Taiwan Semiconductor Q1 beats expectations across the board! Net profit hits record high
阿斯麥2026Q1業績直播
Key Takeaways (AI-Generated)
Financial Performance
- Q1 2026 total net sales of €8.8 billion, within guidance range
- Net system sales of €6.3 billion with €4.1 billion from EUV systems
- Gross margin at 53%, high end of guidance driven by installed base business
- Net income of €2.8 billion (31.4% of sales), earnings per share €7.15
Business Highlights
- High NA platform processed over 500,000 wafers with 80% availability
- Productivity improvements: NXE 3800 E upgraded to 230 wafers/hour, F systems to 260
- High NA reduces process steps by factor of 10 for critical layers
- Expanding low NA EUV capacity to at least 80 systems for 2027
Financial Guidance
- Q2 2026 total net sales expected between €8.4-9.0 billion
- Q2 gross margin expected 51-52%, installed base sales around €2.5 billion
- Updated full year 2026 revenue guidance to €36-40 billion (narrowed and increased)
- Maintaining 2026 gross margin guidance of 51-53%, revenue weighted to second half
Opportunities
- AI-related infrastructure investment driving unprecedented demand for advanced logic and memory chips
- High NA EUV technology enabling single exposures to replace complex multi-patterning processes
- Productivity upgrades providing immediate capacity increases to customers through installed base improvements
- Strong customer adoption of EUV in DRAM applications creating market expansion opportunities
Full Transcript (AI-Generated)
Operator
Good day and thank you for standing by. Welcome to the ASML 2026 First Quarter Financial Results Conference Call on April 15th, 2026. At this time, all participants are in a listen only mode. After the speaker's introduction, there'll be a question and answer session. To ask a question during the session, you will need to press *1 and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *1 and one again. Please be advised that today's conference is being recorded.
I would now like to turn the conference call over to Mr. Jim Kavanaugh. Please go ahead.
Jim Kavanaugh
Thank you, operator. Welcome, everyone. This is Jim Kavanaugh, Head of Investor Relations at ASML. Joining me today on the call are ASML CEO, Christophe Bouquet and our CFO, Roger Dassel. Today, the subject of today's call is ASML's 2026 first quarter results. The length of the call will be 60 minutes and questions will be taken in the order in which they are received.
This call is also being broadcast live over the Internet at www.asml.com. A transcript of management's opening remarks and replay of the call will be available on our website shortly following the conclusion of this call. Before we begin, I would like to caution listeners that comments made by management during this conference call would include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve material risks and uncertainties.
For a discussion of risk factors, I encourage you to review the Safe Harbor statement contained in today's press release and the presentation found on our website at www.asml.com and in ASML's annual report on Form 20F and other documents as filed with the Securities and Exchange Commission. With that, I'd like to turn the call over to Christopher Bouquet for a brief introduction.
Christophe Bouquet
Thank you, Jim. Welcome, everyone, and thank you for joining us for our first quarter 2026 results conference call. Before we begin the Q&A session, Roger and I would like to provide an overview and some commentaries on the first quarter 2026 results as well as provide some additional comments on the current business environment and on our future business outlook.
Roger Dassel
Thank you, Christophe, and welcome, everyone. I will first review the first quarter 2026 financial accomplishments and then provide guidance on the second quarter of 2026. Let me start with our first quarter accomplishments. In the first quarter of 2026, total net sales were €8.8 billion, which is within our guidance. Net system sales were €6.3 billion, which includes over €4.1 billion from EUV system sales, including sales from 2 high NA systems and over €2.1 billion from non EUV system sales.
Net system sales were almost equally split between logic at 49% and memory at 51%. Installed base management sales for the quarter came in at €2.5 billion, slightly above our guidance. Gross margin for the quarter was at the high end of our guidance at 53%, primarily due to the contribution of very high margin components within our installed base business. On operating expenses, we came in as guidance. R&D expenses were around €1.2 billion and SG&A expenses came in at €0.3 billion.
Effective tax rate for Q1 was 17.1%. For the full year 2026, the expected annualized effective tax rate is around 17%. Net income in Q1 was €2.8 billion, representing 31.4% of total net sales and resulting in earnings per share of 7.15 euros. Turning to the balance sheet, we ended the first quarter with Cash, Cash equivalents and short term investments at a level of €8.4 billion. Our Q1 free cash flow was negative €2.6 billion, largely driven by the timing of down payments.
With that, I would like to turn to our expectations for the second quarter of 2026. We expect Q2 total net sales to be between €8.4 billion and €9 billion. We expect our Q2 installed base management sales to be around €2.5 billion. Gross margin for Q2 is expected to be between 51 and 52%. The expected R&D expenses for Q2 are around €1.2 billion and SG&A is expected to be around €0.3 billion.
Moving to our cash return to our shareholders. In Q1, ASML paid the third interim dividend 2025 of 1.60 euro per ordinary share. We intend to declare total dividend for the year 2025 of €7.50 per ordinary share, which is a 17% increase compared to 2024. Recognizing the three interim dividends of 1.60 euro per ordinary share paid in 25 and 26, this leads to a final dividend proposal to the annual General Meeting of €2.70 per ordinary share. In Q1 2026, we purchased shares for total amount of around €1.1 billion.
And with that, I would like to turn the call back over to Christophe.
Christophe Bouquet
Thank you, Roger. As Roger highlighted, we finished the first quarter with good financial results. Looking ahead with respect to the market, the growth outlook for the semiconductor industry continues to solidify driven primarily by AI related infrastructure investment. These investments are increasing demand for advanced logic and memory chips in many areas and for the foreseeable future demand will continue to outpace supply.
This creates constraints across end markets from AI to mobile and PCs, which is driving our customers to aggressively add capacity. In the memory business, many customers have said that they are sold out for the remaining of the year and that they expect the supply limitation to persist beyond 2026 despite their plans to add significant capacity. In the logic business, our customers are adding capacity across multiple advanced nodes to support demand while continuing to ramp the two nanometer node in support of next generation HPC and mobile application.
We also expect supply limitation across those advanced nodes beyond 2026. Both our memory and logic customers are responding to this unprecedented demand by increasing capital expenditures and accelerating capacity expansion plans this year and beyond. Those investments are supported by long term agreement with their own customers. In addition to expanding capacity, both advanced DRAM and logic customers continue to further adopt EUV and immersion DUV on new process nodes, which further increases their demand for lithography as a result.
ASML's order intake continues to be very strong and we stay closely aligned with our customers to support their needs. At the same time, we offer customers productivity upgrades for their installed base to increase their short term output requirements. Turning to our capacity expansion plan for 2026, we are executing on an output plan of at least 60 low NA EUV systems and despite a slow start as discussed last quarter, driving output of our immersion systems close to that in 2025.
Based on these developments in demand and order intake, we are quarter by quarter increasing the move rates for our EUV products, raising low NA EUV capacity to at least 80 systems next year and scaling deep UV and immersion products in alignment. We continue to see a strong year ahead and expect ASML to grow in 2026. We are therefore updating our 2026 guidance both narrowing and increasing the expected revenue range to between €36 billion and €40 billion, while maintaining our expectation of a gross margin between 51% and 53% with revenue weighted to the second-half of the year.
As we said last quarter, EUV revenue is expected to rise significantly this year, driven by the dynamics in advanced logic and DRAM markets mentioned earlier. For non EUV revenue, we previously expected this to be similar to last year, but given continuing demand momentum, we now expect growth as a result of customers adding more deep UV lithography to support their expansion plans. We also expect installed base management revenue to grow significantly this year, driven by service revenue from our expanding EUV installed base and customer demand for performance upgrades to support their increasing capacity requirements.
We expect that the bandwidth in our 2026 guidance accommodates potential outcomes of ongoing discussions around export control. Turning to technology, we continue to make very good progress on this front with several milestones we highlighted at the SPIE advanced Lithography and patterning conference this February in San Jose. At the conference, we presented an updated low NA EUV productivity road map that reflects improvement to both our short term and long term plans for these products.
This includes the ability to reach at least 330 wafers per hour on low NA EUV at the start of the next decade, enabled in large part by our continued source power improvement as evidenced by our recent 1000 Watt source demonstration. In the short term, all NXE 3800 E systems can benefit from an upgrade that provides an increase of 10 wafers per hour with 230 wafers per hour available immediately to all customers. For NXE 3800 F systems, we have raised the wafers per hour specification from 250 wafers to 260 wafers per hour.
We plan to start shipping that system in 2027 with full volume slated for 2028. We also shared that the high NA platform has now processed over half a million wafers and achieved over 80% availability. Also at the conference, we saw customers presenting several strong papers highlighting their progress with high NA. These presentations demonstrated use cases in both logic and in DRAM in which a single high NA exposure can replace complex multi patterning processes that today require 3 or 4 low NA exposures.
For some critical layers, high NA can reduce the number of process steps by a factor of 10. The progress being made throughout the ecosystem, especially with resist, allow us to target line end pitches of 18 nanometer for logic and contact pitches below 28 nanometer for DRAM. This means that high NA can support single exposure for at least three nodes in logic and DRAM. We continue to work to further mature the platform alongside our customers as they start to test the technology on product wafers and move closer to bringing high NA into high volume manufacturing.
Looking more broadly, what we have seen over the past few months has further confirmed our view on the positive impact of AI on customer demand for our advanced products and especially for our EUV systems. In both advanced memory and logic, we see the end market dynamics supporting a shift in product mix towards more demand for our advanced lithography products and an increase in litho intensity. Our strong productivity road map on low NA in combination with the introduction of high NA support the cost of technology reduction for our customers.
In summary, demand remains strong for our entire product portfolio. With that, we will be happy to take your questions.
Jim Kavanaugh
Thank you, Roger, and thank you, Christophe. The operator will instruct you momentarily on the protocol for the Q&A session. Beforehand, I would like to ask you to kindly limit yourself to one question with 1 short follow up if necessary. This will allow us to get through as many callers as possible. Now operator, could we have your final instructions and then the first question please?
