ASML rakes in €2.4bn profit but warns tariffs could shake €35bn revenue target

ASML delivers strong Q1 2025 earnings as AI demand sustains chip sector momentum

ASML Holding NV reported a solid start to 2025 with first-quarter net income reaching €2.4 billion and total net sales of €7.7 billion, as strong demand for advanced semiconductor lithography equipment continued to shape its financial performance. Gross margin for the quarter stood at 54%, driven by a favourable product mix and performance-linked incentives. The company confirmed its full-year guidance for net sales between €30 billion and €35 billion, but flagged rising uncertainty linked to evolving global tariff regimes that could affect the broader semiconductor ecosystem.

What drove ASML’s Q1 2025 financial performance?

The first quarter of 2025 reflected consistent strength in ASML’s core operations. Net system sales contributed €5.7 billion, while Installed Base Management, comprising service and field upgrades, added €2 billion to revenue. The net income of €2.4 billion represented 30.4% of total net sales, with earnings per share recorded at €6.00. Compared to the previous quarter, total sales decreased from €9.26 billion, primarily due to fewer lithography systems sold—77 in Q1 versus 132 in Q4 2024.

Gross margin improvements were attributed to a higher average selling price for EUV tools, particularly due to an increased share of NXE:3800 systems versus earlier models, and a richer configuration mix. CEO Christophe Fouquet highlighted that the company also benefited from achieving specific customer-related performance milestones during the quarter, further enhancing profitability.

How did markets react to ASML’s Q1 earnings?

Despite the better-than-expected margin performance, ASML’s stock (NASDAQ: ASML) declined sharply by approximately 7% following the earnings release on April 16, 2025. The selloff was largely triggered by weaker-than-expected net bookings, which came in at €3.9 billion, falling short of market expectations. Investors also appeared wary of the broader macroeconomic implications of recently announced U.S. tariffs on semiconductor equipment and related goods, which added a layer of uncertainty to ASML’s forward-looking guidance.

Sentiment around the stock has turned cautious, with analysts pointing to the company’s dependency on international trade flows and export licenses. ASML’s global supply chain and customer base leave it particularly exposed to geopolitical tensions. While long-term fundamentals remain intact due to its technological leadership in EUV and High NA lithography, current sentiment leans neutral to negative in the short term. Analysts are generally maintaining a hold position, awaiting more clarity on tariff enforcement and second-quarter bookings.

How is ASML navigating the AI-driven semiconductor expansion?

ASML’s leadership emphasised that artificial intelligence remains the dominant force behind growth in the semiconductor sector. During the earnings call, Christophe Fouquet reiterated that the ramp-up in advanced logic nodes, particularly around the 2-nanometre process, continues to drive demand across logic segments. The memory segment is also showing signs of stabilisation, with customer activity suggesting a repeat of last year’s performance levels.

ASML expects lithography intensity to increase further, especially in DRAM manufacturing, as customers shift toward single-exposure EUV lithography. The company’s NXE:3800 platform has emerged as the preferred tool for Low NA applications, contributing to margin strength and reduced cycle time for clients. Meanwhile, High NA technology is being increasingly adopted by major customers, with Intel and Samsung both reporting operational efficiencies and simplification of process steps through these systems.

What is the revenue outlook for 2025?

Despite near-term fluctuations, ASML has reiterated its guidance for full-year 2025 revenue to fall between €30 billion and €35 billion, with a gross margin expectation in the range of 51% to 53%. The company anticipates second-quarter sales to range from €7.2 billion to €7.7 billion, with Installed Base Management revenue remaining around €2 billion. Research and development expenses are projected at approximately €1.2 billion, while selling, general and administrative costs are estimated to be around €300 million.

However, CFO Roger Dassen acknowledged that Q2 2025 gross margin forecasts reflect a wider-than-usual bandwidth due to uncertainty stemming from new U.S. trade policies. These include potential tariffs on complete system shipments, field operation components, imported manufacturing parts, and the possibility of reciprocal tariffs from other countries. While the direct impact on ASML’s financials remains difficult to quantify, the company is working closely with partners to mitigate potential disruptions across the supply chain.

How is ASML responding to geopolitical risk and tariff uncertainty?

Tariff-related concerns dominated the macro-outlook commentary, with executives describing the situation as “dynamic” and difficult to assess with precision. The company outlined four categories of tariff impact: whole-system exports, parts and field tools, imported inputs for US operations, and retaliatory tariffs from other countries. These risks could indirectly suppress global GDP and semiconductor capital expenditure, making visibility into the second half of the year more challenging.

Roger Dassen explained that ASML is actively collaborating across the ecosystem to reduce any negative financial effects. While the first quarter benefited from product mix and milestone incentives, the second half could face margin dilution from increased High NA tool deliveries and reduced upgrade revenue.

What are ASML’s latest developments in High NA and lithography systems?

Technological progress continued during the quarter. The company confirmed that all EXE:5000 High NA systems planned for initial rollout have now been shipped. Three customers currently have these tools installed or under installation. ASML expects to gather more usage data and insights in the coming months.

Customer feedback at the SPIE conference in February 2025 revealed practical use cases and benefits of High NA. Intel reported having processed over 30,000 wafers using the tool and highlighted a significant reduction in process steps for certain layers—from 40 to 10. Samsung similarly indicated that High NA could cut cycle times by as much as 60%, underscoring its potential for simplifying semiconductor manufacturing.

ASML believes this evolution towards EUV and High NA platforms aligns closely with industry trends favouring advanced nodes, particularly for applications tied to artificial intelligence, high-performance computing, and next-generation mobile technologies.

How is ASML managing shareholder returns amid macroeconomic volatility?

ASML continues to maintain a disciplined capital return strategy. In the first quarter, the company repurchased approximately €2.7 billion worth of shares under its ongoing 2022–2025 buyback programme. It also announced a proposed final dividend of €1.84 per share for 2024, bringing the total dividend for the year to €6.40 per ordinary share—a 4.9% increase compared to 2023.

With robust free cash flow generation in previous quarters, ASML retains sufficient liquidity despite Q1 2025 recording a negative free cash flow of €475 million, primarily due to cash used in financing activities and property-related investments. As of the end of the quarter, ASML held €9.1 billion in cash and short-term investments.

What lies ahead for ASML and the semiconductor market?

Looking beyond 2025, ASML reiterated its long-term ambition to capitalise on a semiconductor market projected to exceed $1 trillion by 2030. The firm sees a pathway toward annual revenues between €44 billion and €60 billion by the end of the decade, underpinned by anticipated growth in lithography intensity, advanced node adoption, and ecosystem-wide collaboration on technology development.

Executives confirmed that customer engagement suggests both 2025 and 2026 will be growth years, despite the unknowns tied to macroeconomic conditions and evolving trade policy. The ongoing shift towards 2nm logic, expanded EUV deployment, and the maturation of High NA systems are expected to be central to the company’s roadmap in the medium term.

In sum, while ASML’s Q1 performance reaffirmed the company’s strategic alignment with AI-driven semiconductor trends, investor sentiment remains cautious due to near-term booking softness and trade policy risk. Analysts broadly maintain a hold recommendation on the stock, pending clearer visibility into second-half order flow and macroeconomic developments.