ASM.AS FY2026 Q1 Earnings Call Transcript
Date: 2026-04-22
Source: Financial Modeling Prep

Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ASM First Quarter 2026 Earnings Call. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Victor Bareño. Head of Investor Relations. Please go ahead, sir.
Victor Bareño: Thank you, operator. Good afternoon, and thank you for joining our Q1 earnings call. With me today are our CEO, Hichem M'Saad; and our CFO, Paul Verhagen. ASM issued its first quarter 2026 results yesterday at 6:00 p.m. Central European Time. For those of you who have not yet seen the press release, it is available on our website together with our latest investor presentation. As always, we remind you that today's conference call may contain forward-looking statements in addition to historical information. For more details on the risk factors relating to such forward-looking statements, please refer to our press releases and financial reports, all of which are available on our website. Please also note that during this call, we will refer to profitability metrics, primarily on an adjusted basis. Reconciliations to reported numbers can be found in the press release and in the investor presentation. And with that, I will now turn the call over to our CEO, Hichem M'Saad.
Hichem M'Saad: Thank you, Victor, and thanks to everyone for attending our first quarter 2026 results conference call. We will follow the usual agenda for today's call. Paul will begin with a review of our first quarter financial results. I will then discuss market trends and our outlook followed by the Q&A session. I will now turn it over to you, Paul.
Paul Verhagen: Thank you, Hichem, and thanks, everyone, for joining our call today. Let me first walk you through the Q1 financial results. Our revenue in the first quarter of 2026 amounted to EUR 863 million, which was at the high end of our guided range of EUR 830 million plus or minus 4%. On a constant currency basis, revenue increased by 16% year-on-year and by 26% compared to Q4 '25. Equipment sales increased by 14% at constant currency and were led by ALD. Spares & services continued to deliver a very strong performance with a 23% year-on-year growth at constant currency. This was the result of continued expansion of our outcome-based services and strong spares demand in an environment of elevated set utilization rates. In terms of customer segments, revenue was led by logic/foundry, which accounted for the clear majority. For the full year, advanced logic/foundry sales are expected to show significant growth this year. However, due to quarterly phasing, they were down from the very strong first quarter last year. Mature logic/foundry for the large part from customers in China increased compared to Q1 last year and rebounded strongly compared to the relatively low level in Q4. Memory sales showed sequential growth compared to Q4 last year and also expected to grow significantly for the full year, mainly in DRAM. Sales in the memory segment were predominantly driven by applications for high-performance DRAM in HBM-related applications. Sales in the power analog wafer segment increased compared to the first quarter of last year, mostly in silicon-based solutions but from a low base. Gross margin in the first quarter amounted to a strong 53.3%. This was virtually unchanged compared to 53.4% in Q1 of last year, up from 49.8% in Q4. Gross margin was supported by a favorable product and customer mix including an increased sales contribution from China, which rebound strongly compared to the lower level in Q4. The gross margin also benefited from a gradual impact from cost reduction programs that we have been implementing over the past few years. We expect the gross margin to be at the higher end of the target range of 47% to 51% for the full year. SG&A expenses increased by 8% year-on-year at constant currency, mostly due to higher variable expenses, but dropped slightly as a percentage of sales, demonstrating our ongoing focus on cost control. For the full year, we continue to expect SG&A as a percentage of sales to drop below 9%. Net R&D increased 11% year-on-year at constant currency in Q1. We continue to step up R&D investments to support customer transitions to next-generation nodes and to advance our expanding pipeline of opportunities. For the full year, we intend to keep the net R&D within our target range of a low double-digit percentage of revenue. Operating profit increased by a solid 21% year-on-year at constant currency, and the operating margin reached a new record of 33.1%. If you look at the main movements below the operating line, financial results included a currency translation gain of EUR 10 million in Q1 '26 compared to a translation loss of EUR 40 million in the first quarter of last year. As a reminder, we hold a large part of our cash in U.S. dollars and the related translation differences are included in our financial results. Our share of income from investments, reflecting our stake of approximately 25% in ASMPT amounted to EUR 7 million in the first quarter, up EUR 2 million in the year ago periods. Next, the balance sheet and cash flow. ASM's financial position remains [ solid ], and we ended the quarter with a cash position of close to a EUR 1 billion. Free cash flow was EUR 48 million negative mainly reflecting the working capital outflow in the quarter marked by a sharp ramp in activity levels. Days of working capital increased to 69 at the end of March, up from 45 at the end of December. The main driver for the increase was higher accounts receivable due to strong sales increase compared to the relatively low level in Q4 as well as back-end loaded distribution of sales during the quarter. CapEx amounts to EUR 38 million in the first quarter, up from EUR 30 million in the same quarter of last year. And for the full year, we expect CapEx to be around or to be somewhat above the higher end of the guided range of EUR 150 million to EUR 250 million, with the largest part related to the construction of a new site in Scottsdale, which remains on track for completion in Q1 2027. And with that, I'll turn the call back over to Hichem.