Operator
Thank you. As a reminder, to ask a question, you will need to press *1 and one on your telephone and wait for your name to be announced. To withdraw your question, please press *1 and one again. We'll now take the first question. And your first question today comes from the line of Joe Kotraki from Wells Fargo. Please go ahead.
Joe Kotraki
Yeah, thanks for taking the question. Maybe I just start with the updated 2026 revenue guide, you talked about taking up your immersion outlook and your DUV outlook. How much of that is coming from China versus non China and did the EUV outlook change at all?
Roger Dassel
Hi Joe, it's Roger. This is primarily non China when it comes to immersion, China remains at the midpoint around 20%. That's the expectation that we have for the China business. So that view has not changed. What has changed here is as we mentioned on the last call, we were looking at immersion and said, given the supply chain situation and immersion, we said we dealt whether we can get immersion to the level that we had last year.
We've been working extremely hard and right now we're at the point where we believe we can get immersion close to the levels that we had last year and that would primarily flow to the non Chinese customers. So that's where it's at. So that's a major driver of the uptick and also on EUV, we believe there is a bit more that can be done. So it's in that combination and as you can see from our achievements and also our expectation for the installed base business that one is strong as well.
So I would say it's actually a combination, but clearly immersion is an important part of the uptick of the guidance.
Joe Kotraki
That's helpful. And then just as a follow up on the gross margin, just the range not changing but clearly immersion increasing. I know that that's a bit higher gross margin. Just any puts and takes there of why the gross margin guide stays the same for 26?
Roger Dassel
Yeah, you're right. I mean for the entire year, the gross margin remains in spite of a bit more immersion. But it's also clear that we're increasing the move rate quite a bit. Of course, increasing the move rate means that you're hiring people, hiring people, training people. That also costs a bit of money. So every ramp you always have a little bit of cost before you have the benefit of that.
So that's the other side of the equation. So that's why we believe that the guidance range as we have it, taking into consideration all the puts and takes, we believe keeping it as we articulated a quarter ago is the right way to go.
Joe Kotraki
Thank you.
Roger Dassel
You're welcome.
Operator
Thank you. Your next question comes from the line of Krish Sankar from TD Cowan. Please go ahead.
Krish Sankar
Hi, thanks for taking my question. I have two of them. First one, Roger Christophe. I'm kind of curious, what is the visibility you're getting from your customers? Does that extend into 2028? And based on that, how to think about ASML's growth profile in 27 and 28 either qualitatively or quantitatively?
Christophe Bouquet
Well, I think 2028 is still quite far away. And I think a lot of the discussion we have with our customers today are still a bit about 2026. As we mentioned, we're still working hard even for 2026 with our customers to make sure we deliver what they need. And of course a lot of discussions are moving to 2027, which is also why we are also there working very hard to increase the capacity. But 2028 is a bit too far away, I think.
Krish Sankar
Is there a way to think about 27 at this moment, Christophe?
Christophe Bouquet
Well, I think we mentioned already that we are going our move rate every quarter. So I think we're still in a dynamic where we believe that we have to create more space for our customers. I think we've explained in the introduction that we are preparing to build at least 80 low NA EUV systems next year. So I think these are the signs if you need any that of course the discussions we have about 2027 are currently around making sure that we have enough capacity for our customers.
Krish Sankar
And that was a quick follow up. I think you mentioned how you are under shipping demand today. If you start looking at 27 and 80 unit capacity for low NA, are you meeting demand? Are you still under shipping demand at 80 units next year?
Christophe Bouquet
I think all those discussions and I think the numbers we share today are I will say the results of very close discussions with our customers. We talked about at least 80 because those discussions are still ongoing. I think you have seen of course the dynamics in the last couple of quarters. So I think we said that also last quarter. We were working every day very closely with our customers to make sure basically that we stay in line with what they need.
I think we have of course a very strong mission to meet their demands. So that's what those numbers reflect. I think that's the results of where our discussions are today.
Krish Sankar
Thank you, Christophe.
Christophe Bouquet
You're welcome.
Operator
Thank you. Your next question comes from the line of CJ Muse from Contour Fitzgerald. Please go ahead.
CJ Muse
Yeah, good morning, good afternoon. Thank you for taking the question. I guess first question going back to gross margins and if we isolate March versus June, March your revenue to high NA zero I think embedded in June. And so I get kind of the upgrades as a real positive for March, but I would have thought the higher low NA EUV and immersion would have led to higher gross margins. I understand you're adding headcount, but that still seems pretty severe. So wondering if there's anything else in that mix that's driving that change.
Roger Dassel
No, there's nothing in the mix really, CJ it really is down to the elements that you just referred to. So a few put and takes, but the primary ones being the very high margin elements in the upgrade business that we had in Q1. We're not counting on such a strong pattern in the upgrade business in Q2. So that's an important element. And then indeed, to the point that I made earlier on the increase in head counts that we're going through to prepare for the move rate.
