Asm International Nv

Good afternoon. This is the Chorus Call Conference Operator. Welcome and thank you for joining the ASM International 4th Quarter 2025 Earnings Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Victor Barreño, Head of Investor Relations. Please go ahead, sir.

Thank you, Operator. Good afternoon, and thank you for joining our Q4 earnings call. With me today are our CEO, Vishen Nassar, and our CFO, Paul Verhagen. ASM issued its fourth quarter 2025 results yesterday at 6 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 related 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 the reported numbers can be found in the press release and in the investment presentation. And with that, I'll now turn the call over to our CEO, Vishen Masan.

Thank you, Victor, and thanks to everyone for attending our earnings call. I'll start with a few of the highlights. Even with the revenue at the lower level, results in Q4 remained solid, and the quarter marked a reacceleration in demand. For the full year, our sales increased 12% at constant currency, our ninth consecutive year of double-digit growth. and operating profit increased by 17%. Strategically, we strengthened our position with key customers with the current generation of gates all around going into high-volume manufacturing and with some traction in R&D engagement for the next nodes. To power ASM's next phase of growth, we continue to invest in our people, our global footprint, and in innovation. I want to thank all our people for their relentless dedication and collaboration, which contributed to another successful year for ASN. As for the agenda today, it's the standard format. Paul will start with a review of our financial results. I will then discuss market trends and provide our outlook, followed by the Q&A session. With that, I'll hand it over to Paul.

Thank you, Hrisham, and thanks everyone for joining our call. Let's start with the review of the fourth quarter results. Revenue in the fourth quarter of 25 was €698 million, as pre-announced on January 19. This represents a 7% year-on-year decline at constant currency, but came in above the guidance range of €630 to €660 million, which we provided with the Q3 results. Logic Foundry was our largest customer segment in the fourth quarter. Within this segment, Advanced Logic Foundry accounted for the majority with sales approximately flat compared to the third quarter and somewhat down from a very strong level in Q4 of 24. Mature Logic Foundry sales, mostly from the Chinese market, dropped sharply as anticipated. both compared to the prior quarter and to Q4 of 24. Memory sales were relatively steady, both year-in-year and compared to Q3, with solid advanced DRAM sales, offset by lower NANDs. The contribution from the power analog wafer segment remained at a fairly low level overall. Our spares and service sales were up 22% year-in-year at constant currency. This represents a very strong performance, especially considering the tough comparison with Q4-24, when sales grew roughly 50% driven by accelerated demand in China. Gross margin of 49.8% in the fourth quarter was down from 51.9% in Q3, but still at a solid level, supported by a favorable mix. SG&A expenses were down 1% year-on-year, while net R&D expenses increased by 6%, largely due to phasing of R&D investments. Operating margins dropped to 25% in Q4, explained by lower revenue and related gross margin, partially offset by lower OPEX. The results from associates increased to €26 million in Q4, which was for a large part explained by a one-off benefit in HMPT's results. Our Q4 net earnings dropped compared to Q3, mainly as that quarter included a non-cash reversal gain of $181 million related to the recovery in the market value of HMPT. Our new orders in the fourth quarter amounted to $803 million, up 19% year-on-year and also better than indicated with Q3 results. This was driven by very strong advanced logic finder orders. Mature logic finder orders from Chinese customers were relatively soft, but showed an acceleration in demand towards the end of the quarter. Memory orders were steady compared to Q3. Power, analog and wave orders showed some recovery and reached the highest level in 2025, but were still at a relatively soft level. Please note that starting in 2026, we will discontinue reporting of quarterly bookings. This change reflects the high volatility of quarterly orders, which has been driven more by timing effects than by underlying demand trends. We will continue to disclose the year end backlog as part of our Q4 results. In addition, beginning in 2026, We will report sales by key customer segments, logic findery, memory and other, on a half-yearly and annual basis. Let's now have a look at the full year results. At €3.2 billion, our sales increased 12% at constant currency to a new record high. In terms of customer segments, logic findery accounted for the largest party of equipment sales. Within this segment, advanced logic findery represented the clear majority. Gate all-around related sales increased very strongly as customers stepped up in investment in 2nm high-volume manufacturing. Mature logic foundry sales, mostly from the Chinese market, also increased, but at a more modest pace compared to the leading edge segments. In memory, sales dropped to 16% of total equipment sales, down from 25% in 2024. Advanced DRAM for HBM-related applications continued to be solid, and accounted for the large majority of memory sales. However, this was offset by a normalization of memory-related sales in China. As discussed in previous quarters, memory in China is typically a small market for ASM, but in 2024, it showed an unusual high demand. The overall drop in memory sales was also explained by lower 3D NAND sales, which were still at a relatively higher level in 2024. Power, analog and wafer sales dropped for the second consecutive year. As part of this, silicon carbide sales, which were still resilient in 24, dropped by more than 50% in 25, reflecting a sharp deterioration in this market. At constant currencies, equipment sales increased 10% in 25, primarily driven by strong double-digit growth in ALD. Spares on service sales grew 18% at constant currency, an excellent performance which was driven by strong growth in our outcome-based services. Growth margin for the year increased further, rising from 50.5% in 2024 to 50.1% in 2025. This improvement was primarily driven by stronger product and customer mix, including a resilient contribution from the Chinese market. Additionally, the margin benefited from the gradual impact of cost-saving initiatives, such as more move to common platforms and ongoing cost optimizations across our manufacturing and supply chain operations. Growth R&D increased 9% in 2025, reflecting the continuous growth in our pipeline of new opportunities. As a percentage of revenue, net R&D expenses increased slightly to 12.5%. Our target remains to keep net R&D in a low double-digit percentage of revenue. SG&A expenses decreased 7% in 2025, on the back of discipline cost control as well as the benefits of earlier investments made to scale the organization for growth. As a percentage of sales, SG&A decreased from 10.6% to 9.2% in 2025. For 2026, we project SG&A to show a further decrease as a percentage of sales. Operating profit increased 17% in 2025, thanks to improvements in revenue and gross margin, SG&A discipline, and with continued growth in R&D investments. The operating margin increased from 28% to a record 30.2% in 2025. Now turning to the balance sheets. ASEM's financial position continued to be in good shape. We ended the year with a cash slightly north of €1 billion and no debts. Excluding M&A related cash payments totaling 181 million, free cash flow increased 12% to a record of 615 million in 2025. This growth was driven by improved profitability and lower working capital partially offset by higher capex. Working capital decreased to 347 million at the end of 2025. This was mainly due to the phasing of revenue during the year with Q4 2025 sales at a relatively lower level, together with very strong cash collection. CapEx increased from $168 million to $280 million in 2025, fully in line with our guidance range of $200 to $250 million. This increase is for a large part driven by spending related to completion of our new Korean facility and ongoing construction of our new facility in Scottsdale. 2026 will be a year of continued investments for a large part related to our Scottsdale site, which remains on track for completion in the first quarter of 2027. Regarding cash spent on acquisitions, in December 25 we acquired Axis Technology, a provider of C&P solutions for 81 million net of cash acquired along with a potential earn-out up to 30 million tied to performance targets over 26 and 27. In addition, we paid 100 million euro in earnouts as part of the earlier LPE acquisition and as already communicated with the Q3 reporting. In terms of shareholder remuneration, we spent close to 300 million in cash on dividends and share buyback in 2025. And with our Q4 press release, we announced a new share buyback program for an amount of €150 million, as well as a proposed dividend of €3.25 per share, up from €3 in the prior year. And with that, I'll hand over to Hichem.