Hichem M'Saad: Thank you, Paul. Let's now continue with a review of the market trends. The first quarter, again, confirmed that AI is the main driver of semiconductor demand. Customers continue to add capacity to support the ongoing expansion of AI data centers and the broader infrastructure build-out. This is keeping demand strong in the areas where we are most exposed, especially logic/foundry and we saw this demand strengthening further during the quarter. We have also noted a continuing proliferation and diversification of the AI workloads into the CPU and the power markets. For this reason, we see AI driving strength in all segments of our business: advanced logic/foundry, mature logic/foundry, memory and especially DRAM and, to a lesser extent, power, wafer, analog market. Looking ahead, our strategic view remains unchanged. As AI adoption broadens and demand continues to scale, compute capacity is increasingly the limiting factor. In semiconductors, this is translating into tighter capacity needs for advanced logic/foundry and memory devices, driving higher investment intensity and increasing the urgency of tool deliveries. Against this backdrop, our focus is on execution as we continue to support our customers' expansion plans. The pace of demand is putting additional pressure from the supply chain. But so far, we have been able to manage these rising challenges in close cooperation with both suppliers and customers, reflected in the sharp step-up in our quarterly sales from EUR 700 million in Q4 of last year, to a level approaching EUR 1 billion projected for Q2. Turning now to customer segments. Logic/foundry again led our performance in Q1 supported by continued strength at the advanced nodes and a sequential rebound in mature logic/foundry demand. Our view is unchanged that logic/foundry will be a strong driver of our sales in 2026 and also going into 2027. The structural outlook for this segment remains strong. AI-driven compute requirement and the ongoing shift to more complex 3D device architecture and new materials continued to increase ALD and epitaxy and density. As we progress through the year, we expect momentum to build further with ongoing capacity additions as the 2-nanometer technology node accounting for the largest part of advanced logic/foundry sales in 2026. This first generation of gate-all-around device technology is shaping up to be a large node, enabling new applications in high-performance compute, including AI as well as advanced mobile and other leading applications. We continue to benefit from the step-up in our served available market at 2-nanometer supported by a broader position in Epi and sustained strong market share in ALD. In addition, we have seen a healthy uptick in demand related to the nodes from 3-nanometer to 7-nanometer, driven by agentic AI. The demand is outstripping supply which has led to renewed capacity investment. Looking ahead to the industry's next node transition to 1.4 nanometer, we expect pilot-line investment to begin later this year. We are deeply engaged with key customers as they prepare for that transition, and we expect the first meaningful contribution to our sales in the second half of 2026. As we have highlighted before, we expect the SAM uplift at the 1.4 nanometer to be even larger than what we saw at 2-nanometer node. At 2-nanometer, the industry's main priority was to get the first generation gate-all-around architecture and to high-volume manufacturing with gate-all-around now in production and ramping, customer have more room to include additional performance boosters. And for ASM, that translates into more functional there in the transition stack to further optimize power and performance, including additional dipole layers to enable Multi-Vt options. Alongside the higher SAM opportunity, we have already secured several key product penetration which supports our expectation for a higher ALD market share in the 1.4 nanometer node, public disclosure from some leading customers suggest that the 1.4 nanometer node is designed to deliver clear improvement in performance, power efficiency and density versus today's 2-nanometer node. This is well aligned with ever increasing AI token demand and the associated compute and power constraints in data centers. As our customers move toward higher volume manufacturing in 2027 and 2028, we expect 1.4 nanometer to become a meaningful driver for ASM. Next, looking at memory. Demand in Q1 was solid, with robust momentum in the most advanced DRAM technologies used in HBM-related applications. Continued investment in AI infrastructure is keeping demand for high-performance memory strong and supporting ongoing expansion of advanced DRAM capacity. For the full year, we continue to expect healthy growth in our memory business. Looking further out, DRAM remains a meaningful and strategic opportunity for ASM. From a technology perspective, our customer R&D engagement in memory continue to expand, including development work around new ALD and epi applications that support the transition to 4F² and very fantastic DRAM. As we highlighted at Investor Day, the transition to 4F² is expected to drive a step-up in ALD and Epi intensity and expand our served available market by approximately USD 400 million to USD 450 million based on 100,000 wafer start per month capacity. Turning over to power, analog, wafer market segment. The contribution in Q1 remained relatively low, reflecting the soft market condition in broader parts of automotive and industrial. That said, we have seen some pockets of strength in selected areas, particularly in power applications for AI data centers. For 2026, our view is unchanged that this segment should recover gradually from a low base. We remain well positioned to benefit once demand conditions improve more broadly. Moving on to China. The increase in Q1 was largely driven by the mature logic/foundry segment, where we saw higher activity across a broader set of customers, reflecting improving market conditions and to a lesser extent, the power, analog segment. In addition, I'd like to highlight ASM's ongoing success in winning new positions which also contributed to our strong performance in China. This demonstrated the continued competitiveness of our solution and the strength of our local team. Based on current visibility, we expect sales in China to increase for the full year with a stronger contribution in the first half. Now let's talk about advanced packaging. As we have discussed during the Investor Day, we are looking into advanced packaging as another midterm growth area for ASM. We believe that this market is ripe for disruptive solution in new materials and interface engineering playing into ASM's strength. We are engaged with multiple customers on advanced packaging, and we are seeing some encouraging traction for our innovative solutions. That brings me to the outlook. At current currency, we project revenue to increase in Q2 2026 to EUR 980 million plus or minus 5%, and we continue to expect revenue in the second half of 2026 to be higher than in the first half. As mentioned, China sales are expected to be first half weighted. This means that our other business segments are expected to strengthen from the first to the second half, including continued solid momentum in advanced logic/foundry higher sales in memory and a gradual recovery in power analog. While it's too early to provide specific guidance for the full year, based on our guidance in Q2 and a further increase in the second half, it should be clear that 2026 is going to be a strong year for ASM. And with that, we have finished our introduction.