So it's really those elements as a result of which we're now narrowing the bandwidth for this particular quarter to 51 and 52. Of course you would see that the second-half of the year that volume is more skewed towards the second-half of the year, right, if you look at our guidance. So it's also appropriate to see more of the benefits of the increase of the ramp that we're doing in the second-half of the year. As a result of that, we maintain the guidance for the full year at 51 to 53%.
CJ Muse
Perfect. Makes sense. And I guess as a follow up, Christophe to try to talk about the supply side, obviously under shipping demand today. Curious how you working internally at ASML outside of headcount, what kind of things are you doing to help drive productivity and extra supply and also with your supply chain, particularly around the optics and mirror fronts, what is necessary there. And if you are considering 80 plus EUV, what does that mean from an immersion unit perspective in 27? Thanks so much.
Christophe Bouquet
Yeah. So I think we're working on many fronts. I would say you mentioned the supply. And I think we have been mostly explaining the last few years that we were preparing the supply chain basically to be able to go to a capability of 90 low NA and to a capability of 600 for DUV, total DUV. And I think what we see in this ramp is that a lot of the preparation is paying off.
So I think that of course you always have challenges with the supply chain, but I will say so far our supply chain has been able to support our move rate increase quarter by quarter. That's include by the way Zeiss to name them. That's include the optics where I think we had major challenges a few years ago in the previous ramps. I think we are in a much better shape there. I think that's also true with what we have prepared in terms of capacity here in ASML.
So I'm talking about the space we need to build the tools, both EUV and DUV and this allows us Roger mentioned that to basically now add the people we will need to meet the move rate that is required. The other element I'd like to stress, we also talked a lot about the 3800 in the last few years as you have noticed that the mature tool is much is a much better place than it was a year ago, which also allows us to make great progress on cycle time in our factory.
And of course shorter cycle time give us opportunity for more tools. So we have many parameters that we drive I would say all at the same time very aggressively basically to get more output. That's true for EUV, that's true for DUV. 27 is a bit far for DUV so I think that the expectation, as I mentioned before, is that the number of DUV tools, the number of immersion tools, the demand there will scale pretty much with what we see on the EUV.
Roger Dassel
I think CJ it's also important to recognize CJ that and Christophe said it, we are working with customers to understand what the capacity requirements are that they have. And you're very much focusing on unit numbers. I would say there's a lot more that we're doing to give customers their productivity. First off, and Christophe said it, the maturity of the tool is going up, but also the productivity of the tool is going up, right.
So the fact that we're now looking at a tool from 220 to 230 wafers per hour. As you know in 2027, we're going to introduce the F model that gets you 260 wafers per hour. So you have the unit numbers that everyone is very much focused on. But then you should also look at the progress that we're making in terms of productivity. And if you take that into consideration, last year we had 44 tools.
If you're just looking at 80 tools, we say at least 80. But if you just look at 80 tools, those 80 tools give you double the wafer per hour capacity that we would have shipped in 2025. And on top of that, we're helping customers upgrade their own installed base. So as Christophe said, we're really working hand in glove with the customers to look at what is your capacity need, what's the easiest way and also the most economical way for you to get to the productivity that you need.
And we're executing on all fronts on availability, on productivity, on unit numbers capacity and on upgrading the installed base.
Christophe Bouquet
And the last point I would make because you make a very good point on those productivity upgrades which you heard in the introduction, we have accelerated. I think our customers are extremely happy with that because these allow them to get capacity right away. When you buy a new system, you have to wait a bit in this case. And I think this is reflected in the strength of the installed base sales. This is something we can provide immediately most of the time by the way with a software switch and some qualifications.
So I think Roger is right. I think in our case capacity is a lot more than one funny trick. And we feel quite blessed that we have all of this because we have many tools we can use to basically make sure we deliver what our customers need.
CJ Muse
Thank you.
Christophe Bouquet
You're welcome.
Operator
Thank you. Your next question comes from the line of Sandeep Deshpande from JP Morgan. Please go ahead.
Sandeep Deshpande
Yeah, hi. Thanks for letting me on the questions. My first question is regarding your DUV capacity. I mean when you look at it Christophe, I mean in the last up cycle you sold a lot more DUV outside China than you are selling in the last few years. As you go into the next build cycle, don't you think that you will need to add more DUV capacity if China remains at these sort of levels that you're seeing.
Christophe Bouquet
Yeah. I'm not sure, Sandeep, what you mean by the next build cycle. What are you referring to?
Sandeep Deshpande
So what I mean is into 27, when you look into 27 where you're seeing these EUV tools at the minimum that you're going to ship if you see the number of DUV tools you sold for the whatever number of EUV tools you sold between in the last big capacity build cycle because there's not been a lot of massive capacity building that you're now going to see in the industry over the next 2-3 years. Would you say that you would need more DUV capacity because you have about 600 tool capacity at this point. Is that enough for you in terms of DUV?
Christophe Bouquet
Well, I think 600 is for total deep UV. And I think that when we look at the total, I think we still feel pretty good about that. And a bit like EUV, we have other means to play with that number if needed. When it comes to immersion specifically, well, we believe that all non Chinese customers, the demand on immersion will scale with the demand for EUV because as you know there is a pretty clear relationship between the two.
