to, to Francois question. So you know, I, I explained that the 2 * 30% is based on our existing footprint. So the, the question basically is really the speed at which we need to execute to support the customer on demand and potentially at some point we can execute. But on that part, as you have noticed in the last few months, we, we have been very successful.

So we have the space we we have, I will 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 SML is to provide their customer what what they need basically.

Speaker

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, will be ease and S, while this year it's a combination of ease and ease. And if you, if you recognize the, the, the, the, the difference in an output, then in essence what you're looking at is, is not 30% improvement of, you know, wafer capacity that we're adding, but approximately 45%.

And in addition to that, as you also know, you know, we're, we're, we're, we're offering a whole slew of upgrade packages to the install base to customers, which gives them another significant uptick. So it's in, in the combination of improving the number of the, the, 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 Crystal said, we think you know that that we're, you know, very successful in meeting the objectives and in advance of our customers.

Joe Kotraki

That's really helpful color. I appreciate all the detail. Maybe just as a follow up, 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 NA? Can you remind us what high NA capacity is for looking into 2728?

Christophe

Well, I think for, for, for inage, we, we follow the exact same principle, which is to, to match our supply with our customer demands. So I think, you know, we, we optimize across all the products. And you know, there's also of course some discussion around INA, as we mentioned, there's some discussion about insertion. So we, we, we keep our, so of course, the flexibility to, to be able to respond to that when, when the time comes.

So the optimization I was referring to before is really basically across all product. Now I think everyone understand that of course a lot more is being done to the Unlo NA and the immersion for example than INA. But we are not sacrificing I would say any of our INA supply by doing the rest of the optimization.

Joe Kotraki

Helpful. Thank you.

Speaker

You're welcome. Thank you.

Operator

Our next question today comes from the line of Krish Sankar from TD Cowan. Please go ahead.

Krish Sankar

Yeah, hi, thanks for taking my question. I told them the capacity increased to 85 in 110 units. You are meeting the demand not under shipping. Is that correct? And if so for you to increase, are you waiting for purchase orders from customers before you start adding more capacity? And then I had a follow up.

Christophe

Well, I think you know on the first question, I think that as you've 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 setting up 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 would not say that we have done with this discussion. I think you see the dynamic on the market, this is still pretty, pretty strong. So this is also, you know, bringing some of course I'll say always tension to to make sure that the the two number match, but that's again something we'll continue to to 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 sure for 27, even 28, but we also obviously are not at the end of of of the discussion with our customer.

Speaker

And clearly, Chris, we're not, we're not waiting until we get the orders right because we said we're investigating, you know, the, the, the, the 30, the, the 1-10 scenario for EUV in loan A by 2028. Of course we don't have, you know, orders for 410 EUV loan A at this, at this stage. So we're not waiting. We're pre empting, but we are doing this because the demand signals that we're getting from customers that have not yet translated into full deals, that the demand signals we're getting from customers are quite strong.

So that's why we're that's why we're investigating this and preparing as best as we can at this stage.

Krish Sankar

Such a very helpful. And then a quick follow up. It seems like the three nanometer node is actually being a more of a longer and stronger node than people thought. So I would assume that you would still be shipping 3600 DS. But Rosie, you mentioned that next year there won't be any D in the mix. So 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 you have mixer shifting to more volumes of E and eventually S?

Speaker

Point in time, we're simply sold out when it comes to to to D models, right? So the D uses a specific UB from from Zyves and at a certain point in time we're just done and we expect to be done or maybe. Virtually done, but but done this this year. There might be one or two stepping into that. Year but, but essentially we're done with this this year and and then you know from that moment onwards there is no DPOB left anymore and therefore will, will, will build to eat the next, next year.

And of course that mix will come with a better ASP than the mix that we have this year because it also will come with higher productivity as as we just laid laid out and other 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 but it is true that the mix effect on EUV next year will be more positive than it is this year.

Krish Sankar

Thanks a lot, Rudy.