Victor Bareño: Thank you, Hichem. Let's now move on to the Q&A to ensure that everyone has an opportunity to participate please limit your questions to no more than two at a time. Operator, we are ready for the first question, please.
Operator: [Operator Instructions] First question is from Andrew Gardiner, Citi.
Andrew Gardiner: Hichem, just sort of pick up on the point you were making at the end of your prepared comments there. You're saying you will have growth in the second half of the year versus the first half, but obviously, the visibility is perfect to quantify it for us yet. Previously, you've been willing to talk about your performance relative to the wafer fab equipment market broadly and that ASM would outperform that. Clearly, WFE expectations are moving quite rapidly as well at the moment. Could you give us an update on how you see the broader market in terms of WFE? And can you confirm that you will still outgrow that in 2026?
Hichem M'Saad: Thank you very much for the questions. Yes, we talked about that in our previous conference call that we're going to at least perform as good as the wafer fab equipment market or better. Yes, we have seen improvement in the WFE market. I mean we follow very closely what Gartner and VLSI are talking about. And we can reconfirm again that our growth in our market, in our revenue in 2026 will at least outgrow the WFE market again. So as I mentioned, we see strength in the market and our revenue is strengthening, and we are very confident that we'll be able to at least grow at least at the WFE market or beat that in 2026.
Andrew Gardiner: Okay. And just a clarifying question, the point you were making on China. In the second half, so is that China down second half on first half? Or down year-on-year or perhaps it's both?
Hichem M'Saad: No. I think China is really up year-on-year. So the -- what we talked about that we see right now that China is lower in the second half of 2026 versus the first half of 2026, saying this, and I want to repeat it again. China visibility is not that great as we talked about it, okay? So from that point of view, if there is anything, that second half China business that we see right now might also increase eventually. But right now, what we see very strongly that the second half would be a little bit slower than the first half. But again, that might strengthen in the second half. We don't know.
Operator: Next question is from Nigel Van Putten, Morgan Stanley.
Nigel van Putten: I want to follow up on the previous question on China. Perhaps for the full year, there are some limited visibility. But can you provide us a revenue or China revenue as a percentage of overall revenue for the first half at least? And how that maybe compares to the full year '25 when you said it's going to be -- or it came in a little bit over 30%. That is my first question?
Hichem M'Saad: Nigel, thank you for your question. Nigel, maybe there's a misunderstanding that about the visibility -- low visibility of China. Right now, okay, our visibility for 2026 is very good, okay? China or no China, okay? Because I mean, it's really clear everywhere in our market, okay? So that's why we are really confident about the market. If there's anything in China, the revenue is going to increase further in the second half, okay, from where we see it right now. So, but China business has been good, and we feel very confident about it.
Paul Verhagen: So maybe to add to what Hichem is saying, what we see in is now, at this moment, at least, is an accelerated demand. And in China, we have a higher H1 expectation. And H2, which might still change, we don't know, as Hichem has indicated. Possibly, that is because of concerns on export controls, we don't know. One thing is for sure that the overall sentiment is very good, like in the rest of world, also AI related. That's itself positive. Two, we also won some more layers in itself is a positive. But yes, there is clearly an acceleration going on, which, of course, customers are on tariffs, but which could be triggered by concerns around export controls and how that will develop further, I think, at this stage, and nobody knows. Then on the full year, based on everything we know today, I think the equipment revenue as a percentage of total sales will be similar to last year. But again, it's really too early to tell, so this might change because for all the reasons that we already mentioned.
Nigel van Putten: Got it. That's really helpful. Then now maybe switching to the advanced logic customers which I understand are providing increased visibility maybe 8 quarters on a rolling basis. Question would be, do you see any sort of broadening on the horizon, sort of it's clear that the main customer remains very strong, but how are the other two doing maybe today? And how do you see that developing into the second half of the year?
