ASML's Bookings Explosion: A Wake-Up Call for the Entire Semi Equipment Sector
Global lithography leader $ASML Holding NV(ASML)$
Three Things to Watch
Net Bookings Explode: The Memory Sector Begins an Epic Expansion Wave
ASML delivered a blowout number for Q4 net bookings at €13.16 billion. This represents an 86% year-over-year increase and a staggering 144% quarter-over-quarter jump, obliterating the market consensus of just €6.795 billion. Specifically, EUV bookings came in at €7.4 billion, up 147% year-over-year. The total backlog at the end of the quarter stands at €38.8 billion, far exceeding the consensus of €32.8 billion, with EUV comprising €25.5 billion.
Deconstructing the bookings mix reveals the primary driver. Memory accounted for 56%, a 17 percentage point increase year-over-year, while Logic accounted for 44%. In absolute terms, the memory expansion cycle has officially kicked off. Memory net bookings for the quarter hit €7.34 billion, a massive 167% year-over-year increase and a multi-year high.
On the earnings call, management reiterated that the 2026 Logic market will continue to grow due to explosive AI demand. Meanwhile, the Memory market is being powerfully driven by the HBM and DDR5 cycle.
Mainland China Revenue Mix Surges Unexpectedly, Expected to Normalize to 20% by 2026
Despite the embargo on high-end EUV systems to Mainland China, demand for ASML's DUV immersion systems from the region has seen a blowout surge in recent years. Revenue contribution from Mainland China peaked at 49% in Q2 and Q3 of 2024, far above the historical average of 10-20%, before beginning to decline as export controls tightened.
While Mainland China revenue came in at €2.62 billion this quarter (+42% YoY), representing a still-high 36% of total revenue, management expects this mix to normalize to approximately 20% in 2026.
€12 Billion Buyback Announced, But No Hike to 2030 Targets
Management provided Q1 2026 revenue guidance of €8.2–€8.9 billion (+6% to +15% YoY), with Installed Base revenue at €2.4 billion and a Gross Margin of 51%-53%. Based on the midpoint of the revenue guide, implied net income is €2.45 billion (+4% YoY).
For the full year 2026, ASML is targeting revenue of €34–€39 billion (+4% to +19% YoY) with a Gross Margin of 51%-53%. Management expects significant growth in the EUV business while the non-EUV business remains flat, although demand for metrology and inspection equipment remains quite strong.
However, management did not raise their long-term guidance. They maintained the 2030 revenue target of €44–€60 billion with a Gross Margin of 56%-60%. At the midpoint of these targets, the implied revenue CAGR from 2025 to 2030 is less than 10%, with a net income CAGR of just 6%.
Q4 Key Financial Highlights
– Revenue: €9.72 billion (+5% YoY), beating the market consensus of €9.56 billion and landing at the upper end of the prior guidance range (€9.2–€9.8 billion).
– Gross Margin: 52.2% (+0.5pp YoY), beating the market consensus of 51.9% and landing at the upper end of the prior guidance range (51%-53%).
– Net Income: €2.84 billion (+5% YoY), slightly missing the market consensus of €2.91 billion but perfectly in line with the midpoint of ASML’s own guidance.
Q4 Revenue Breakdown by Platform
– Net System Sales: Revenue was €7.58 billion (+6% YoY), primarily driven by lithography and metrology. Lithography systems contributed €7.28 billion (+7% YoY), while other metrology equipment contributed approx. €300 million (+7% YoY).
– Net Service and Field Options: Revenue was €2.13 billion, a slight decline of 1% YoY.
Drilling down into the lithography business: ASML shipped 102 units this quarter, a 23% YoY volume decrease.
– EUV Systems: Revenue of €3.64 billion (+22% YoY), accounting for 48% of sales, beating the market consensus of €3.08 billion.
– ArFi (Immersion) Systems: Revenue of €3.03 billion (+4% YoY), accounting for 40% of sales.
Summary
Due to its unique position in the supply chain, ASML's recent growth had been constrained by weakness among memory customers. It relied heavily on the mature node expansion in Mainland China and $Taiwan Semiconductor Manufacturing(TSM)$
While the forward guidance implies moderate growth rates, the massive beat on Net Bookings has successfully alleviated market fears regarding short-term growth. This beat was fueled by the undeniable Memory capacity expansion wave. Moving forward, the market's focus will likely broaden to investment opportunities across the wider semiconductor equipment sector.
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