Thank you, Paul. Let's now review the trends in our markets. In 2025, the semiconductor market continues to be driven by AI, reflected in a wave of new AI data center and infrastructure expansion plans from hyperscalers and other leading industry players. These drove solid capacity investment in leading-edge logic foundry and in advanced memory, areas where our ALD and EPI technologies play an increasingly central role. At the same time, several other end markets, including smartphones, PCs, automotives, and industrial remained relatively soft due to persistent microeconomic and geopolitical uncertainties. Looking ahead, the fundamental technology drivers remain firmly intact. Demand continues to rise for faster, more power-efficient semiconductor devices capable of supporting the massive growth in data and compute intensities. This will further accelerate the industry's transition toward more complex 3D device architectures and the introduction of new materials. These trends increase the number of ALD and epi layers required at future nodes, supporting healthy long-term growth in our key market. The main engine behind our growth in 2025 was the continued strong momentum in leading-edge logic foundry, our GatorAround-related sales rose substantially as customers ramped 2 nanometer capacity and started to move into volume manufacturing. At our investor day, we reconfirmed the significant expansion of our served available market by about $400 million in the transition to first generation gate all around. We also highlighted the increase in our epi layer share from 22% to 33% and the reinforcement of our leadership position in ALD. Our product penetrations included new applications such as MOLLE ALD and area selective deposition entering high volume manufacturing at the two nanometer node. In 2026, We expect customers will continue investing in two nanometer expansion supported by rising and market demand across AI, high performance computing, and advanced mobile applications. Based on public commentary from several of our customers, the two nanometer technology node is expected to be large and long lasting. While two nanometer will continue to represent the majority of leading edge logic foundry investment in 2026, we have also seen an uptick in three nanometer related demand. The pace of innovation is not slowing down and customers are already advancing toward the 1.4 nanometer node with pilot line investments expected to start in the second half of 2026 and volume production in 2027 and 2028. This transition is projected to expand our served available market by a further $450 to $500 million. A significant driver of this increase is the rising importance of functional layer in the transition area, which is the core strength for ASM. As also highlighted during investor day, we expect these transition-related layers to increase to roughly 60% of all ALD layers at the 1.4 nanometer node, up from about 50% at the 2 nanometer node. Based on the breadth of R&D engagement and the production tool of record selection, secured so far, we expect to gain further market share as the industry moves to the 1.4 nanometer node. Let's now talk about memory. Our sales in the memory segment decreased in 2025. And as discussed, this reflected a normalization in China after an unusually strong 2024. At the same time, momentum in the advanced segment of HPM-related DRAM remained robust. AI-driven data center investments continue to require high-performance DRAM, and in this segment, ALD Hi-K Metal Gate has become essential to achieving the performance and power efficiency levels customers demand. During the year, we strengthened our position with new ALD WIMs, for layers that are expected to ramp in 2026 and 2027. And we also recorded our first APWin in the DRAM segment. We expect healthy growth in our DRAM sales in 2026, even though memory is likely to remain a smaller share of our business than Logic Foundry in the coming years. Looking further out, DRAM scaling presents significant long-term opportunity. The transition to the 4F-squared architecture will require more complex 3D channel structure and additional ALD and EPI steps, expanding our served available market by $400 to $450 million. Let's now look at the power analog wafer. In 2025, the power analog wafer market remained in a cyclical downturn. In 2026, and based on an early signs of stabilization, we expect for this segment a modest sales improvement. This recovery will be limited to silicon-based power and analog applications. The silicon carbide market will take longer to recover, but we remain well-positioned with a strong portfolio, including our PE208 platform for 200 millimeter applications. China remained an important market in 2025. After two years of exceptional growth, we had anticipated a period of normalization. Revenue from China did decline in 2025, but the decrease was milder than expected. and mostly supported by continued robust activity in the mature logic-foundry segment. Sales softened in the second half of the year, particularly in Q4, but we saw demand accelerating toward year end. Based on this momentum, we now expect higher sales in China in 2026, an improvement from our earlier forecast of a double-digit decline. As Paul already discussed, we continue to invest in R&D and CapEx to capture the opportunities ahead of us in logic foundry, in DRAM, and also in new areas such as advanced packaging. In 2025, we completed our new extended innovation and manufacturing center in downtown Korea. Combined with our key manufacturing site in Singapore, and ongoing efficiency improvement in our supply chain model, we believe we have sufficient capacity in place to support our growth well into the next decade. I'm also excited to see the progress at our new Scottsdale facility, which will enable substantial expansion of our ALD and EPI product development activity in the coming years. And last but not least, In December, we announced our intention to invest in a new site in the Netherlands, which will house our new global headquarters and a state-of-the-art clean room. In December, we also acquired Axis Technology, a provider of differentiated equipment for chemical mechanical polishing, focused on markets such as compound semiconductors and more than more manufacturing. CMP fits well with our capabilities in chemistry and interface engineering and plays an increasingly critical role in emerging technologies such as 3D integration. In 2025, we made further progress in accelerating sustainability, which remains one of ASM's strategic priorities. We maintained 100% renewable electricity for the second consecutive year. We also deepen collaboration across our value chain, including a new initiative to support suppliers with energy efficiency improvement and renewable energy adoption. In addition, we continue to advance product sustainability through initiatives that improve the energy efficiency and precursor consumption of our tools, contributing not only to reduction in scope three emission, but also helping our customers lower operating costs. Let's now look into the outlook for 2026. Let me recap the key points of our guidance as included in yesterday's press release. We expect Advanced Logic Foundry to be our strongest business in 2026. In memory we anticipate healthy sales growth. In power analog, we expect a modest recovery from a low base. And for China, we expect sales to increase in 2026. For the first quarter, we expect revenue to increase to a range of 830 million euro plus or minus 4%. with a further increase projected in Q2 compared to Q1. And we anticipate our revenue in the second half to be up from the first half. With that, we have finished our prepared remarks. Let's now move on to the Q&A.