Hichem M'Saad: No, I think, Nigel, I think we see -- we're working right now with all customers in advanced node for both of the 2-nanometer node and 1.4 nanometer node. And then we see that gate-all-around is a technology that's going to be adopted by more customers. And we feel very confident that that's going to be the case. Of course, okay, some customers have better yield or performance than the other ones. But we think that gate-all-around is going to be really a broad technology node and for a variety of customers.
Operator: Next question is from Didier Scemama, Bank of America.
Didier Scemama: Just a follow-up actually to the previous question on the boarding of the customer base in advanced logic. Obviously, your largest customer is doing terrific. On the two smaller ones, is that supposed like expected to strengthen in Q2? Or is that more of an H2 driver? And I've got a follow-up.
Paul Verhagen: Yes, let me take that question. I think what I can say on that. I don't want to be specific on Q1 and Q2 or Q3 when it comes out both down to customers. But what I can say is at least that based on current visibility that all those customers are expected to grow year-on-year. And of course, there is a significant difference with regard to the size of the various customer and the absolute amount of growth as a result of that. But we expect all three for the logic part, all three of them to grow year-on-year.
Didier Scemama: Okay. And for my follow-up for Q2, would you expect China to be up sequentially or flat? Or how should we think about that relative to your overall sequential growth guidance?
Paul Verhagen: What we've said indeed is that for next quarter, we expect EUR 980 million plus or minus 5%. We also said that for H1, we see an accelerated demand for China coming in for various reasons I just discussed in the call before. So I think it's reasonable to assume that also Q2, China will be pretty good.
Didier Scemama: Should we expect, therefore, the gross margins in Q2 to remain at sort of above the long-term guidance given the mix?
Paul Verhagen: You know that I'm not going to specifically guide on a quarterly basis for the margin, but the margin will be good that I can say China is accretive, as you know. But also, I think what is also not unimportant. I also want to highlight that is that the other product mix that we've seen actually in the last few quarters has been very strong. So that also helps. And last, but not least, the structural cost improvements that we're working on, which will every year add a little bit also play a role. But having said that, yes, higher share of China typically is accretive, yes.
Operator: Next question is from Francois Bouvignies, UBS.
Francois-Xavier Bouvignies: I have a question for 2027, actually. So if we look at your '26 growth drivers. I mean if I look at the different drivers, I don't see much layers increase in '26 as a growth driver, because I think it's mostly capacity, [indiscernible] was already adding a lot of capacity last year. So from a year-over-year point of view, you don't have a lot of incremental layers. Now if you look at '27, it looks like you will have a lot of layers opportunity that you laid out at your Capital Markets Day. So I was wondering, if we think about this dynamic of layers increasing, is it fair to say that '27, if we assume the same capacity increase that '26, that should be a higher growth than '26? You have more drivers on top of the capacity in '27 than you had in '26. Is that the right way to look at it, if you understand my question?
Hichem M'Saad: Yes. I think we understand your question. I think it really depends both on the end demand from that point of view. But we -- as the technology node transition from 2-nanometer to 1.4 nanometer, we see the adoption of 1.4 nanometer starting in the second half of 2026. And we see the 1.4 nanometer bias to increase in 2027 for final production in the first half of 2028. And with the 1.4 nanometer node, there's more ALD and more Epi. And as we mentioned, these ALD layers are mainly in the front end of line for performance level. And that's where we have many more -- a lot of strength, and that's where we're going to have many more ALD layers. So we are really very happy with -- we'll be very happy with the 1.4 nanometer transition, because of the higher ALD intensity. Also, we have more ALD layers in molybdenum. I think that as we mentioned in our last press release that we are very happy to be in production, high-volume production at the 2-nanometer node with our moly ALD. And with the transition to the 1.4 nanometer, we also have won some process of record layer in molybdenum. So overall, the transition to 1.4 will be very accretive to us, and we'll be very excited with that transition in the future.
Francois-Xavier Bouvignies: And the memory side -- Yes, go ahead.
Paul Verhagen: I think you said it, but I want to make it a little bit more explicit that just for you guys to be clear that already in this year with the pilot for 1.4, which is also, of course, increased layers, as you know, we already see a very, very meaningful contribution of 1.4. So that's not only in '27, but it's already starting in '26.
Francois-Xavier Bouvignies: Good to know. And maybe you didn't address maybe the memory layers and maybe for '27. And then you mentioned market share higher in A14. So can you maybe explain a bit the higher share here? I mean, is it because just your time is getting higher than the others? Or you just have more layers than you expected? -- more than before?
Hichem M'Saad: Yes. So the 1.4 nanometer, what's the difference between the 1.4 nanometer node and the 2-nanometer node. So they are both gate-all-around. But for the 2-nanometer node, that's an architecture change. So customers didn't want to be very aggressive in putting many functional layers because of the change in architecture. But once we move to 1.4, they have added many goodies, which we call performance layers. And those layers are really mainly ALD layers. And they are all in the front end of line, where we play significant. That's where our strength is. Yes. So definitely, we see more ALD layers in 1.4 nanometer. Second thing, as you shrink, those -- and with the gate-all-around structure, as you shrink those layers become much more difficult because of the 3D nature and the shrinking. And with that, the since every layer becomes much more difficult, that also slows down the process. And with that, you need more equipment from that point of view. The other thing we see is that also there is a higher epitaxy intensity going forward. So overall, that's very positive.