Operator

Thank you. Your next question today comes from the line of Stefan Uri from Odo BHS. Please go ahead.

Stefan Uri

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

Speaker

Well, the fact that, the fact that we say that we, that we investigate 110, we wouldn't investigate 110 if customers were telling us that, that, that, that would be a ridiculous number, right. So we're investigating this simply because customers are signaling to us that the demand is, is very, very strong. But the fact that we now start talking about having significant order intake 428 already like 2-2 years in advance is pretty, pretty strong, right?

So, so that is something that we haven't that that situation we haven't and enjoyed in many, many years. So I think that is a very, you know, a very good underpinning of the strong market dynamics that are currently going, going on. You know, we're, 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 to seriously investigate this 110 number and the related number on immersion that we that we signal to you.

Stefan Uri

Thank you. And about the 75% memory growth in 2026, can you share with us how much is coming from the HBM driven lithography intensity versus volume addition? IE what I'm trying to to know if is also if with these investments you know the memory manufacturer, your clients are kind of closing the gap between offer and demand or just investing in, in new technologies like HBM. Thank you.

Christophe

Well, I think the demand is really a combination of a lot more volume both for HBM and DDR. I think we have seen some shift between one product to the other recently because the, the, the price point of, of, of DDRI think is extremely strong right now. So there's some optimization at our customers. It's hard to, 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, the, the DRAM DRA itself is the same. You know, HBM will require more wafer. So there there's a volume effect again. So that's one element. The second element is of course the number of UV and immersion layer which which has increased basically on the, the, the nodes that are ramping very, very strongly right now.

So that the 1C nodes, for example, which is going to be a enormous node or even 1B are using more UV layers. So this is really this, this combination which which create a bit the perfect storm for for a SML on on DRAM this this year and most probably the next, the next few years to come.

Stefan Uri

OK, thank you very much.

Operator

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

Didiya Simama

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 struggled a little bit to get even to the midpoint. So sorry, I'm struggling to to to not get above the upper end. I apologize. So I'm trying to understand if your ASPs are going higher in Q3Q4 because of your holistically so attach rate on software always any mix impact that is a particularly meaningful?

And associated with it, when I look at your full your guide on gross margin, you essentially saying that your gross margin exit rate Q4 is around 56 to 58%, which again would suggest that you'll mix your volumes, your software upgrades etcetera are very strong. So just trying to understand what's going on is those ASPs and systems in particular in Q3Q4, you just, it's very hard to, to validate your number on the, on the, on, on the, on the phone.

Speaker

But let me tell you that if, if you look at the, if you look at the, the guidance that we have provided that of course there is a little bit of a mix effect in there. I would say for EUV, we, we had quite some D models in the first half and the mix effect will be a bit more positive in the, in the, in the second-half. We'll also have in the second-half. You know, we'll, we'll, we'll have all the 230 configurations in there.

So that's, that's going to help a little bit on the, on the ASP, on the ASP 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 you know we were we had decided in 2025 we were having Zeiss prep for a substantially lower version number that what we're currently facing.

So we started the year rather week. We will make up for that quite substantially in the second-half of the of the of the year. So I would say the, the guidance to get to the guidance you know is the, is the around 65 EUV tools with a slightly better ASP because of what I just what I just mentioned. And of course immersion will be, will be quite strong in there.

And of course, you know, the installed base business, as I also indicated, will, will grow over 30%. I I think if you take all those elements into the mix, you should be able to get to the midpoint that I just that I just talked about in terms of the gross margin. If you, if you do the analysis and if you take midpoint by midpoint, then I think you're looking for the second-half as a, as A at A, at a gross margin of 56% approximately.

So you know, and we guided 55 to 57 for Q3. So you should be, you know, looking midpoint at approximately the same number there for, for four Q for Q4. And why is that? Again, it's, it's, it's the mix because we have quite a bit more immersion and low in AUV in there 1-2 because we have better priced UV in there for the second-half.

