ASM International (OTC:ASMIY) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=NaDtdlpN
Summary
ASM International reported Q1 2026 revenue of 863 million euros, a 16% increase year-on-year and 26% quarter-on-quarter growth, driven by strong performance in logic foundry and memory segments.
The company’s gross margin remained robust at 53.3%, supported by a favorable product mix and cost reduction initiatives, with expectations for margins to remain at the higher end of the 47-51% target range for the year.
Strategically, ASM International is focusing on AI-driven semiconductor demand, with plans to expand in advanced packaging and maintain strong momentum in advanced logic foundry and memory sales.
The company anticipates revenue growth in Q2 2026 to approximately 980 million euros, with the second half of the year expected to be stronger than the first.
Management highlighted ongoing supply chain challenges but expressed confidence in managing these issues while also benefiting from increased demand, particularly in China and the advanced logic foundry sector.
Full Transcript
Victor Barinho (Head of Investor Relations)
Thank you, operator. Good afternoon and thank you for joining our Q1 earnings call. With me today are our CEO Misha Massad and our CFO Paul Hagen. ASM issued its first quarter 2026 results yesterday at 6:00pm 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 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’ll now turn the call over to our CEO, