TLDR
- Q1 2025 net sales hit EUR7.7B, matching company guidance
- EUV system sales reached EUR3.2B, boosting gross margin to 54%
- EPS came in at EUR6 with net income at EUR2.4B
- Free cash flow was negative EUR475M due to payment timing and CapEx
- Tariff risks and margin compression expected in H2 2025
ASML Holding NV reported total net sales of EUR7.7 billion in Q1 2025, matching its earlier guidance and reinforcing the strength of its core lithography business. Net system sales made up EUR5.7 billion of that, with EUV lithography machines contributing EUR3.2 billion. This performance was a clear indicator that advanced chipmakers continue to rely heavily on ASML’s cutting-edge EUV technology.
The Install Base Management segment brought in EUR2 billion, supporting the company’s recurring revenue strategy through servicing and upgrades. These results underline ASML’s importance in the global semiconductor supply chain, especially as AI demand surges.
Margins shine in Q1
Gross margin stood at a strong 54%, beating expectations thanks to a favorable product mix and the delivery of systems aligned with customer productivity milestones. This profitability translated to a solid bottom line, with net income of EUR2.4 billion—about 30.4% of total sales. Earnings per share landed at EUR6.
Despite high R&D costs of EUR1.161 billion and SG&A expenses of EUR281 million, ASML kept its operating structure lean enough to protect margins. Return on equity over the trailing twelve months was an exceptional 55.62%, reflecting its efficient capital use and high-value product portfolio.
Negative Cash Flow Raises a Flag
While earnings performance was encouraging, the company reported negative free cash flow of EUR475 million in the quarter. This was attributed to customer payment dynamics and heavy investments in fixed assets. It’s not an immediate red flag given the company’s EUR9.1 billion in cash and short-term investments, but sustained negative flows could put pressure on future flexibility.
ASML also returned EUR2.7 billion to shareholders through share repurchases in Q1, part of its ongoing capital return program. These moves reflect confidence in the business, though they come at a time of growing macroeconomic and geopolitical uncertainty.
Tariff Worries Cloud H2 Outlook
Looking ahead, ASML acknowledged that the gross margin outlook for the second half of 2025 is murky. The company expects lower upgrade revenue and the possible impact of tariffs on its global operations. These geopolitical tensions—especially surrounding semiconductor equipment exports—could weigh on customer demand and margins if not resolved.
Management stated that it anticipates a wider range of gross margins in Q2 2025, signaling an unpredictable near-term environment. With the U.S., Europe, and China all actively reshaping semiconductor policies, ASML could find itself navigating a more volatile landscape than in prior years.
Long-term Demand Intact
Despite the short-term risks, ASML remains a linchpin in the semiconductor supply chain, particularly as chipmakers expand production for AI and high-performance computing. The company continues to invest in both low and high NA EUV platforms, keeping it several steps ahead of competitors in terms of technology.
Sell-side analysts still target EUR919.28 for the stock, suggesting confidence in long-term growth even as H2 2025 presents uncertainty. ASML’s five-year return of 128.74% also highlights its proven ability to deliver shareholder value through cycles.
ASML delivered a solid Q1 marked by strength in EUV sales and margins. Yet, rising global trade tensions and negative free cash flow show that even the most dominant players aren’t immune to external pressures. Investors may need to brace for short-term swings while keeping an eye on the long-term innovation narrative.