Three, because of the the installed base business, which which you know remains quite strong. 4 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 it gives you a positive fixed cost coverage. So it's the combination of those 4 as a result of which you see an improvement of the gross margin in the second-half versus the first half.

Didiya Simama

Yeah, I got it very clear. And if I, if I, if I take the things that you mentioned in previous questions, you know, the mix of UV tools etcetera, etcetera. Is there any reason why your gross margin should not go higher in fact in 27 than the exit rates of 26? And I guess related to that, any, any color you can give us on the mix of low NA tools next year, whether you have prominent prominently the, the E2 or EDF tool capturing more than 50% of the value.

Speaker

So you would appreciate I'm not going to give you guidance on the 27th gross margin. But if you look at the, if you look at the main drivers that I that I just gave you for, for why the second-half is better than the than the first half on the mix effect within EUV, of course that, that, that should only be better because as I mentioned, you know, in that next year we're going to get a mix of ES and FS.

I think it will primarily DJB ES there, there will be a number of FS in there, but the lion's share of the tools next year are going to be, are going to be ease. 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, if, if indeed we're able to, to, to get those done, then then clearly our high margin scanner products, you know, with the 30% increase that we just that we just talked about should be, should be positive in there. The volume effect, of course, the fixed cost coverage you, you should get that the fact, right. If indeed we're we're we're going up 30% in the in those two businesses.

And then the the swing factor of course is the is the installed based business, which of course the service component of the installed based business you know should be strong, right, Because that simply grows with the that. Grows with the. Base almost by definition, so that part should be strong and that. And the question is how strong will the will the upgrade business be?

You know, which in the current climate is very, very strong because customers are looking for productivity. So in the current market dynamics, you, you could realistically assume that. So that's a qualitative description of the, of the different, different components. Again, we're not going to guide gross margin, but but you know, if if your perspective on 27 is that yet again that will be a a bullish market where customers are looking for a lot of for for capacity expansion, then you could argue that the drivers of the gross margin that I just gave you should also be strong in the next year.

Didiya Simama

Absolutely. Thank you so much.

Speaker

You're welcome.

Operator

Thank you. Your next question today comes from the line of Nigel Panpoten from Morgan Stanley. Please go ahead.

Nigel Panpoten

Hi, thanks a lot. Got a follow up question on the the difference between boxes and productivity, super helpful that you laid that out 30% unit growth, but 45% on the on the actual predicted productivity that you are shipping to customers. Now beyond productivity I think 3800 F 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 the lower end of what we should model for, for revenue in terms of EUV over that. That's my first question.

Speaker

Yeah, I'm not going to guide in any way the business for, for next year. I, I think we've, we've said what we wanted to say about what, what we plan for in, in, in next year. And I'm not we're not going to translate that into euro months yet. You're you're I think you're very well capable of putting that into your model. No, no percentage.

Nigel Panpoten

Great. I think, I think you're implying 3800 apps pretty much only in IN238, which makes sense. I mean high productivity. It's just that, you know, given, given the commentary 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. There's more than just the productivity in terms of throughput. There's there's overlay improvements, et cetera. And, and just, you know, thinking if that is what we should think about when you say there's more flexibility in pricing,

Speaker

Nigel. The only, the only thing is, of course, we've we've always been able to to show customers not just productivity upgrades, but also the value from, from better imaging, the better the, the, the value of better overlay, etcetera. And then as you know, we've always shared the value with the customer in an equitable way and, and do and, and in a certain way. And the way that that resulted was that you got this very strong correlation between throughput improvement and ASPI 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, and, and what have you.

That's sort of the way things historically panned, panned out. And you know, there's no reason to believe that that's going to be dramatically different other than what I 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, for that, for the additional value.

Nigel Panpoten

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 color 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 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 for base upgrades and, and some more visibility also for you guys to be able to service that demand?

Christophe

Well, I think that you said it. So the, the, the, 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 the need for capacity on on very successful advanced node is, is there the upgrade product we are developing are covering all the different version of our UV lo, 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 UV or immersion tool. And today we see a very strong acceptance of those products to the point that you know we're many discussion where we are being requested to try to accelerate that and create new product which we plan to do in, 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 we would expect that the demand for those products would be very strong.