And if you add EUV capacity, you would be also adding some immersion capacity. So I would say we pay for sure the same amount of attention to our deep UV ramp, our immersion ramp that we do on EUV because the two are of course extremely linked, especially when it comes to non China.
Sandeep Deshpande
Thanks Christophe. And I mean maybe Roger, I would like to go back to this question of mix and ASP. I mean you have indicated for this year that you've got more 3600, there are some 3600 shipping this year versus next year. There should not be any 3600. There should also be this next generation of E and then the F would start shipping next year. How should we be looking at the mix of EUV tools that you ship next year and how that will drive your revenue according to EUV next year?
Roger Dassel
So this year as you say, the lion's share is still E's, right. So there is a bit of D's in there, but the lion's share is clearly still E's. And I would say about 20% maybe is D's and the rest is E's for next year. I think hardly, if any of D's, and I would say the lion's share of it is E's. And there will of course we will introduce the F's the way customers are planning to ramp their nodes.
I believe that the lion's share of the tools for 2027 will still be E's. So there will be E's at that point with the high throughput that we just talked about the 230 that will go ex factory at that level and there will be a number of F's, but that will be a clear minority.
Sandeep Deshpande
So would you say that your ASPs will grow next year because of how the mix is shifting from this year to next year?
Roger Dassel
Oh, yes, yeah, clearly. So the mix next year is more favorable than it is this year. No D's and a bunch of F's. So clearly the ASP next year will improve over this year.
Sandeep Deshpande
Thank you.
Roger Dassel
You're welcome.
Operator
Thank you. Your next question comes from the line of Francois Beauvigny from UBS. Please go ahead.
Francois Beauvigny
Thank you very much. My first question is on high NA. I mean a bit beyond 27. There is obviously a very high demand in advanced logic and memory. And I was wondering if high NA could play a role in that tight market as high NA could save low NA capacity. I mean, Christophe, you refer the three mask, I mean 1 instead of 3 mask with high NA. So if we go into 2728292030, could that tightness help adoption of high NA saying I'm not going to build 100 tools of low NA necessarily if high NA can actually replace with the mask. So I'm just wondering if you could help adoption in other words, high NA with the tightness of the market?
Christophe Bouquet
Yeah, I think Francois, I think it's a bit too early to answer the question. I think what we see today is that several of our customers are going to test high NA on real product wafers. So it means basically they will demonstrate for themselves the ability to use this tool on real product. We see that with some logic customers, we see that with some DRAM customers. That's a discussion that is ongoing pretty strongly right now.
So they continue to make steps basically to have this option if they want. And of course if the maturity of the tool allows that to use the tool, I will say whenever they want and especially when it comes to DRAM, I will say the threshold to start using high NA on existing product is pretty low. So I think that's a possibility. I think that as things evolve in the next few months combination of again capacity requirements that continue to be strong plus progress on high NA will not exclude that.
I think it's just a bit too early to respond to the question by the affirmative today.
Francois Beauvigny
Thank you Christophe. And maybe as a follow up on this F model and maybe the ASP. So actually if you said you talked about 260 wafers per hour, which is a nice increase from the 250 originally, which is roughly 15% higher than the E model. So is it the right ASP increase we should expect, 15% higher throughput and 15% higher ASP or it could be more because you also increase or improve availability and overlay like so you suggested. So how should we think about the ASP of the F versus the E?
Roger Dassel
Yeah, all of that is true. But you also know that we typically share the benefits between the customers and ourselves. But you're right, that's historically the correlation between the throughput and ASP is very strong. So we're not negotiating in this call with our customers, but I think the proxy approach that you just followed doesn't lead you to a very bad outcome.
Francois Beauvigny
Thank you very much.
Operator
Thank you. Your next question today comes from the line of Didier Scemama, Bank of America. Please go ahead.
Didier Scemama
Yes, thank you for taking my question. I just wanted to sort of get your thoughts maybe on the numbers you've given at the CMD November 24, you said 160,000 wafer starts per month capacity addition in DRAM per year 25 to 2030 and I think 200 in advanced logic. How do you feel about those numbers where we in the right ballpark 25 and how we're looking at 26 and beyond? And I've got a follow up. Thank you.
Christophe Bouquet
Well, I think that we will all agree that things have changed a bit with AI in the last couple of years. So I think we have to go back and mostly look at those numbers again. I think we are going to mostly share the results for 26 next year in a capital market day. I would say most probably the place where we see the biggest change is DRAM. I think we've talked about that for a few quarters. I think DRAM is very strong right now.
Most probably the added capacity per year is above the numbers we have discussed at least this year and we have to try to understand exactly how this will really play on the longer term. So I think too early to say a lot of change in the last few quarters. If you remember two quarters ago we were having a bit of a different discussion on the market. So give us a bit of time. I think we are most probably going to come back to all of you with our latest view on the long term market next year in the capital market day.
