François Bouvignies

François Bouvignies from UBS asked CEO Christophe Fouquet if the industry's current rush for capacity on existing nodes could delay High NA adoption, as customers might be too busy to integrate new technology. He then asked CFO Roger Dassen about the implications of China being 20% of 2026 revenues (implying a 20-25% YoY DUV decline), and how DUV flat guidance for 2026 means non-China DUV would need to grow 40%. He also questioned the disconnect between non-China DUV and EUV growth in 2025, despite a previously stated strong correlation, and if a catch-up is expected in 2026.

Answer

CEO Christophe Fouquet stated that the High NA adoption plan, with its three phases (R&D, qualification, insertion), provides ample time for proper integration, and the current capacity acceleration is focused on existing, known technologies, thus not posing a risk to High NA delays. CFO Roger Dassen acknowledged that 2025 non-China DUV was disappointing but noted a reversal in the latter months of 2025 that is expected to continue into 2026. He explained that customers often prioritize long lead-time EUV and maintain more flexibility with shorter lead-time DUV.

François Bouvignies asked if the current industry rush for capacity in advanced logic and memory could delay High-NA adoption, as customers might prioritize existing, known technologies over new transitions. He also questioned the implied non-China DUV growth needed to achieve flat DUV revenues in 2026, given China's expected decline and the disconnect between non-China DUV and EUV growth observed in 2025.

Answer

Christophe Fouquet, CEO, stated that the current capacity acceleration focuses on existing nodes, while High-NA preparation for future nodes is planned to allow proper insertion without being sensitive to short-term capacity fluctuations. Roger Dassen, CFO, acknowledged the disappointing non-China DUV business in 2025 but noted a reversal in the last months of the year, which is expected to continue into 2026, driven by leading customers catching up on shorter lead-time DUV investments.

François Bouvignies asked about the positive news flow reducing uncertainty, seeking elaboration on ASML's improved visibility for 2026 regarding customer capacity needs and layer adoption, and whether this is based on concrete numbers or extrapolation from market sentiment. He also inquired about the visibility on the significant decline in China revenue for 2026, questioning if it's conservatism or a full picture given DUV lead times.

Answer

CEO Christophe Fouquet explained that positive news on AI infrastructure creates a positive backlog of opportunity, with more customers benefiting from AI, which is good for long-term market capacity. He noted that only part of this will affect 2026. Regarding China, Mr. Fouquet stated ASML has consistent clarity, expecting a return to more reasonable business levels in 2026 after a very high cycle in the past two years.

François Bouvignies asked about NXP's comfort with typical Q1 seasonality (high single-digit decline) given current visibility, assuming no stockpiling and stabilizing demand. He also questioned the drivers behind the Q4 gross margin increase, the implications of high inventory levels on future gross margins, and the company's strategy for managing gross margin directionally.

Answer

Rafael Sotomayor, President and CEO, indicated that modeling pre-COVID seasonality (high single-digit decline) for Q1 2026 would be reasonable, citing a favorable setup into 2026 with automotive inventory normalization and demand improvement in Industrial & IoT. Bill Betz, CFO, attributed the Q4 gross margin increase to higher revenues, improved operational costs, and higher utilizations, partially offset by unfavorable product mix. He noted that Q1 2026 would see normal seasonality and annual price negotiations, with NXP aiming for its 57-63% long-term gross margin model in 2026 through revenue levels, utilizations, and cost reductions. Mr. Betz also explained that Q3 inventory at 161 days was due to staging for Q4 growth, late orders, customer escalations, and 200mm consolidation pre-builds, expecting similar levels in Q4.

François Bouvignies inquired if NXP is comfortable with typical Q1 seasonality (high single-digit sequential decline), assuming no stockpiling and stable demand, given Rafael Sotomayor's comments on low automotive inventories and broad-based improvements. He also asked CFO Bill Betz about the gross margin direction post-Q4, considering high inventory and loading, and the factors influencing it.

Answer

President and CEO Rafael Sotomayor stated NXP is optimistic about the setup into 2026, with auto inventory normalization and Industrial/IoT demand improvement. While not guiding Q1, he suggested modeling pre-COVID seasonality (high single-digit decline) as reasonable. CFO Bill Betz attributed the Q4 gross margin increase to higher revenues, improved operational costs, and higher utilizations, partially offset by unfavorable product mix. He noted Q1 2026 would see normal seasonality and annual price negotiations, which NXP aims to offset with cost reductions. Mr. Betz expects NXP to remain within its 57-63% long-term gross margin model for 2026, with further lifts beyond 2027 from hybrid manufacturing. He also detailed NXP's inventory strategy, staging products for Q4 growth and managing for late orders and customer escalations.