Thank you, Hissen. We'd like to ask you to please limit your questions to no more than two at a time so that everyone has the opportunity to participate. Operator, we are ready for the first question.

Thank you, sir. The first question comes from Tammy Q of Barenburg.

Hi, thank you for taking my question. The first one is on 1.4 nanometers. So I remember that last time when you said you were expecting ramp-up pilot production in second half of the year, you were talking about only one customer but hoping for another one. I'm just wondering what is the progress? Did you get more interest of more customer ramping up 1.4 nanometers than just once?

Okay, thank you for the question. I think that 1.4 nanometer is a technology node that all key customers are looking for. And right now, I cannot really be more specific on whether one or two or three customers are ramping up the 1.4 nanometer node, but we see interest from all leading suppliers from the high-end logic and foundry to work on 1.4 nanometer. So we are very excited about the opportunity, and we see our customer really continuing to increase their investment in the next generation gate all around. The other thing that we see is that the customers are very serious about going into HVM in the 1.4 nanometer node in 2027 and 2028.

Okay, thank you. And the second question is on China. So your peers also talked up China comparing to their expectation from Q3 last year. But your comment from down year on year to growth year on year. And also, we all know that China has been a lower visibility market comparing to the rest of the market. Is that something you've seen significantly changed over the past two months made you to have this call at such an early stage of the year? Or is that just basically customer conversation has been giving you the confidence that it will happen?

I think what we have mentioned before, it was very tough for us to really give a very clear projection for China. We mentioned very, very often that it was very tough because of many factors. One of them is the changing trade infrastructure and also the funding releases which really are very unpredictable from our customer. But we did see that at the end of the year, that Chinese customers are becoming much more bullish about their business in 2026, which really was very exciting to us. And that's why we feel that 2026 is going to increase with us. For us, we see visibility with them, and we see strong momentum from that point of view.

Okay, thank you.

Thank you, Tommy.

The next question is from Andrew Gardner of Citi.