So give us a bit of time to really digest everything that is happening and try to translate that into a bit of a long term view of the market.
Didier Scemama
I mean what I'm hearing is that you're tracking towards the upper end of your guidance for 2030, but not going to put words in your mouth. Maybe a follow up on that maybe for Roger. I think you said 56 to 60% on 44 to 60 billion of revenue. So let's take a wild guess, let's say you are above 60 billion. Do you think your gross margins can be above that range or are they constrained by other elements that we have to take into account?
Roger Dassel
I think the same applies to what Christophe is just saying. It's very difficult to take out one element. I've given the moving parts in the past and the moving parts on the gross margin, a lot of it is on EUV and it's on the one hand us improving the productivity of the tool and you see how well we're executing on that front. And that comes with commensurate increase in the ASP and leads to gross margin improvement. So that's an important element.
The second important element is high NA volume and that is very critical, right, because the number of tools that we have at that stage and the number of tools that can absorb the fixed cost associated with high NA obviously is very critical in determining what your gross margin is on that front. Then we see continued improvement of profitability in installed base and we have some ideas in DUV, but it's really in that context that things need to be addressed.
But as Christophe said, let's wait for next year where we have our capital markets day thank you can revisit all of these assumptions.
Didier Scemama
Perfect. Thank you.
Roger Dassel
You're welcome.
Operator
Thank you. Your next question today comes from the line of Alexander Duvall from Goldman Sachs. Please go ahead.
Alexander Duvall
Yes, good afternoon. Many thanks for the question. A year ago, I think there was some discussion in the market about the market structure for customers where ASML had essentially one very significant customer in the foundry side and two others lagging significantly. Since then, some have seen progress from two of the players on foundry relative to where we were in the past. So curious to what extent you're baking in a contribution from those foundry players in the coming year and to the extent that those players are ultimately successful, how beneficial could this be in terms of market efficiency?
Secondly, as a quick follow up. There have been news articles talking about how ASML is looking to do more to help the hybrid bonding process. Wondered if you could help us understand to what extent you see hybrid bonding is important and how you think about the ways that ASML could contribute to customer efforts related to this. Many thanks.
Christophe Bouquet
Maybe I'll start with the second one. I think we explained a few months ago in fact we started a capital market day that we saw that 3D integration will become an important part of the tools our customers have basically to deliver density either for logic or for DRAM. And as a result, we started to create all kind of activities in ASML in order to support our customers there. You talked about hybrid bonding. I'd like to mention that one of the things we see happening today first is wafer to wafer bonding, which is going to be used by the DRAM and logic and where we think that our holistic lithography products, meaning the combination of metrology and process components, our tools can help enormously.
Our customers basically to adopt this new technology and deliver basically the performance they need on their wafers. I think we also announced that we were entering advanced packaging with the XT2 60s. This has been an important tool. We continue to see good traction there. And on top of that, we're looking again at a few more things. Some of them have to do with lithography in advanced packaging and for processes such as hybrid bonding.
I think we'll continue to look at the opportunity to support our customers in their activity and that can be done in many different forms. I think right now we're looking still at a limited amount of use practically of hybrid bonding, especially in front end. So not too much activity with our, but I will say some discussion for the future on how maybe we could help there. So that's the first part.
Roger Dassel
Back to the question you had on the foundry business. And the potential for Samsung and Intel, it's pretty clear that the demand in the foundry business is huge and is outweighing the supply right, so that leaves a bit of room for others than the market leader. And I think that's room that the other players are trying to enter into. We all know about the plans of Samsung. So that's real and of course that also requires shipments for us, which is happening.
The US player in this business already has quite some capacity. I would say. So we've said it before that for this year, we're not counting on a huge number of shipments in that regard, because they already have quite a bit of capacity. Then you ask about the longer term and of course the market that is characterized by multiple players at least will sort of guarantee innovation. And that I think is what is important.
I think the market leader has been tremendously innovative. So you cannot say that even in the market that was dominated by one player, you would still see a lot of innovation. I think that's what we've seen in the past couple of years, but having three players in there will probably guarantee even more innovation. And ultimately I think that is good for the ecosystem.
Alexander Duvall
Many thanks.
Operator
Thank you. Our next question today comes from the line of Chris Caso from Wolfe Research. Please go ahead.
Chris Caso
Yes, thank you. Much has been discussed on the call about your own actions to increase your capacity to supply. Could you speak about your customers capacity constraints specifically the clean room constraints as well? And I guess this is perhaps a better question for next year perhaps. But to what extent is your ability to ship constrained by your own ability to produce tools, your customers clean room space or is demand going to be the constraint? Is it going to be a supply constrained environment or demand constrained environment?
Christophe Bouquet
Well, I think we talked quite a bit about that last quarter where I think we saw a lot of demand coming in. So this was a bit coming very fast. I think we mentioned that the clean room capacity was one of the factors if not the key factor on what we could do this year. I think yet you have seen us increasing our range for 2026, which means that we have progress there. We have even increased the upper part of the range.
