ASML Q2 Earnings 2025

Ray Marce

Welcome back to Market & Earnings Digest, everyone. I’m Ray Marce, joined as always by Mark Dalli. Today, we’re diving into ASML’s Q2 2025 results, which—let’s be honest—absolutely blew past what anyone was expecting. Mark, €7.7 billion in revenue, that’s up 24% year-on-year, and net income at €2.3 billion, up 47%. That’s not just a beat, that’s a proper walloping of consensus, isn’t it?

Mark Dalli

Yeah, Ray, it’s a monster quarter. I mean, analysts were looking for €7.5 billion in sales, and ASML just sailed right past that. And the net income—€2.3 billion versus the €2.05 billion expected—shows just how much operating leverage they’ve got when demand is this strong. The EPS, €5.85, up 47% as well. It’s all just, well, it’s a bit of a flex, isn’t it?

Ray Marce

It really is. And what’s driving it? I mean, we’ve talked about AI and tech sector demand in previous episodes, but this feels like it’s gone up another gear. The CEO even said momentum is only accelerating, and a lot of these wins haven’t even hit the numbers yet. The backlog is at €39 billion, which is just wild. And they shipped 72 lithography systems this quarter, including 12 EUV machines. That’s a record, right?

Mark Dalli

Yeah, and it’s not just the volume, it’s the mix. The product mix is skewing towards higher-value systems, and that’s helping margins too. But the real story is the demand from chipmakers—TSMC, Intel, Samsung, you name it. They’re all scrambling to keep up with AI, data center, and edge computing growth. And ASML is the only game in town for EUV lithography. That’s why the backlog is so massive. It’s not just orders for next quarter, it’s orders for the next couple of years.

Ray Marce

And the installed base management side—€2.1 billion in service and upgrades, up 5% year-on-year. That’s a nice recurring revenue stream, and it’s helping gross margins, which hit 53.7%. That’s up from 51.5% last quarter. So, it’s not just about selling new machines, it’s about keeping the old ones humming and upgraded.

Mark Dalli

Exactly. And the bookings—€5.6 billion in new orders, 26% above what people were expecting. That’s a sign that chipmakers are still investing, even with all the macro noise out there. But, and I think we’ll get to this, there’s a bit of a cloud on the horizon, isn’t there?

Ray Marce

Yeah, let’s not get ahead of ourselves, but you’re right. For now, though, this quarter is a reminder of just how critical ASML is to the whole semiconductor ecosystem. If you want to make the most advanced chips, you need their machines. Simple as that.

Mark Dalli

So, let’s talk about where all this demand is coming from, because the regional breakdown is fascinating. China accounted for 49% of ASML’s sales this quarter. That’s up from 26% in Q1. I mean, that’s a huge jump. But it’s not all rosy, is it?

Ray Marce

No, not at all. The China number is a bit of a catch-up, right? Some of those shipments were delayed from last year, so it’s a bit lumpy. But it does show how much Chinese chipmakers are investing in mature nodes, probably to get ahead of any further export restrictions. But, as we’ve seen with the US tightening the screws on semiconductor exports, there’s a real risk that this level of demand from China isn’t sustainable.

Mark Dalli

Yeah, and that’s the big risk. The US is pushing for more restrictions on what ASML can sell to China, especially the advanced EUV systems. If those go into effect, it could really crimp future sales. And it’s not just about ASML’s top line—it’s about the whole global chip supply chain. If China can’t get the tools, it slows down their chip industry, which has knock-on effects everywhere.

Ray Marce

And then you’ve got the milestone shipment this quarter—the first High-NA EUV system, the EXE:5200B. That’s a big deal for 2nm chip production. The revenue from that hasn’t even been recognized yet, but strategically, it’s huge. Whoever gets those machines first—TSMC, Intel, Samsung—they’re going to have a real edge in next-gen chips.

Mark Dalli

Absolutely. High-NA EUV is the next leap. It’s what’s going to enable 2nm and beyond. And, you know, as we discussed in the NVIDIA episode, the race for AI hardware is all about getting to smaller, more efficient nodes. ASML is the bottleneck and the enabler at the same time. But, again, if geopolitics gets in the way, it could slow the whole industry down.

Ray Marce

It’s a bit of a double-edged sword, isn’t it? On one hand, you’ve got this incredible demand, but on the other, you’ve got governments playing chess with the supply chain. And ASML is right in the middle of it all. I mean, management was pretty clear—they can’t confirm growth in 2026 because of all these uncertainties. That’s not what investors wanted to hear.

Mark Dalli

No, and it’s why the stock got hammered despite the great quarter. The market hates uncertainty, and right now, there’s a lot of it—tariffs, export bans, even the risk of overcapacity in China if everyone rushes to build before the door closes. It’s a tricky spot for ASML, and for investors trying to look past the next quarter or two.

Ray Marce

Let’s dig into the margins and capital returns, because there’s a lot to unpack there. Gross margin at 53.7%—that’s a big jump, and it’s above guidance. Product mix and upgrades are helping, but R&D expenses are up 10% year-on-year, and share buybacks hit €1.4 billion this quarter. That’s a lot of cash going out the door.

Mark Dalli

Yeah, and it’s interesting. The higher R&D spend makes sense—they’ve got to keep pushing the technology forward, especially with High-NA EUV and whatever comes next. But the buybacks, €5.8 billion since 2022, that’s a real commitment to returning capital. And don’t forget the interim dividend, €1.52 per share. They’re rewarding shareholders, but they’re also investing heavily in the future.

Ray Marce

But despite all that operational strength, the market’s not happy. Shares dropped over 10% after the call. And it’s all about the outlook, isn’t it? Management narrowed 2025 guidance, but for 2026, they basically said, “We don’t know.” No firm guidance, and the CFO even said they’d need to double the order pace to hit the old targets. That’s a tough pill for investors to swallow.

Mark Dalli

Yeah, and it’s a bit of a pattern, right? We’ve seen it with other companies this earnings season—great results, but if there’s any hint of caution about the future, the market punishes them. Investors want certainty, and right now, with tariffs, inflation, and all the geopolitical stuff, there just isn’t any. But, long-term, ASML is still targeting €50 billion in sales by 2030. The demand for chips isn’t going away, it’s just going to be a bumpier ride than people hoped.

Ray Marce

Yeah, and I think that’s the key takeaway. Operationally, ASML is firing on all cylinders, but the external risks are real. For investors, it’s about balancing that long-term opportunity with the short-term volatility. We’ll keep tracking it, and as always, we’ll be back with more updates as the story unfolds. Mark, thanks for the insights as always. Make sure to follow us in order to stay informed for your weekly market updates and earnings reports.

Mark Dalli

Cheers, Ray. And thanks to all our listeners, remember The information provided on this podcast is for informational purposes only and should not be considered financial advice. You should consult with a qualified financial advisor before making any investment decisions. We look forward to seeing you next time on Market & Earnings Digest.