Good afternoon. Thank you for taking the question. It's a related one on China, but really as it pertains to your business mix and how you think that will shape up over the course of 2026. If I go back to how you were framing things in October and indeed at the capital markets day in September, you had cautioned us that business mix as pertains to gross margin would deteriorate in 2026 and the decline in Chinese revenue was going to be a large part of that. Today, as you just mentioned, China is going to grow, maybe not quite as quickly as the advanced logic demand, but still it's going to grow. And so your mix is, isn't going to deteriorate as much as you had previously suggested it might. How should we therefore take that into consideration when looking at gross margin for 2026?

So I think for our gross margin, like you mentioned, it really depends on product and also customer mix. And China would actually help our gross margin. So with the change in the mix, then the gross margin would also depend on that. And we see that in 2026, I think we have made in 2025 and 2024 significant improvement, not only in, actually we have made significant improvement in reducing our cost structure in our tools with the commonality. So we have initiatives to commonize more and more of our products, giving us economies of scale and more leverage with our supplier base to reduce costs. And I think with the way 2026 will materialize, I mean, if the customer mix goes further and further positive on the China-wise, then yeah, we expect our gross margin also to be positive from that point of view. Overall, I think that we have made improvement in our basic gross margin in the past few years with better cost control, and I think China also would help in the gross margin in 2026.

Just so that I'm clear, Hisham, you're suggesting with less of a change in customer mix year on year, and with those structural improvements you've made, maybe we shouldn't see much change at all in gross margin relative to last year.

Let me take that, Andrew. Basically, confirm what Heatham said. So the mix, given that China is now better than what we anticipated before, is of course a positive, plus all the structural measures that we've taken. I think it goes too far to say that it will be the same as this year or maybe even higher at this stage. But I think what we're confident to say at this point already is that it will be at the higher end of the range that we guided for. And you know that we guided for, what is it, 46 to 51. So at the higher end of that range, I think, is a reasonable assumption to take, given what we know today.

Okay. Thank you both.

The next question is from Didier Esquimama of Bank of America.

Good afternoon, gentlemen. Thank you for taking my questions. I've got two questions. I think if we take the sort of, you know, baseline WFE, you know, growing 15% to 20% constant currency, are you comfortable to tell us that you will at least be in line with that at constant currency, or do you see any reason why it should be better? Thank you.

So I think that, okay, thank you, Didier, for your question. I think that for our market, WFE market in 2020, we see that our growth will be at least at the level of the WFE growth. So if the market is going to grow by 20% WFE, then we grow at least at that level, at the 20% level. We are very, really upbeat about our position and our growth this year and actually in the future.

Thank you. DJ, as you already mentioned in your question, but I want to repeat that because there is quite a difference, of course, between the current rate that we, of course, project going forward and, of course, the average rate of last year. So the question was right, at constant currencies.

Sorry, I don't want to use a follow-up for that, but Paul, since you opened the door, can you tell us what your average was in 2025 so that we know where the starting point is?

Yeah, I think it was around 1.12.

1.12, okay. My follow-up is, I think there is a bit of confusion in the market as to what you're actually trying to say when it comes to the Outlook for 26, because it feels like you're saying your Foundry logic or advanced Foundry logic is going to be the key growth driver for the business, and then memory is going to have healthy growth, so implicitly that memory will grow less than advanced logic Foundry logic. So I guess, is that the right way to interpret that? And if that's the case, why wouldn't memory outperform given how bad it was in 25 and given that DRAM WFE looks pretty healthy, at least from a top-down perspective?

Let me take that question, DJ. So basically what we said is that we expect growth almost on all fronts, to be honest. But the base from which the growth starts is very, very different. And I think that's the key. So, of course, by far, our largest business is Logic Foundry. And within Logic Foundry, the largest part is Advanced Logic Foundry. And then in China, in particular, Mature Logic Foundry. So especially Advanced Logic Foundry, we continue to see strong investments supported by investments, continuous investment, 2 nanometers, but also 1.4 by it, as we mentioned. mature you just heard our comments on china we expect to to grow so that's a positive memory from a much smaller base in particular dram we also expect good growth but they'll still be the much smaller part of our overall business as you've seen also in in 25 and in addition to that although it's still also from a lower base and modest we also expect this year a a modest improvement in power wave analog excluding silicon carbide. Silicon carbide will still take longer, as Hichem already explained, but also power wave analog, which is partially in China, by the way, and partially outside of China.

Okay, so your commentary was based on Euro incremental growth as opposed to percentage of growth. Is that correct?

That's correct. I think that's really what we're trying to say here, Didier, because our logic is a higher base, but in percentage-wise, the growth in DRAM is higher than percentage-wise in logic foundry. Percentage-wise, DRAM is higher, but we're starting from a much lower base.

Very much. Thank you very much. Thank you, Didier.

The next question is from Francois Bouvenier of UBS.

Thank you very much. My first question is, HM, on your comment on the AP, you mentioned an AP win on the DRAM side. Can you give more colors on what this win is, when it's going to start kicking in, and was it competitive? Just more color on this comment, that would be great.

Okay, yeah, thank you very much for the question. I think that we're really excited of getting a win in DRAM, and this is really in HBM. which we have realized in 2025. And it's going to be incremental to our revenue starting this year in 2026.

And is it going to be for multiple customers or just one?