So I think that we see that the plans for 2026 are really solidifying getting more and more clarity about the number of pedestals that would be available when. So that's clear and it wakes up to 2027. I think that well there is supply limitation right now. I think I mentioned before we see our customers having a lot less hesitation to really accelerate their capital expenditure. I think you of course have noticed that our DRAM customers are doing extremely well thanks to the price of memory right now.
And I think you just mentioned for logic also that the capacity limitation is quite high. So I would say there is no hesitation whatsoever in the mind of our customers at this point of time, not only to invest also because sometimes they even get guarantees from their own customers on the investment, but also as a result to move as quickly as possible. So that's the dynamic we are in and I think that's why we see our outlook improving this year and we continue to have I would say very active discussions with our customers to prepare next year.
But I would say right now everyone is really moving towards the more the faster the better, right that's clear.
Chris Caso
As a follow up to that, given what's happening in DRAM now, could you speak to what that means for litho intensity? And we've seen one of the remedies for the tight supply is migrating to some of the new nodes. How does that affect litho intensity and does it have any effect on high NA adoption at your DRAM customers in effort to address some of the supply constraints?
Christophe Bouquet
Well, I think first for DRAM, I think DRAM has been a bit the perfect storm for ASML because of course we have this capacity build up. But as we mentioned a few times, we have seen a major adoption of EUV in DRAM in 2025. And you may have noticed that however, I will say US DRAM customers also made this announcement that they were shifting also pretty strongly on EUV. And the reason for that is of course performance, but it's also capacity because if you are going to use more EUV layers.
You are going to need less multi patterning and multi patterning takes a lot of space also in the fabs. I think this is also definitely another argument in favor of EUV. I think this was mentioned by the way, by this US customer in their call. So I would say the first results of that is first more adoption of low NA EUV, which I think is also translated into the numbers Roger was mentioning before with I would say a very high point on our memory business this year. That's also true for EUV.
Now, of course, what's true for low NA today, I think we expect to be true for high NA in the future. So this again, not prime time for high NA today. But I can only say that more low NA EUV adoption today can only help for more high NA adoption in the future because the logic of high NA is the same. It's going to single exposure simplifying the process, getting more space etcetera. So I think DRAM has been really a good story when it comes to litho intensity in 25 and I think it's translating very strongly into EUV demand this year and most probably the years to come.
Chris Caso
Clear. Thank you.
Christophe Bouquet
You're welcome.
Operator
Thank you. Your next question today comes from the line of Tammy Qiu from Berenberg. Please go ahead.
Tammy Qiu
Hi, thank you for taking my question. So firstly on the DRAM sector or memory sector in general. So we have learned that the memory sector has been all signing those three to five years agreement. So with your customers visibility higher on their own end market, do you see any behavioral change from your side? Are they more willing to give you more visibility of orders for your tools going forward? And also at the same time, because of they are currently desperate for capacity, do you see any room for charge more or upgrade more? IE your own business or memory business will be more profitable for you on high visibility than it was previously?
Roger Dassel
Yeah. So in terms of visibility and behavioral change. The visibility to us customers are very open by the way, that's also the case on the logic side, but very customers are very open to us and they're very openly discussing with us also their expansion plans for this year, but also beyond. It's also clear that if you look at the scale of the fabs that they're building, it's pretty significant, right? So if you look at the more recent fabs that are being built by our customers, it's pretty clear that they allow for quite some expansion.
So if you talk about behavioral change, I think that's probably the number one behavioral change out there vis a vis us. They're just very open in terms of how they see the market and how they see their further capacity expansion. Now in our model of pricing, as you know, our model of pricing is not based on is not based on with the squeeze that our customers find themselves in. That's not the way we do business. The way we do business is that we look at the value that we provide to our customers, generation on generation, tool on tool.
And we take our fair share in that. And you might say in the current climate, can't you squeeze out a little bit more? I understand that, but it's also true that when a market is good, it goes down a little bit and the customers are going through more difficult times that they also pay the price. So fundamentally we believe that the model that we have is a fair model. It's also model that is paired to all the players because I would find it difficult to explain why we're charging more in let's say the memory environment versus the logic environment.
That's just not the way we do business. So we're very happy with the business model that we have, which is based on the value of our tools and we would gladly continue with that approach.
Tammy Qiu
OK, thank you. And next one is on your 80, at least 80 capacity for 2027. So you're at least if I understand correctly is based on what customers have told you for the time being. And if that at least based on customers is limited by clean room space so that they don't know and don't want to commit further or something else. What's driving that at least?
Roger Dassel
The at least is the alignment that we currently have with customers which takes on board their gauge of the market situation, their gauge of the progress that are having in fab building. And our gauge of the ability to what's the right way to give them capacity. I told you unit numbers is one way to provide capacity, but there is more. So this really is the alignment that we currently have based on the signals that they're providing us and what we think is the way to give them that capacity.
Tammy Qiu
OK, thank you.
Roger Dassel
You're welcome.
Operator
Thank you. Your next question today comes from the line of Lee Simpson from Morgan Stanley. Please go ahead.
