ASML Holding N.V. (NASDAQ: ASML)

ASML’s Q2 2025 financial performance demonstrated the company’s exceptional execution and strong market position. Total net sales increased 23% year-over-year to €7.69 billion, significantly outpacing the prior year’s €6.24 billion. This growth was driven by both higher system sales and robust service revenue, despite shipping fewer lithography systems.

Net system sales increased 18% to €5.60 billion, primarily due to higher average selling prices and a favorable product mix. The company’s ability to command premium pricing reflects the critical nature of its lithography systems in advanced semiconductor manufacturing and the limited competitive alternatives in the EUV segment.

Service and field option sales surged 41% to €2.10 billion, representing the highest growth rate among revenue segments. This growth reflects the expanding installed base of systems requiring maintenance and upgrades, as well as ASML’s strategic focus on growing its high-margin service business.

Gross profit expanded significantly to €4.13 billion from €3.21 billion in the prior year, with gross margin improving 220 basis points to 53.7%. This margin expansion reflects operational leverage, favorable product mix, and the company’s ability to optimize manufacturing costs despite supply chain challenges.

Operating income increased 45% to €2.66 billion, with operating margin expanding dramatically by 520 basis points to 34.6%. This improvement demonstrates ASML’s operational efficiency and the scalability of its business model, as revenue growth significantly outpaced operating expense increases.

Net income surged 45% to €2.29 billion, translating to diluted earnings per share of €5.90, up 47% from €4.01 in the prior year. The strong earnings growth reflects both operational improvements and effective tax management, with the effective tax rate remaining stable at 18.1%.

ASML’s operational metrics in Q2 2025 reveal a strategic shift toward higher-value products and improved operational efficiency. Lithography systems sold decreased to 76 units from 100 units in Q2 2024, representing a 24% decline. However, this reduction was more than offset by significantly higher average selling prices, indicating a favorable product mix shift toward more advanced, higher-margin systems.

Net bookings remained stable at €5.54 billion, down marginally from €5.57 billion in the prior year. This stability reflects consistent customer demand and ASML’s strong order backlog, providing visibility into future revenue streams. The company’s ability to maintain booking levels despite broader semiconductor industry volatility demonstrates the essential nature of its products.

The workforce expanded strategically with payroll employees increasing 4% to 43,193 FTEs, reflecting ASML’s continued investment in R&D capabilities and manufacturing capacity. Simultaneously, temporary employees decreased 45% to 870, suggesting improved operational efficiency and workforce optimization.

The reduction in unit shipments while maintaining revenue growth highlights ASML’s pricing power and the premium nature of its advanced lithography systems. This trend is particularly evident in the EUV segment, where systems command significantly higher prices due to their critical role in advanced node manufacturing.

Research and development costs increased 6% to €1.17 billion, representing 15.2% of net sales. This continued investment in R&D underscores ASML’s commitment to maintaining its technological leadership and developing next-generation lithography solutions to support future semiconductor nodes.

ASML’s six-month performance for 2025 demonstrates accelerating momentum across all key metrics. Net sales increased 34% to €15.43 billion, significantly outpacing the 23% growth rate in Q2 alone, indicating strengthening demand throughout the first half of the year.

Net income surged 66% to €4.65 billion, reflecting both revenue growth and substantial margin expansion. The company’s ability to nearly double its profitability demonstrates exceptional operational leverage and effective cost management.

Gross margin expanded 260 basis points to 53.8%, while operating margin improved dramatically by 700 basis points to 35.0%. This margin expansion reflects the company’s pricing power, operational efficiency improvements, and favorable product mix.

Basic earnings per share increased 67% to €11.90, indicating strong value creation for shareholders. The combination of higher profitability and ongoing share repurchases has contributed to this significant increase in per-share earnings.

The six-month results position ASML for continued strong performance in the second half of 2025, with the company benefiting from a robust order backlog and continued investment in advanced semiconductor technologies by its customers.

ASML maintains a strong balance sheet that provides significant financial flexibility for strategic investments and capital allocation. Total assets decreased to €44.85 billion from €48.59 billion at December 31, 2024, primarily due to reduced cash balances following substantial share repurchases and dividend payments.

Cash and cash equivalents decreased to €7.24 billion from €12.74 billion at year-end 2024, reflecting the company’s aggressive capital return strategy. Despite this reduction, ASML maintains ample liquidity to support operations and strategic initiatives.

Shareholders’ equity totaled €17.62 billion, representing 39.3% of total assets, up from 38.0% at year-end 2024. This improvement in the equity ratio reflects strong earnings generation and effective balance sheet management.

Working capital dynamics remained healthy with accounts receivable increasing to €5.00 billion from €4.48 billion, reflecting higher sales volumes. Inventories increased to €11.58 billion from €10.89 billion, indicating preparation for future deliveries and the complex, long-cycle nature of lithography system manufacturing.

Operating cash flow generation remained strong at €747.7 million in Q2 2025, though lower than the prior year’s €923.4 million due to working capital investments. The company’s ability to generate substantial cash flows supports its capital allocation strategy and long-term growth investments.

ASML returned significant capital to shareholders through dividends and share repurchases, totaling €2.20 billion in Q2 2025. The company paid dividends of €714.4 million and repurchased €1.49 billion in shares, demonstrating its commitment to returning excess cash to shareholders.

ASML’s exceptional Q2 2025 performance reinforces its dominant position in the lithography equipment market and critical role in enabling advanced semiconductor manufacturing. The company’s unique position as the sole supplier of EUV lithography systems provides significant competitive advantages and pricing power.

Key Market Drivers

• AI and Advanced Computing: Continued demand for advanced semiconductors driven by artificial intelligence, high-performance computing, and data center requirements
• Technology Node Advancement: Ongoing migration to smaller process nodes (3nm, 2nm, and beyond) requiring ASML’s most advanced EUV systems
• Geographic Expansion: Growing semiconductor manufacturing capacity in multiple regions driving demand for lithography equipment
• Service Revenue Growth: Expanding installed base requiring maintenance, upgrades, and spare parts support

The company’s strong performance in the face of broader semiconductor industry volatility demonstrates the resilience of its business model. ASML’s systems are essential for advanced node production, creating relatively inelastic demand compared to other semiconductor equipment categories.

Looking ahead, ASML is well-positioned to benefit from long-term secular trends in semiconductor demand, particularly as AI and advanced computing applications drive requirements for cutting-edge chip manufacturing capabilities. The company’s continued investment in R&D and next-generation lithography technologies ensures its technological leadership will be maintained.

The stable booking levels and strong backlog provide visibility into future revenue streams, supporting continued strong financial performance. ASML’s ability to maintain pricing power while expanding margins demonstrates the value proposition of its advanced lithography solutions.