ASML designs, manufactures and services lithography systems for semiconductors, along with metrology and inspection systems and computational lithography software, selling to Logic and Memory chipmakers. Revenue arrives two ways: system sales under "volume purchase agreements" running up to five years, with down payments collected before delivery, and recurring revenue from service, upgrades and options on the installed base. The filing reports a single operating segment, since ASML presents itself as a "holistic lithography solution provider".
The business in one page
Sales were €32,667.3 million, up 15.6%. Systems are 74.9% of that and service and field options 25.1%, against 20.4% in FY2023. EUV, NXE plus EXE, generated €11,602.7 million, or 35.5% of sales. Unit volumes fell from 583 to 535 while system sales grew 12.4%: the mix moved to EUV, whose units went from 44 to 48. By region Taiwan grew 91.5% and China fell 6.6%, to 29.1% of sales from 36.1%. Employees at year end: 44,209 full-time equivalents.
Five items have no counterpart in the comparative columns: an 11.1% fully diluted stake in Mistral AI for €1,302.2 million; €691.7 million of commercial paper outstanding under the ECP programme against nil a year earlier; a May 2025 restatement of the framework agreement with Carl Zeiss SMT introducing interest-free loans; a change of auditor, with PwC replacing KPMG; and the adoption of ASU 2023-09 on income tax disclosures.
What we think matters
- Return on capital of 85%
- Cash conversion above reported earnings
- Operating leverage worked in 2025
- One supplier, and no alternative named
- Four customers, 61% of sales
- China at 29% of sales, under live export controls
How ASML Holding N.V. makes money
Competitive advantage
In EUV lithography the filing names no competitor. For DUV it states "We compete primarily with Canon and Nikon in respect of DUV systems"; in patterning support the named rivals are Applied Materials and KLA-Tencor.
EUV, NXE plus EXE, was €11,602.7 million of sales in 2025, 35.5% of the total.
The advantage is shared with one supplier. Carl Zeiss SMT is the sole source of optics and ASML its sole customer for optical columns; the filing calls the relationship "two companies, one business", and lists the exclusivity among the risks.
The installed base turns into annuity revenue: service and field options went from 20.4% of sales in FY2023 to 25.1% in FY2025, with remaining performance obligations of €46.5 billion.
Pricing power
No price lists or revisions are published, so average prices have to be derived from Note 2: EXE €289.2 million per system, NXE €237.4 million, ArF immersion €78.7 million, KrF €12.8 million.
The average NXE price rose 26.9%. The filing neither explains the move nor separates price from mix: it attributes the gross margin gain to a "favorable NXE product mix", and the CFO cites strong sales of the NXE:3800E.
The same CFO notes that upgrades on the installed base shifted "a substantial portion of EUV system revenue" into service revenue, which other things equal lowers the average system price. ArF immersion rose 5.0%; KrF fell 2.0%, consistent with the "price-based competition" the filing flags for DUV.
Gross margin rose in both lines, systems from 52.2% to 53.5% and service from 48.2% to 50.9%, while the filing itself flags EXE systems as dilutive to margin.
Transparency of growth
Acquisitions of subsidiaries were nil in FY2025 and FY2024 and €33.6 million in FY2023, and goodwill is unchanged at €4,588.6 million: the 15.6% growth is organic in terms of scope. The Mistral AI stake is a minority investment carried at cost and contributes no sales.
The currency effect on sales is not quantified, so constant-currency growth cannot be isolated.
Growth is uneven. Total units fell from 583 to 535 while system sales grew 12.4%, because EUV units rose from 44 to 48. Taiwan grew 91.5% and China fell 6.6%.
Scalability
In FY2025 every cost line grew more slowly than sales, and operating margin rose from 31.9% to 34.6%. Sales per average payroll employee rose 11.4%, from €677.8 thousand to €755.0 thousand.
FY2024 is the counter-example: sales up 2.6%, personnel expenses up 13.0%, operating margin down from 32.8% to 31.9%.
The filing acknowledges the asymmetry, conceding that after strong headcount growth costs would be hard to adjust in time in a downturn. The January 2026 reduction of around 1,700 positions is the first adjustment.
Catalysts identified in the filing
- 2026 guidance of €34 billion to €39 billion
The range implies sales growth between 4.1% and 19.4%, with gross margin guided to 51-53%. The filing adds that the outlook "has strengthened significantly in the final months of 2025".
- A contracted order book of €46.5 billion
Remaining performance obligations are €46.5 billion, 65% of it expected within twelve months, about €30.2 billion. The CEO separately cites a backlog of €38.8 billion; the filing does not reconcile the two.