Operator: Next question is from Stephane Houri, ODDO BHF.
Stephane Houri: Yes. To come back on the Q2 guidance, which is about EUR 100 million of what the consensus was expecting. So I'm just trying to understand what led to this acceleration, if it's more advanced logic or memory. And if you could comment also on the lead time at the moment if they are increasing? And is there a difference between the two different segments? And I have a follow-up.
Hichem M'Saad: I think that the acceleration is happening in mainly in the 3-nanometer to 7-nanometer node. in addition to the gate-all-around node. So what we have seen lately is that Agentic AI is becoming more important. And with that, that tends to favor using the CPU instead of GPU. So the 3 to 7-nanometer node is really mainly driven with CPU. And we see much more demand from our customer in that node, and that's really happening super fast at this point in time. We also see strength in memory continuing. So overall, the market is really strong in the leading edge, both logic and mainly logic and foundry, that's really the highest part of the market. Second is really also DRAM is also increasing.
Stephane Houri: And about the lead time, sorry.
Hichem M'Saad: So regarding the lead time, I mean, lead time has increased because of the supply chain constraints right now. I mean there's a huge demand everywhere. So yes, the supply chain has increased, and that's really the customer specific. We've been able to expect that to happen. That's why we can -- we have increased our capacity to from like EUR 700 million per quarter in Q4 of last year to about EUR 1 billion per quarter this year. And it's going to continue to increase in the second half, as we have mentioned.
Stephane Houri: Okay. And that's exactly my follow-up. I mean you're going to be at least EUR 1 billion per quarter in the second half run rate and there's probably some additional growth coming in 2027, given what you said and what we see in the market. So at what point will you fill all your plants and notably the Singapore plant and that you will have to again increase the capacity?
Hichem M'Saad: I think our manufacturing capacity is -- can take care of our business. I think we have expensive manufacturing capacity in Singapore and Korea. So we're ready for much higher volume. I think what's limiting -- if there's any limit is really the supply chain that's limiting the capacity than anything else. But I think that we'll be able to manage that in the second half. So that's why we're confident of increased volume in the second half of 2026.
Operator: Next question is from Sandeep Deshpande, JPMorgan.
Sandeep Deshpande: Maybe you can give a comment on what has changed in your customer behavior versus what you were -- you had seen from your customers the last time you reported in -- reported your results. Has something substantially changed given your very strong guidance into the second quarter? And then I have a small follow-up.
Hichem M'Saad: I think that the market is really strong all over. Has there been any significant change? I think the change that we have seen is really on the PC part where for -- on the CPU part where it used to be that AI is mostly driven by GPU, but we see that CPU part becoming more important than before. And we see that's the strength we see in the 3-nanometer to 7-nanometer node, which was not there before. So that's really the strength we see. It's mainly the CPU-driven part for artificial intelligence.
Sandeep Deshpande: And then when you look at the WFE, I mean you had said 15% to 20% at last results. I mean, given your guidance for the second quarter and your indication on the second half of the year, it looks like you're going to grow well over 20%. So what is your perception on WFE at this point for this year? And I mean, despite your lower exposure in the memory market, you are growing incredibly well. And so is this mainly associated with the second half ramp also with 1.4 nanometer where your content is growing, your number of layers you have is growing very substantially. So this is essentially share gain in the WFE market?
Paul Verhagen: Yes. Let me take that, Sandeep. So yes, to give you a very short answer, that's part of it, absolutely. But also basically, I think as Hichem already said, but maybe in different words, we're firing in all cylinders. Every segment of the market is growing significantly. I mean, advanced logic/foundry, mature logic/foundry, memory of which, in particular, DRAM, we see a high growth and even power with analog for power-related AI data center applications from a low base, but as a percentage, still high growth. And of course, also pilots 1.4, that I started with, adds a decent amount for this year already, yes.
Operator: Next question is from Adithya Metuku, HSBC.
Adithya Metuku: Firstly, I wanted to talk about 2027. I know you gave these targets of EUR 3.9 billion to EUR 4.6 billion, top line at a EUR 125 billion WFE number. So call it EUR 4.2 billion midpoint. If you look at WFE numbers now, people are depending on whose numbers you take 40% to 50% higher than that EUR 125 billion in 2027. So my first question is, should we assume that, that EUR 4.2 billion could be maybe 40% to 50% higher from 2027? What are the nuances we need to keep in mind when we think about where WFE is going and how your revenues might go in 2027, you've clearly talked about outperforming WFE, I presume that will continue. So just any pointers you can give around how we should think about these targets you gave at the CMD 40% higher, 50% higher? And I've got a follow-up.