Nigel Panpoten

Thank you.

Operator

Thank you. We'll now take the next question. And the question comes from the line of Tami Q from Berenberg. Please go ahead.

Tami Q

Hi, thank you for taking my question. So the first one is based on my feedback, investors usually compare your growth to the, we will try the equipment spending growth and based on my understanding they share you have a lot of upgrades because some customers for lack of clean room etcetera. And in 2027 and 28, in theory we are having more clean room coming out of the space. So therefore there will be more Greenfield investment. Do you think you'll be therefore in a better position to row comparing to WFE comparing to what we are seeing in 2026?

Speaker

Yeah, I mean the the sound 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?

Tami Q

Yeah, Yeah, sure. Sorry. So basically 2026 has a lot of clean room constraint and 2027 and 28 will be more clean room space, space, Greenfield expansion. And in my view that put you in a better position to outgrow WFC or at least growing in line with WFC. Do you think coming into 27 and 28 you be? Be able to outgrow or grow more than WFE for your business comparing to 2026.

Speaker

I mean, we, we, we, as you know, we never comment on WFE. We, we, 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 you, you, I'm sure you have your own expectation of where WFE is going and, and just just compare that. But we think that with the 30% numbers that we just indicated, we think we're were contributing to, to the demand that our customers are having.

So yeah, the the 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 UV for more immersion. So maybe that helps you a bit to, to, 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 to lethal. So I think that's maybe one element to to to help you in in your calculations.

Tami Q

OK, 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?

Christophe

Well, you know, I don't know if they would be bigger or not. I think what we see is of course that both technologies are qualifying equally INA today. So you know, we talked about Intel today. I think you know that Intel was first to get the technology. So they're first implemented in production as we speak. There is a lot of walk down to qualify, you know the technology on on product welfare.

So the opportunity for DRAM is significant also because the you know the the volume is also significant, but there's no real change there. I think we still see both logic and DRAM being a good candidate for I need the reason for that is both DRAM and advanced logic will be shifting more and more towards multi patterning low NA over time. So that's that's applied to both basically.

Tami Q

OK, thank you.

Operator

Thank you. Next question today comes from the line of Chris Cafe from Wolf Research. Please go ahead.

Chris Cafe

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, 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 that would be a big part of, of any decisions to add capacity.

Speaker

Yeah, it's, it's, it's a Chris, it's a combination, right. So we have, as Christophe said, obviously we're doing work here. So you know what, we're freeing up cabins. So making sure that cabins are fully dedicated to output. Right now we will to have prototypes and, and, and R&D tools in cabins. So finding another hole for those tools such that all the cabins that we have here are fully dedicated to, to, to output.

We're looking at, at, at reducing cycle time. So those are the key things that we're doing here within, within the SML. And of course, we're working with our supply chain to an essence, you know, to make sure that they do the same thing. As Christophe said, they've made as we did, they've made big investments in the past and 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 that, we get the. Maximum, you know, out of that, out of that capacity

and in terms of how long does it take, well, you know, I, I think the, the 30% that we talked about gives you a good proxy for that. You will in essence, you know, as as we've said before, every year you will see as and with a move rate that is higher of the than the move rate that we enter the year, 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 the 30% that we mentioned for next year and the 30% that we're investigating for for a 2028.

So that's the answer I think to the to the timing questions that you just said that you just wrote.

Chris Cafe

Thank you. As a follow up of a question on pricing and a clarification from some of your prior comments. And I, I think you were very clear about the mix effect of low in AUV on the higher throughput tools where where you get higher is 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, you're rolling up your sleeves as you say. Would that potentially result in, in higher like for like ASPs as you increase your cost to, to do what the customers are asking?

Speaker

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

Chris Cafe

Understood. Thank you.

Speaker

You're welcome.