- EUV High NA moving from pilot to volume
Recognised EXE systems rose from 2 to 4 and the related sales from €465.0 million to €1,156.9 million. Guidance calls for EUV revenue "significantly higher" in 2026, driven by advanced Logic and DRAM ramps. The filing also flags that EXE systems are dilutive to gross margin today.
- Service revenue compounding on the installed base
Service and field options grew 26.2% in 2025 at a 50.9% gross margin, and the filing expects "another year of growth" in 2026 tied to the EUV base and productivity upgrades.
- A new €12 billion buyback
The programme announced on 28 January 2026 runs to 31 December 2028 and equals 3.38% of market capitalisation at the year-end price. The previous programme closed in December 2025 having used €7.6 billion of a €12.0 billion authorisation.
- The 2030 opportunity, confirmed unchanged
The filing restates a 2030 sales opportunity of roughly €44 billion to €60 billion with gross margin of 56-60%. Against 2025 that implies compound annual growth of 6.1% to 12.9%.
Financial analysis
Figures for 3 fiscal years, taken from the Key Metrics tables of each annual report. When a later filing restates a figure, we use the figure reported for that year's own filing.
Key metrics
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Revenue | €27.6B | €28.3B | €32.7B |
| Gross margin | 51.3% | 51.3% | 52.8% |
| Operating margin | 32.8% | 31.9% | 34.6% |
| Net margin (GAAP) | 28.4% | 26.8% | 29.4% |
| Operating cash flow | €5.44B | €11.2B | €12.7B |
| Capex | €2.20B | €2.08B | €1.63B |
| Free cash flow | €3.25B | €9.08B | €11.0B |
| Stock-based compensation | €0.13B | €0.17B | €0.20B |
| Dividends + buybacks | €3.35B | €2.95B | €8.50B |
| Net cash | – | €7.75B | €8.68B |
| Total debt | – | €4.99B | €4.64B |
| Shareholders’ equity | – | €18.5B | €19.6B |
| Effective tax rate | 15.8% | 18.6% | 17.7% |
| ROIC (equity + gross debt − liquidity) | – | 68.5% | 85.1% |
Key risks
The main weaknesses and risks identified in the latest annual report, in the order the report presents them.
- One supplier, and no alternative named
Carl Zeiss SMT is the sole source of optics, and the filing states that if Zeiss could not produce them for a prolonged period "we would effectively cease to be able to conduct our business". Purchases from the Zeiss group were €4,406.9 million in 2025 and the quantified maximum exposure to loss is €3,923.1 million, up as loans rose from €1,440.8 million to €1,907.5 million; loans granted from 2025 onward carry no interest.
- Four customers, 61% of sales
Four customers each exceeded 10% of sales, €20.0 billion together. The largest alone is €7,796.7 million, 23.9% of sales against 16.6% in 2024, and the two largest are 38.0%. The three largest represent 35.4% of accounts and finance receivables at year end.
- China at 29% of sales, under live export controls
The filing states that "deliveries to certain countries, such as China, have been increasingly impacted by export regulations". Licences are required for EUV and for certain DUV immersion systems, and US measures "have restricted, and may continue to restrict" supply. The CFO notes that DUV in China "turned out to be stronger than anticipated" in 2025 and offset weakness elsewhere, which makes the exposure load-bearing rather than incidental.
- The cycle has already bitten once
In FY2024 sales grew 2.6% while net income fell 3.4% and personnel expenses rose 13.0%. The filing concedes that after strong headcount growth "it would be difficult to adjust our costs adequately in a timely manner in the event of an industry downturn". After year end, on 28 January 2026, ASML announced a net reduction of around 1,700 positions. Inventories of €11,429.3 million cover about 271 days of cost of sales and purchase obligations are €12.7 billion.
- A tax rate that depends on one regime
The effective rate of 17.7% against a 25.8% Dutch statutory rate rests on the Innovation Box, worth 9.3 points of rate and €1,055.8 million in absolute terms. The agreement with the tax authorities runs from 2024 to 2028, and the filing warns that a change in these incentives "may have an adverse effect on our worldwide effective tax rate".
Open questions the filing does not answer
- What 2025 sales guidance was communicated a year earlier? The filing says "in line with expectations" without figures, so stated against achieved cannot be compared.
- How much of the 26.9% rise in the average NXE price is price, and how much is mix or the shift of EUV revenue towards upgrades? The filing separates neither.
- How do the €38.8 billion backlog cited by the CEO and the €46.5 billion of remaining performance obligations at 31 December 2025 reconcile? The filing does not bridge them.
- How large is the currency effect on sales? It is not quantified, so constant-currency growth cannot be isolated.