As I mentioned, we had the one in 2025 for this particular customer. And HVM is happening this year. But at the same time, we have... significant engagement with other customers in high bandwidth memory with EpiTaxi and we expect some good news also happening hopefully in this year too.

Great, thank you. And maybe on the advanced logic side, as the pilot line is getting in order this year, I just wanted to check your market share. You mentioned some MOLLE, ALD and area of selective deposition design wins as well potentially. Can you maybe give some color on your market share here? I mean on the pallet line, how do you think it's trading? Is it higher? Is it similar? And selective deposition, I mean I thought it was something a bit later on. So I was a bit surprised to see selective deposition in your comments. Did anything happen on the selective ILD front to accelerate the roadmap?

Okay, so let me answer your question first about ASD and then talk about molybdenum. So if you look into ASD or area selective deposition, I mean, to be honest with you, myself, I'm very pleased and that we got some win in area selected deposition in the Gate-on-Around area. And the reason we saw this win is because actually it's higher yield that's experienced by customers. So I think the simplification of the process flow and the reduction in the number of process steps have given rise to improvement in yield. So we see that happening, and actually we see that also going to happen more and more into the future and i see even acceleration in that a very exciting area i mean and there's lots of possibility going on uh in this uh in this room and when we talk about the the money we're also excited about the winning uh hvm uh capability at the two nanometer node i think we have mentioned very very often that that the money adoption in the industry is going to happen, but it's going to be happening at a very slow pace. We mentioned that it started with 3DLAND, the second logic adoption is happening, and third is going to happen in DLAND. The change for us, this is penetrate, this is the first time that ASM has moved into the metal deposition area, so we're very excited. It's an area that we didn't have any experience about many years. We didn't have any experience because we didn't know how to integrate metal layers. We don't know how to characterize that. But right now, I feel this win shows that, okay, yeah, not only we can develop this new area, but actually we can achieve HVM capabilities at the customer. So we're building the expertise within our development team and our teams. And this is something that really is exciting for us. But as I mentioned, the Mali adoption in logic is going to take a while. And I mentioned before, it's going to start a little bit at the two nanometer. You're going to have a little bit more at 1.5, four nanometer node. a little bit more at 1.0 nanometer node, but it's not going to be at the level of what tungsten and copper is. But this is really exciting for us, to be honest with you.

Great. Thank you very much. Thank you.

The next question is from Adithya Matuku of HSBC.

Yeah, good afternoon, guys. Thank you for taking my questions. So I had a couple. Firstly, just on the CMP acquisition, I just wondered, Hisham, if you could give us some color on which end markets you want to focus on, what sort of applications in end markets, and whether you intend to have any partnerships with your CMP tool, especially when it comes to advanced packaging. There's a lot of debate there, so any color there will be helpful. And then secondly... I wondered, Paul, if you could give us some color on how you're thinking about your OPEX growth in 2026 with a focus on R&D and SG&A. Thank you.

Okay, so thank you for the question. When it comes to TMP, when we looked into this market, we talked in our investor day that we have a focus on also some M&As, and especially in an area where it can do two things for us. It's an area that's strategic to ASM, and it's an area where we can add value to it. And also, we mentioned, okay, that when we do some M&A, we really want to make sure that there's some technology component to it. And this is really what we saw in this CMP acquisition. has a very good technology, a very exciting technology, to be honest with you. That's very unique by itself. They have a great footprint and also very good cost of ownership, very competitive cost of ownership. And we think that this technology, CMP, is actually complementary to our strength in the interface engineering. As you know, when you do the bonding at the end of the day, it's like to bond the interfaces together. So after you do polishing, you have a new surface. And if you can make the surface better and more, you can actually control the engineering of the surface, that can help you also do the bonding. And also, it's also complementary to our deposition technology. I mean, we have... CBD deposition in advanced packaging and CMP would be also complementary to that. So from all these points of view, we think that we can add value to this technology. We are going to see how it works for us in the future. This is a very small acquisition, about 80 million euro acquisition, and we're going to test it. We mentioned that we're going to test it in advanced packaging area, and we'll see how it materializes. But definitely the technology is differentiated. We like the tool architecture, and we think that also cost-wise it will be very competitive.

And then on the OPEX, what I can say is that the start of R&D, we will continue to invest in R&D, so that will grow further. And our net R&D will grow at a higher pace than our gross R&D, simply because of the increased amortization expense, because more and more films that we've been working on in the last few years have entered into HCM, so we start to amortize those, but I think net R&D at constant currency again, because also, I'm not going to give you a percentage now, but a decent chunk of R&D cost is also dollar-based and a decent chunk is also euro-based. So net around 10%, I think, is a good guidance to take into account. And gross will be slightly below that, because net will grow faster than gross. On the SG&A, we will continue to be very strict on SG&A. There will be some increases, of course, annual inflation, merit, but also we invested in, as you know, we had a global big bang of our new EOP system that costs under IFRS need to be capitalized. We will start amortization of these costs as well. We might have some higher variable expenses in 2026, but overall, I think if you take into account a few percent increase, that's what we try to manage. We will be very strict on S&A, and as a percentage of revenue, for sure, that will go below 9%.

Got it. Understood. Paul, maybe just to clarify on the access acquisition, do you have a specific focus on hybrid bonding, or is it more generally bonding applications?

