ASML's Installed Base Management Business Picks Up: What's Driving it?

Core Insights - ASML Holding's upgrade and service business has significantly contributed to its Installed Base Management (IBM) segment in the first half of 2025 and has remained robust through Q3 2025 [1][10] - The company has made notable progress in field upgrades of NXE:3800E systems, maintaining strong IBM business performance in the second half of 2025 [2][3] - ASML anticipates IBM business revenues of €2.1 billion in Q4 2025, with overall revenues projected between €9.2 billion and €9.8 billion, indicating a sequential increase of 26.3% [4][10] Business Performance - The IBM segment's strength in early 2025 was primarily upgrade-driven, while the latter half saw a shift towards recurring service revenues, driven by an expanding Extreme Ultraviolet (EUV) Lithography installed base [3] - ASML's transition into sub-2nm production with High Numerical Aperture (High-NA) EUV systems is expected to further enhance IBM business in 2026 [3] Competitive Landscape - ASML is the sole player in lithography system upgrades for its installed base, particularly in the EUV sector, while competing with companies like Lam Research and Applied Materials in the broader semiconductor equipment market [5] - Lam Research is gaining traction in the memory segment, benefiting from AI advancements [6] - Applied Materials provides essential equipment for chip fabrication, aiding in the production of complex chips for AI and high-performance workloads [7] Financial Performance - ASML shares have increased by 54.3% over the past six months, outperforming the Computer and Technology sector's growth of 19.2% [8] - The company trades at a forward price-to-sales ratio of 12.58X, which is higher than the sector average of 7.46X [11] - The Zacks Consensus Estimate indicates year-over-year earnings growth of 39.7% for fiscal 2025 and 4.3% for fiscal 2026, with recent upward revisions in estimates [14]