Paul Verhagen: Yes. Let me take that. So indeed, I think we said EUR 3.8 billion to EUR 4.7 billion at CMD, where we assumed EUR 120 billion WFE, which today's view is indeed significantly higher, but there's one big difference. The assumption that we took at that time, which was somewhere September last year on the composition of the mix is very different from what we see today. So we had by far the largest part of the total WFE basically logic/foundry, while now the relative share of memory is significantly larger than what we assumed. And although we grow a lot in memory, but still our relative share of memory in our business is still relatively small. So that's why you will not see the full benefit of that increased WFE dripping down into our numbers. Having said that, based on everything we see today, we believe that '27 will be a strong year. But adding 40% to 50%, I would not recommend you to do that. That would give some distorted figure. At the same time, it's a very wide range, EUR 3.8 billion to EUR 4.7 billion is almost EUR 1 billion range. So also even within that range, there's still a lot of room to maneuver. And more than that, at this stage, I don't like to say.
Adithya Metuku: Got it. Okay. We'll leave 40% or 50% of side go with 30% then. And just quick follow-up. On the MATCH Act, can you give us some color on how you're thinking about any potential impact for you guys as you think about your China revenues? Yes. Any color you can give around how you might be affected? I know it's hard to quantify numbers, but any qualitative color would be great.
Paul Verhagen: Yes. So the MATCH Act indeed is being discussed as we speak. If it will happen or not is uncertain. It might or it might not. In what shape it will happen is also uncertain because at the end of the day, it is important, literally the point and the commerce are very important there, especially in relation to how to interpret what is exactly restricted. We're in, of course, discussion with relevant authorities, as you can imagine. So it's very hard, and I would love I could give you some more color to give decent color at this stage. Obviously, if something like that were to happen, it's not a positive, that might be clear. But how much, I'm really not in a position yet. It's too -- it's literally too unclear and too uncertain still on what might happen. So I don't like to speculate on that.
Operator: Next question is from Tammy Qiu, Berenberg.
Tammy Qiu: So the first one is regarding your very strong short-term momentum. You mentioned that just now it's all driven by the CPU-related incremental demand. I just want to confirm that, have you seen any customer from both logic and memory perspective, pulling forward? Are you asking you to accelerate the shipment of equipment because end market demand is coming so dramatic in the short term. So therefore, it's like a pull forward from 2027 at all?
Hichem M'Saad: I think every customer wants the tools now instead of tomorrow. I think the demand is really high. And for us, it's which customer we ship to first than the other one. So I think like we mentioned, we are fully booked for this year. From that point of view, we have a strong demand in all parts of our business, really every part of our business very high demand. And yes, we see customers the demand is even increasing. So I mean, we -- our book is full. So we have to do our best to be able to satisfy the demand that we're getting right now.
Tammy Qiu: Okay. And the second one is, last quarter, we discussed that the 1.4 nanometer is mainly driven by one customer versus others have been having discussion with you, but still a bit distant away from pilot production, et cetera. I'm just wondering where is the status of those remaining customers? Are they getting closer to make the decision on pilot production? Or are they still further down the line?
Hichem M'Saad: So as we mentioned that we see -- we are working with all customers to the 1.4 second generation with a 1.4 nanometer technology node. And we see that business strengthening in all the customers from that point of view. Some of them is at a marginal increase and the other have a higher increase, but I'm not here to speculate on which customer, which, but we see at least a marginal strength in some and a significant strength in other customer. But saying this, I think more likely, like I mentioned that 1.4 nanometer would be more than one customer.
Tammy Qiu: Just to confirm, have you seen any progress during the quarter, i.e., all of them have moved forward or just one of them moved forward comparing to last quarter.
Hichem M'Saad: Can you repeat your question, please?
Tammy Qiu: So basically, the time line of the 1.4 nanometer, last quarter, you mentioned that one is active preparing for pilot production, remaining two is still in discussion firmly at this stage. I'm just wondering, this is three months after, have you actually seen other customers together with a leading customer or moved forward in the time line for 1.4 nanometer? Or just one customer has moved forward instead of all three of them?
Hichem M'Saad: I'm going to repeat my answer, where we see 1.4 nanometer strengthening broadly with some strengthening marginally in some customers and significant increase in other customers.
Operator: Next question is from Jakob Bluestone, BNP Paribas.
Jakob Bluestone: I want to come back to Adi's question around your ability to sort of take part in growth in memory. And my question is, when do you anticipate the transition to 4F² and FinFET for the cell periphery in DRAM to impact your revenues? So is this something that would impact in '27? Is it '28? Or do you think it's further out?
Paul Verhagen: I can take that question. Yes, I think because I think last time already, we mentioned that the pace of adoption customer by customer is different. There might be even a customer that might completely skip it. We don't know yet, but that's to be seen. And I think for us, based on what we see and think we know today, I think you should take into account '28 as the first year where we start to see a positive contribution related to 4F². [ Might ] -- maybe a little bit earlier, I don't know yet, but I would -- I mean time line is still a little bit uncertain and very different from customer to customer. So I think the best color I can give right now is in '28.