Yeah, I think we're really looking into the advanced packaging as not only hybrid bonding, so it's really packaging as the overall market from that point of view.

Got it. Thank you.

Thank you, Ari.

The next question is from Robert Sanders of Deutsche Bank.

maybe just if you could just discuss a bit about what you see in terms of clean room constraints at your customers you know obviously we've seen some companies talk about that obviously your tools don't take up as much footprint and and but in terms of looking into 27 do you see significant capacity opening up and how does that set you up for next year thanks I think that we see if you look into 2026

we do see there's a constraint in subspace and in multiple areas, which limits the expansion for our customer. I mean, I think it's very clear, it's very public information. And also we see a growing sense of urgency from our customer really to get some of the tools. So based on that, we see that there is a good momentum. As more and more capacity come in in 2027, so we see momentum really continuing in 2027. So not only we are excited about 2026 and very positive about 2026, but we see the fact that more and more capacity, the fact that there's a constraint right now in SAP space, but that SAP space is going to open up in 2027, meaning that also 2027 is going to be a very good year for our company.

Great. And just a quick follow-up, just a clarification on Foundry Logic in 26. Are you saying that's going to grow or are you just saying it's going to remain the largest part? I didn't quite understand. Maybe I missed that if that was asked already.

Both. Yes and yes. It will remain the largest part and it will also significantly grow. Okay, thank you.

Thanks, Rob.

The next question is from Stefan Houdin of OdooBHS.

Yes, hello. I just wanted to come back on the decision to stop giving the orders on a quarterly basis because, yes, indeed, some of your other players in the industry have done the same thing. but it seems to me that the volatility was not such a high volatility as for others, and that given your lead time, it was a good indicator. So what are you going to give apart from more granularity on the current level of sales? Thank you, and I have a follow-up.

Yeah, let me take that question, Stéphane. Actually, we have multiple, let's say, stakeholders that we have discussions with, gave suggestions that we should maybe, like our peers, stop with quarterly bookings because the risk of an overreaction is there. As we said already, it's not always demand-driven, but it's timing, good spacing, nothing else. So we see overreactions up if it's really good or overreaction down if it's really not good, which is not helping, of course, the stock increases volatility. So That's a key reason why we're stopping. On the other hand, I think with the hopefully improved transparency on segment information, that might help. We will continue with revenue guidance, of course, like we do today, and maybe some qualitative guidance if we believe that is necessary. So with that, I hope that you guys have enough to model and to come to a view on how we will develop in the coming period. But these have been the considerations, and based on that, we have made this call.

Okay. And what about the evolution of spares and services? It has been outgrowing the equipment parts in 2025, so what is your view on 2026? Thank you.

I think on 2026, I think with the fact that the fabs are at maximum capacity, we expect continued growth in 2026. The other thing, as the market moves more and more into more advanced nodes, we see the service part of our market also growing even higher than the rest because of the complexity of the equipment at the very high end note, which favor outcome-based services or solutions that are much more valuable and add more value to the customer. So I'm very optimistic also on the service market this year and in the future.

Thank you very much. Thank you, Stefan.

The next question is from Jacob Bluestone of BNP Paribas.

Hi, thanks for taking the question. Just on access, could you maybe just help us understand how you plan to cross-sell CMP tools and if you have any idea what share of your customers are currently already using CMP in their processes?

I think that for, I just want to make it very clear, for access as a company, I mean, it has a very low revenue. I mean, we're talking about revenue between 20 to 30 million euros. year. So this is the latest revenue they have in 2025. So this is a very small acquisition from this point of view. And we're going to leverage our expertise to help this technology, bring this technology to a larger customer from that point of view. But as I mentioned, this is all about technology buy. where we think that, okay, we can add some of our strengths into the CMP market. And if you look into CMP, it's C stands for chemical, mechanical polishing. And that chemical part, that really means chemistry. And that's where we play with. I think we have some idea on how to make the chemistry better, especially when you go into 3D integration, whereby the chemical part of the CMP becomes most predominant than the mechanical part, especially as you go to 3D. and the structure becomes more and more fragile from that point of view. So we think we can play a role there. We're going to see how it goes. But again, this is something that we think that we can improve. It's a very small proposition. I think it plays on our streets and going into a market that's growing a lot, which is the advanced packaging. So we're very excited to look into how can we make it even better and improve our penetration into the advanced packaging in the future.

Great. And just a quick follow-up as well on CapEx. Can you provide any commentary on CapEx? capex for 26 seconds, particularly in light of the expansion in Almira.

Yeah, no. So, um, as per our guidance from the investor today, I think it was 200 to 250 in years with expansion. So in 26 this year, it will mainly be capex related to, uh, to Scottsdale still. Um, And then very likely, as we see today, then in 2027, you will start to see the first raw material capex for Almere. Understood.

Thank you. Thanks, Jacob.

The next question is from Sandeep Deshpand of JP Morgan.

Hello, your line is open. Hi, thanks for letting me on. My question is back to the M&A you've done. I mean, has the policy of ASM changed at all with regards to M&A? You know, those of us who have covered the company for a long time, I mean, the company did a lot of M&A, then made a lot of exits. Now you've started doing M&A in a small way again. So has the overall policy towards M&A changed at ASM? And are there more areas apart from now the CNP acquisition that you've plan to do and does the company plan to become standalone players in this or is it just addition to existing tools which is probably a less risky proposition and so I just want to try to understand your thought process behind the M&A.