Operator

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

Mehdi Hosseini

Yes, thank you for squeezing me in. I have a two follow up question and this is for for the team. Christopher OJ. As we think about this migration from E to F which seems to be accelerating the second-half of 27, how are your, how are 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, would would prefer upgrade or just go for complete new system purchase. And I have a follow up.

Christophe

I think the answer to this question today is very simple. It's really 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 3800. EI think this has become you know, today the tool customer really wants they also want to upgrade existing system because typically they sit on different technologies.

So the new tool moving forward you know are going to two nanometer and then it will go to 1.4 while a lot of the upgrade will be for the 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'll define the transition from E to F is going to be again the maturity of the platform and then our ability to to ram going from E to F.

But that's, that's very, I would say, you know, very normal. That's that's what we have done with with the E. But to do today our customer, I think short answer, they want both and and they want as much as both as possible.

Mehdi Hosseini

And 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 two nanometer remains strong, your customers don't want to bring the line down and would prefer to actually purchase a new tool, especially this for below 2 nanometer?

Christophe

Well, I I think the F will certainly be used for 1.4 nanometre because the the timing is, is matching basically the timing of of the F for two nanometre. I think what we also allow between the E&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 will just see a faster tool. So that's also means that when the tool is ready, if there's need for more capacity for two nanometer, then the AF would definitely be an option as well.

Mehdi Hosseini

OK. And what's the updated assumption for high in AUV system and Rev recognized this year 2026?

Speaker

You mean the number of tools that we that we Rev right this year we we've set four to five. Yeah, 4 to 5 is, is still, is still revealed for this year.

Mehdi Hosseini

Yeah. Gotcha. Thank you.

Speaker

You're welcome.

Operator

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

CJ Muse

Yeah, good morning, good afternoon. 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 and we're clearly seeing in the numbers here with top line 35% growth and and OpEx you know 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, is kind of the target that that you're going after and and would love to hear your thoughts on that.

Speaker

Yes, CJ, we're not, we're not going to, we're not going to quantify that, that guidance. But you are right that we have been managing our our OpEx quite, quite nicely. So as G and A and 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 you know also with the reorganization that we talked about before that we can get even more value out of the team and what we enjoyed so far.

So we believe that we with the you know with the current team that we have in the in R&D, there is a lot of value and a lot of innovation road map 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 increase the the head sound of R&D quite substantially. I would say that today we believe that with the team that we have today, we can we can really entertain a very aggressive road map going and going forward.

So All in all, I think you will continue to see is not manage both R&D and SG and A quite nicely and as a result of that the operating leverage that that. You imply. I think the operating leverage will will indeed, you know, become. Better in the, in the, in the quarters in the years to come.

CJ Muse

Very, 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 #2 what's the fungibility around mirrors and other optics between low NA and high NA? And just curious if if you are kind of sold out on low NA, does that create the situation where customers, you know, you know, really desperate for supply might adopt INA sooner? Thanks so much.

Christophe

Well, I think maybe starting with the second question, I think that you know, as the maturity of the INA platform improve, then of course INA become a potential option also for capacity. And I think that's an option that it 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 they expend before can even provide some some benefits.

So I think that's that's I will say potentially another opportunity moving forward assuming that we continue the good progress we have seen on maturity. It's one of the reasons also our customer 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.

Speaker

So the first question. So in, in terms of our own footprint, as Christophe said, you know, the way we we try to increase our capacity is primarily within the current parameter. So we are 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, so, so that is not, that is not, you know what we're doing in order to get to the numbers that we share.

So in essence the the capability improvement that we were talking about, we want to achieve that within the current 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 CGII interpreted to your question that really isn't there. It's totally different. 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 that there is fungibility that you you can use high in a tools to get more low in a output that's not going to work.

CJ Muse

OK then. Thank you, Christophe. Thank you, Roger.

Speaker

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.

Operator

Thank you. This concludes the ASML 2026 second quarter financial results conference call. Thank you for participating. You may now disconnect.

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