- How much capital expenditure is maintenance and how much is expansion? Without the split, owner earnings use total capex and remain an approximation.
- What return is expected on the €1.3 billion invested in Mistral AI? The filing gives only the strategic rationale, and the CFO sits on that company's Strategic Committee.
At €921.40 on 31 December 2025 and 385,417,665 shares, the market valued ASML at €355,124 million, 36.96 times 2025 earnings and 32.20 times free cash flow. The free cash flow yield is 3.11%, and 3.05% net of share-based compensation; the owner earnings yield is 2.54%. That price is 1.4% below the average price at which the company itself repurchased shares in December 2025, so the market and the issuer were valuing the shares alike at year end.
A starting yield near 3% on a cyclical business only works if earnings grow for many years. The filing's 2030 range of €44 billion to €60 billion of sales implies compound growth of 6.1% to 12.9% a year, and gross margins rising towards 56-60%: the price assumes delivery inside that range. The thesis rests on three conditions, each checkable in later filings: EUV, High NA included, stays the only technology for advanced nodes; export controls do not compress the China share further; and the Zeiss exclusivity keeps securing capacity without absorbing a growing share of ASML's cash.
Strengths
- Return on capital of 85%
NOPAT of €9,306.5 million on invested capital of €10,932.6 million gives 85.1%, against 68.5% in 2024. Part of that is the business and part is the funding model: customer down payments finance working capital, which keeps invested capital small. Excluding the Mistral and Zeiss stakes and the Zeiss loans, whose returns sit outside NOPAT, the figure would be 135.2%.
- Cash conversion above reported earnings
Free cash flow of €11,027.3 million is 114.8% of net income, after 120.0% in 2024 and 41.4% in 2023, a year drained by €1,564.6 million of contract assets and liabilities. Share-based compensation is €202.3 million, just 0.62% of sales and 2.11% of net income.
- Operating leverage worked in 2025
Sales grew 15.6% and operating income 25.3%, with every cost line growing more slowly than sales: cost of sales 11.9%, research and development 9.2%, selling and administrative 7.9%. Operating margin went from 31.9% to 34.6%, and sales per average payroll employee rose 11.4%.
- A technology position the filing names no competitor for
In EUV the filing names no competitor at all; in DUV it states "We compete primarily with Canon and Nikon". EUV was 35.5% of 2025 sales. The installed base turns into recurring revenue: service and field options grew 26.2% and are now 25.1% of sales, and remaining performance obligations stand at €46.5 billion against €43.3 billion a year earlier.
- Net cash and interest cover of 95 times
Liquidity of €13,321.9 million against gross debt of €4,642.3 million including leases leaves €8,679.6 million of net cash. Gross debt is 0.38 times EBITDA, net debt is negative at 0.70 times, and operating income covers interest expense 95.5 times.
Last year’s watch-list, checked against this filing
| What we flagged | What happened | Result |
|---|---|---|
| 2025 EBIT margin, the short-term incentive target set at the start of the year (threshold 28.0%, stretch 33.0%) | 34.6% achieved | ABOVE STRETCH - 4.1 points above the 30.5% target |
| Short-term incentive sub-target, EUV 0.55 NA insertion | Pay-out 0.0%; the filing does not explain why | MISSED |
| Short-term incentive sub-target, adoption of multibeam | Pay-out 75.0% | BELOW TARGET |
| Normalised cash conversion rate 2023-2025, long-term incentive target 90.0% | 92.0% achieved | MET - 2.0 points above |
| 2022-2025 buyback programme, up to €12.0 billion | €7.6 billion executed at completion in December 2025 | PARTLY EXECUTED - 63.3% of the authorisation |
| Commitment to a "sustainable dividend per share that will grow over time" | €6.10 for 2023, €6.40 for 2024, €7.50 for 2025 | DELIVERED - up 4.9% then 17.2% |
| 2021 loan facility to Carl Zeiss SMT, up to €1.0 billion | €87.6 million left undrawn and cancelled | NOT FULLY USED |
What to watch in the next filing
- Quarterly gross margin. Below 51%, the bottom of the 2026 guidance, the pricing power thesis would need revisiting.
- China's share of sales. Back above 35% would raise regulatory exposure; a fall below 20% within a single year would signal new restrictions.
- Contract liabilities. A fall below €15 billion, from €19,372.6 million at end-2025, would show down payments slowing and therefore weaker future demand.
- Free cash flow against net income. Below 80% on an annual basis would point to working capital absorption incompatible with the current yield.
- The largest customer's share. Above 30% of sales, from 23.9% in 2025, would make concentration the dominant risk.
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