Yeah, no, so did it change? At least in the last five years it did not, although indeed we made three acquisitions in the last five years and in the ten years before that we made none. So from that point of view you could maybe think there is a change but I think it's not really a change because also before that, what I understand from my predecessor, they've looked at certain opportunities, but for whatever reason, they never materialized. So we look into M&A if we see an opportunity where we see clear value creating opportunities and that helps us to grow and build our position further in certain areas that we have labeled as important slash strategic to us. then we want to act. We did that now three times. There's always a very clear link to strengths that we have. It leverages, let's say, our strength with the capabilities of the company that we buy. It can build and leverage on our global network that we have. The logic, at least for the last three, have been actually exactly the same for Reno, for LPE, and now for CMP. And we will continue to scan the market. We have continuously said that. Our first priority in terms of capital allocation is growth. Number one is organic growth. That's why we continue to invest in R&D. Very important. And infrastructure expansion, as we explained. But the second is also inorganic. If we see true value-creating opportunities, we try to do it in a very disciplined manner. We're not throwing money away because we have it, no. We only do it if we truly believe that there is a medium to longer-term strategic play that can create a lot of value to us based on the capabilities that we have in combination with the target. So that did not really change as far as I'm concerned, isn't it?

Thanks. And a quick follow up. I mean, I think that a quick follow up, I mean, in terms of the earlier question on your improvement being seen in the logic slash foundry market earlier last year, you had talked about a slow start to 26. So did something change in the last few months in terms of the slow start that some key customers changed how the trajectory of how they're taking delivery of the tools or was this slow start is what you have already guided. This is the guidance and it was, you know, underplaying what the market expected. the market was underplaying what you expected.

I think absolutely it changed in the last two to three months. You've seen announcements from some of our customers that have significantly increased their outlook, especially a large family customer, which I think that's where it started with. We just explained the improved sentiment in China in combination with a pause of some of the export control measures that were initially put in place, but then paused, so some customers will take advantage of that. But at the same time, also clearly improved sentiment there. You read about the hyperscalers and their investments in data centers and infrastructure, hundreds and hundreds of billions. It's definitely a different situation in the last two, whatever, maybe three months than what we thought before. We always thought 26 would be still a good year, but starting in the slow, as you said, and then accelerating more towards whatever the second half of the year. But that acceleration that we had expected maybe somewhere in the course of the year literally starts now. So there's clearly a change, yes. Thank you.

Thanks, Sandeep.

The next question is from Tim Schultz-Melander of Rothschild and Company Redburn.

Great. Thank you so much for taking my questions. I have two, please, one for Hicham and one for Paul. The first one is just on the CMP business model, just with respect to consumables, slurry and pads. I know it's a small business, but is that going to be something that you provide or is that going to be provided by an external or a third party and then I had to follow up?

Okay, so to answer your question, okay, regarding the CMP part of the business and the acquisition. So as the technology in packaging moves more and more into high end, it's going to move from PCB to hybrid bonding in the future. Then what happens is that we're going to go to lower temperature processing, and the surface of the interface becomes very significant in the hybrid bonding part of the advanced packaging. So for such, interface control is very important. We have solutions, organic solutions, from our ALD know-how to engineer interfaces and engineer services. But also CNP is part of that whole process flow. And by definition, CNP also affects the surface of the deposition layers of the positive flow. So it's important for us also to understand how that flow that interface from CNP works with our deposition films that we develop in CBD and ALD to engineer a very clear interface. So I hope that's very clear from where we stand. This is a new market for us. This is a new market. And we try to understand this market very well. We have, as we mentioned, we have organic products offering there. This organic offering are in ALD, in the area of ALD. This organic offering are also in the area of CVD, like PCVD, but also this offering, the organic offering is also in the area of epitaxy and silicon photonics, where we also have some traction in those things. So, CMP plays a significant role in engineering the interface It's complementary to our deposition technology, and it's very important for ASM to really know how CMP also engineers the surface and interface in addition to the offerings that we have in deposition, both CVD and ALD. The next thing regarding the question that you have asked about slurry and so on and so forth. As I mentioned, the CMP part is moving more and more into the chemical part. So you have CMP, you're trying to polish. So polishing both with force, okay, that's the mechanical part, but also the chemistry, which is the slurry and so on and so forth. And that slurry thing or the chemical part is becoming much more important than the mechanical part because of the 3D drive that's happening in our device. And when you talk about advanced packaging, you're going to put things on top of each other. And you also have wafers that are very thin. They are very brittle. So you cannot put too much force. So the chemical part becomes much more important. We are a company that knows a lot about chemistry and chemistry. We have know-how and knowledge in that, which we have applied for ALD and other parts, and we think we can do the same for the CMP part of the business.