Hichem M'Saad: So add to what Paul has mentioned here, we see a strength in memory in 2026 and also increasing for us in 2027 and beyond. The biggest increase for us will happen really in the move into 4F², where we have more ALD layers and more also Epi intensity. But also we've seen some customers put in FinFET in their node in their road map. And with that, we're working with them and we might -- and since we have been very prominent in our FinFET technology in logic. So that we see some customers really pulling in that technology node. And with that, we probably will get some more layers as customer put in their FinFET technology node. So the biggest increase would be '28 and beyond, but also we see some increase in 2027.
Jakob Bluestone: Understood. If I can just ask a quick follow-up as well. You mentioned a few times the sort of pickup in 3 to 7-nanometer transition, and I don't know if you can give any color on whether that's your largest customer or kind of more broad-based?
Hichem M'Saad: Which transition, are you talking about, sorry?
Jakob Bluestone: 3 to 7?
Hichem M'Saad: Yes, I think it's really broad based. That's really broad-based. It's not only one customer, it's very broad-based.
Operator: Next question is from Ruben Devos, Kepler Cheuvreux.
Ruben Devos: I just had one on Epi in HBM. I believe you talked about significant Epi engagements with another HBM customer and expect good news this year. So of course, curious whether two months on has anything firmed up on that additional qualification? And would that be, let's say, fully incremental to your memory plan in '26?
Hichem M'Saad: Okay. So to answer your question, yes, we talked about that, and we are engaging with our customer on epitaxy. There's really nothing else to say right now, but we'll let you know if there's any news from that point of view. It's really working with customers on a couple of customers on epitaxy. And hopefully, we can share some good news with you in the next investor call meeting.
Ruben Devos: Okay. And then second one, really to just get a feel of maybe the aftermarket sales, right? I mean you've had a stretch of very good performance in the last few quarters, again, 23% up the past quarter. Outcome-based is about 25% of the mix. So it looks like, I mean, the target you said at the Investor Day of 12% CAGR is becoming more of a floor. I was curious whether you could talk a bit about, yes, the extended visibility you might have now in aftermarket sales. And I can imagine a margin uplift to realize if you manage to make a transition more towards outcome-based. But also besides that, are you able to sort of have the customer pay more per tool for the servicing packaging in general?
Hichem M'Saad: I think that for service market, okay? What I mentioned, the service market is really good as you transition in a newer technology node because of process complexity. It's very important to -- a customer need more support from us and for the more advanced node. And with the advanced node also, we see a transition to much tighter specification on wafer-to-wafer and also repeatability on chamber-to-chamber matching and also on system-to-system matching. And with that, we have to provide a new solution to customers to improve the uptime and the availability. So we are very really -- we think that the surface business is going to increase in the future as you transition to tighter and tighter technology node. And we see that happening in the area of automation, in the area of robotics, in the area of optics. And those are really the solution that we're providing our customers. So the growth is going to be good in that part of the market. You mentioned that 12% growth. To be honest with you, right now, every part of the market is growing a lot. This year, the market is growing over 20%. I mean, latest, you see Gartner talking about 25%. So everything is great. It's really just spending my time, okay, to make sure that we can execute on getting customers the tools in time and make sure that the availability and the execution is top notch.
Operator: Next question is from Timm Schulze-Melander, Rothschild & Co Redburn.
Timm Schulze-Melander: First one for Hichem, please. Just looking at the technology execution and just trying to scale maybe how much upside there is to that? If I look at your long-term revenue guide, the high low range is kind of 20%, 25% between the low and the high. Obviously, part of that is the strength of the cycle. Maybe part of that is also conversion of existing evaluations and layer wins. Maybe could you just share how much of that is upside potential from layer wins? So if you could just think about that in the context of your go-forward revenues? And then I had a follow-up.
Hichem M'Saad: You said the percentage I didn't hear you well on the percentage, which percentage are you talking about, please?
Timm Schulze-Melander: Yes. So if we look at your EUR 3.8 billion to EUR 4.7 billion revenue guide, so part of that is going to be cyclical. Part of that's going to be your execution in terms of technology wins. I'm just trying to think is that half off, but some kind of scale of that?