Lee Simpson
Great. Good morning, Good afternoon. Thanks for squeezing me in. Maybe just a quick clarification question on the installed base management. I just want to understand, well, I assume at least that most all of the outperformance in Q1 margin came from that. That's largely because I think you said earlier there was a high incidence of upgrades business that quarter and that most if not all of the rest of the year will be more the maintenance type of business. Thanks.
Roger Dassel
No, that would not be fair. So we expect upgrade business to continue throughout the year. But even in the upgrade business you have different margin profiles of the upgrade services that you provide. And it just happens to be that the business in the installed base business that we had in Q1 just happened to be the kind of business that is associated with very high gross margins. No. We definitely expect the installed base business.
And the upgrade business in that installed base business to continue, that's also what you would expect in an environment like this where as we said before, customers are really asking for upgrades. But even within the upgrade business you have the ones primarily software based which come with very high gross margins and then ones with maybe a little bit lesser gross margins. That's the mixed effect within the installed base that we were calling out.
Lee Simpson
Maybe just on that mixed effect, It does look still more and more the sort of warranty like business that you have now with the installed base and EUV is coming through. So how much of a gap are we seeing closure between what is traditional maintenance and what is traditional upgrade cycle? Are we talking about less than 10 percentage points gap between those two elements?
Roger Dassel
When you say 10 percentage point, you mean in terms of gross margin or what?
Lee Simpson
In terms of gross margin, yeah.
Roger Dassel
In terms of gross margin, I cannot say that Lee. It's too diverse. As I just mentioned, the margin profile is very diverse. So it's very much dependent on what kind of upgrade business. I mean on the service front, we've given you updates in previous years on the progress that we're making on EUV service gross margin. So four or five years ago we were bleeding money. We actually have negative gross margins and gradually we were able to improve that and we're now at a gross margin that is no longer very much apart from I would say the corporate gross margin.
So we've gotten that I think to a level which I think is business wise the right level for us to aspire to on the upgrade business, it very much depends on what it is. So there the profile is so different that it would not be appropriate for me to give you a number there.
Lee Simpson
So that makes sense. I mean, maybe if I take a step back and look again at the capacity as a multi year proposition here, because clearly we are going into a massive upcycle with AI and now we've got generative AI and driving to a different whole discussion on what the ROI could be in and around AI. So our sense here is that EUV is becoming a bottleneck as other tools are in the system.
And if we look at your own clean room build out it did look as though you took maybe two or three years to get this set up, which was sensible given the paucity of demand at the time. But could we see this accelerating? Could we see concrete pour shell build one year and then the next year fit out happening consecutively whereby you could have two or three clean room projects at the same time, which I guess is me asking how much land bank can we secure in the immediate vicinity?
Christophe Bouquet
Well, I think the first thing I'd like to say is that we do not want EUV to be the bottleneck. So I think I'd like to say that very strongly. And as we discussed a bit before, we have many different ways to drive capacity up being of course the number of tools we manufacture, which also depend on our cycle time, the speed at which we manufacture them, productivity etcetera. And of course adding more footprint is another one.
And I will say that we will use whatever is needed in the future to meet our customer demands and we are reviewing this very carefully on a monthly basis with some, as you know, long term visibility because of the lead time of our tools. And today, I think we are not in such a situation and we have the ability again to use any of the tools we just discussed to make sure we continue. And that's something we'll continue to do.
So I would just say again, very strongly, we do not want to be the bottleneck for our customers. And so far we've been using all the tools we have at hands to make sure we don't get there. And we'll continue to do that.
Roger Dassel
And the key thing that we've done, Lee, on that front is of course to get the long lead time items in place. That's what we've done. That gives us many degrees of freedom, including, you talked about the land bank, including making sure that we have sufficient room to expand. We've worked on that extremely hard in this region to get that accomplished. And we were recently able to get that done.
So we have a lot of degrees of freedom on a go forward basis with long lead time items in place. And that gives us the kind of flexibility that Christophe is talking about to give customers what we think they need.
Christophe Bouquet
Yeah. And maybe to illustrate that, if you compare a bit what we did in 25, which is what we could do in basically 27 with the at least 80 systems, we more than doubled basically the total EUV capacity we can ship to our customers, this is done basically in about two years. And we do that I would say without blinking too much. So we're still, I would say on top of our game there.
And I think again, the combination of all the elements we gave you is really putting us in a good position to continue to grow and also to continue to do that because this has been sometime you're concerned when the market was not so good without spending too much money. I think that's also important. So I know the question of bottleneck comes back very often. I think we don't feel at all that we are the bottleneck today. We're very closely working with our customers and again we have many tools in our hands to make sure we keep it this way.
Lee Simpson
Thanks so much and well done in the quarter.
Christophe Bouquet
Thank you very much.
Jim Kavanaugh
OK, I'm afraid that is all the time we have for today. So on behalf of ASML, I would like to thank you all for joining us today. Operator, if you could formally conclude the call, I would appreciate it. Thank you.
Operator
Thank you. This concludes the ASML 2026 first quarter financial results conference call. Thank you for participating. You may now disconnect.
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