Great. That's very clear. Just moving on to Paul, I sincerely appreciate the improved disclosures. For one, I'd probably request for a quarterly rather than a semi-annual disclosure. But the disclosure improvement is much appreciated. I just wanted to ask about the cost saves and the run rate and just kind of get a sense as to kind of what the exit rates were or are for 25 coming into 26 and maybe just trying to think about the cost savings contribution and how that might scale or how that sizes relative to the increase in R&D, which I think your guiding is going to, on a gross level, rise by about 40, 45 million. I just wanted to get a sense of maybe the extent to which cost saves might offset, how much of that they might be offsetting. Thank you.

Are you specifically referring to SDNA and R&D or also to cost of goods?

I'm referring to the broad A to Z cost savings and efficiency programs that you guys have across the company and just trying to scale those relative to the specific cost increase that you're guiding for in the gross R&D spend.

So on the real cost savings, that's more, let's say, margin related where we have explained before on the For instance, the standardized platforms. We have more and more products now that are qualified by customers based on standardized platforms, which have a better cost structure, lower cost structure, and more common parts, etc., which leads to cost reduction, but also to a reduction of complexity in terms of logistics. It will lead to somewhat improved inventory simply because of more commonality. I'm not going to give you a number there, but it's a meaningful improvement, let me say it like that. The other part, but also that will go slow, so every year you will see some benefit there, is the MIT that we talked about before, the Merchant Transit, where we don't have everything come to Singapore first, assembled and tested, but have the platform go straight to the customer, the process chamber that comes from Singapore, then straight to the customer and assemble it there and test it there, which gives one big step, which is also a big improvement. Of course, we have value engineering initiatives on our products. We have material cost savings, commercial savings. There's a cross-board savings going on on the R&D part. There, I mean, the name of the game is selecting the rights priority from the many priorities and many opportunities that we see which of course to a large extent are based on the the overall market opportunity that we see and whether or not we can have a differentiated composition or not but it's not so much about saving costs although we try to be very efficient of course in what we do there for sgna is literally doing more with less so so we grow and grow but we want to automate more we want to make our processes better We want to leverage AI better, so there, instead of just adding people more and more, it's all about doing more with less and do maybe more with the same, to be honest, to support this growth without adding too much cost. So every line has a different dynamic, if you wish. That's very helpful. Thank you.

Thank you, Tim.

The final question is from Mark Hessling of ING.

Yes, thanks for taking the question. First, it's a follow-up on market share in memory. I think now you very clearly state that whatever the industry of WV is doing, you expect to be growing faster. So does that also imply that in the more advanced parts of the memory market, your market share is getting closer to the market share that you have in the advanced logic foundry?

Let me take this, Mark. No, absolutely not. I wish. Because then we would be looking at very different numbers. No, no. So what I think we try to say is that on the small revenue base that we have today in memory, we expect significantly growth, significant growth, even more as a percentage than in advanced logic finding. Having said that, form 26 we also expect significant growth in particular in advanced logic foundry maybe a little bit less maybe as a percentage than DRAM but still very high if that growth would let's say change significantly during the year the percentage so that advanced logic foundry if we don't expect that this scenario would grow much and DRAM would soundly go even more and stronger than we are today, then the statement that we make would become maybe invalid because if all the growth would be in DRAM, of course, we would not be saying what we were saying. But also, we say what we say because we believe that also the growth in advanced logic foundry will be very significant. That is the reason why we say what we say.

Okay, that's clear. And then my second question is on It's more of an organizational question. So you're adding R&D capacity, you're adding, you have introduced a new IT system, you have now a new board member. With the growth of the company, you're adding this kind of, let's call it another layer of professionalization within the company. Is that the way to look at it? Is there more to come? And is there more that you have to scale in the coming years given the high growth that you have going forward and what you had in the past?

Maybe one small adjustment, Mark. We did not add a new board member. There's a new EXCO member, so senior leadership. It's not a management board member. The Gary that we talked about is an EXCO member. I think what we're doing is we have, actually this is something that's happening for many, many years in a row, Of course, we're trying to professionalize the company and trying to get ready to scale the company in an efficient and effective manner. So, for instance, the new EOP system, which we have globally implemented through a big bank, is, let's say, the foundation for further, let's say, growth in a more automated fashion, in a more productive way than we would have been able to do without this. Because with the previous system, we had to do much more manual work than what we can do today as an example. Also, AI applications, we can leverage better with the foundation that we put in place now than what we would have been able to do without this foundation. So yes, it's all about scaling. Yes, it's about professionalization of the organization. So I'm not sure if that answers your question, but this is... what I can say.

Yeah, the question was also a bit, is there more to do on this side? I mean, I think we had quite some announcements over the past few years. Is that a large part behind it now, or are you still taking another steps here?

Yeah, I'm not sure what you're referring to, because so many announcements I don't think we've had. I mean, we have an Expo, we have a number of KPUs, We professionalize our way of working, which I guess every company does. So we will continue to do that. We will not stop. It's not like, okay, from now on she will not see any announcement anymore. But, yeah, I think what we do is for the reasons that I just tried to explain, is to scale the company in a controlled, professional, and highly productive manner. That's what we are trying to do.

Okay. Thanks. That is clear. Thank you, Mark.

That was the final question. I will turn it back over to the CEO for any closing remarks.

On behalf of Paul and Victor, I would like to thank everyone for attending today's call. We hope to meet many of you guys very soon in the upcoming investor events. Thanks again and goodbye.