Hichem M'Saad: If you look into the business and where we are, one thing I can tell you, I'm really very excited about our technology road map. I think that things are going in our direction. If you look into logic, you see more and more layers coming in with 2-nanometer and also with 1.4 nanometer. ALD intensity is increasing and [indiscernible] intensity is increasing, and we're winning share in that part of the market. If you look into memory, memory is moving more and more into FinFET more and more in 4F², which needs more Epi, needs more ALD. So we're going to have more layers, and we feel very confident about it. And if you look into logic -- if you look into power, wafer, analog, we are really -- if you look at the power, wafer, analog, the power part of the market is the only part of the power, wafer, analog that's strong right now. And that's being driven by data centers, power devices for data center. If the wafer part and the analog part goes up, it's going to be even accretive to us. So the service business is also good. In the service business, we're going more and more by automation. And we really -- we're getting some -- getting into even robotics and that customer and leading customer, we're even selling them, okay, some robots to improve the system availability and so on. If you look into advanced packaging, that's an area that we mentioned that we have entered last year. It's a new area for us. I can tell you that we have so many -- believe me, so many interactions with customers. And we have to prioritize which one to do and some customers tell them, guys, maybe we don't have -- we cannot really help you there. And -- but with the customers that we're really engaging right now, I can see that they really like to work with us as a company because we're looking into the advanced packaging through a different option. We're looking into that as, okay, what can we do to disrupt the technology? What can we do to provide a solution that's better than what it is right now. How can we -- a solution to make sure that, okay, we reduce the -- to reduce the thermal mass on advanced packages coming with a new material that improve thermal conductivity. We're working with customers to make sure that we can seal the devices much better. So there is no moisture going in the packages. We're working with customers to actually improve the speed of connection between one chip to the other one, working with them on some innovative photonic layers. So I'm sure that with all of this really, we feel very confident where things are are going to go from that point of view. And depending where the market is going to go, I'm very confident that we're going to at least match the WFE market growth or actually have a higher growth than WFE. It's a great time for ASM right now. And we -- I see customers really want to work with us. I think our execution has improved. I think our competitiveness is getting even better than before. And what I can tell you, it's the best time to be in semiconductor.
Timm Schulze-Melander: A very impressive runway. Maybe just a quick follow-up for Paul, just some housekeeping, actually. You talked about rising utilization rates, but actually Q1 aftermarket sales were down sequentially. And on your guide, I think last quarter, your guidance range was plus minus 4%. This time, you've widened that range to plus minus 5%, which doesn't maybe sit that well with a sort of improving visibility. Just wondered if there's any color you could share in terms of what you're seeing.
Paul Verhagen: Yes. So actually, the range is, I think, already referred to is related to supply chain challenges. So far, we've been able to manage it. But at the same time, we have to be on top of it to make sure that we get what we need to deliver what we need as per our customer preferred COD customer request date. So that's a little bit where the range comes from, Timm. It's not so much demand. It's more what can we deliver on time given the supply chain constraints that so far manageable again. But yes, we have to be on top of it and nothing can go wrong here.
Timm Schulze-Melander: So that's what was in the aftermarket in Q1 and maybe there's some catch-up in Q2?
Paul Verhagen: I don't know if there's catch-up in Q2. I mean I think had a very good Q1. I think we delivered more or less what we wanted to deliver, and we will target to do the same in Q2.
Victor Bareño: Thank you, Timm. We still have a number of participants in the queue, but we are running out of time. So let's take one final question. Operator, can we have the last caller?
Operator: Final question is from Javier Correonero, Morningstar Equity Research.
Javier Correonero Borderia: In the interest of time, I will just ask one. So your Axus acquisition 3 months ago, it is small, but I think there is a lot to unpack there when you think longer term. So Axus is specialized in silicon carbide processing. So I was wondering if you could explain a little bit more what's the rationale of the acquisition here? Is it like more silicon carbide content as we move into the 800-volt data center? Or is it TSMC potentially adopting silicon carbide interposers in the next few years or both? And of course, it is very early and small acquisitions, but do you have an estimate of what service of addressable market this acquisition could open once it is properly integrated with ASM [indiscernible]?
Hichem M'Saad: Okay. So thank you very much for the question. So yes, we have acquired this company called Axus Technology, which is -- we're very excited about the acquisition in CMP. They have a very great CMP technology and very innovative, to be honest with you. And the -- like we mentioned, we have acquired this for the advanced packaging market because advanced packaging is -- needs more and more CMP layer, many, many, many more CMP layer. So there is room for another player. Also, it's a technology that's all about interfaces. And I think that we have some -- we do have some knowledge in interface engineering so that we will be able to really put our print there. It also CMP helps us with our new materials that we're developing for advanced packaging that I just talked about a few minutes ago because I mean, you deposit the film, but also you need to CMP. So we want to understand what's the interaction about the material that we're depositing the new material that we're depositing and the CMP, because CMP also has a slurry. There's a new -- with a slurry that means we're talking about new chemicals and so on and so forth. So it would help us also develop better materials in ALD, but at the same time, also good polymerization, which is extremely important for advanced packaging. So that's really why we made that acquisition. And then we're working right now on developing the product for advanced packaging, and it's going to increase our SAM absolutely. It is going to increase our SAM and we're in the process of doing R&D and so on in this part of the market.
Victor Bareño: Okay. That concludes the Q&A. Thank you all for attending our call today, also on behalf of Hichem and Paul. Thank you. Goodbye.
Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.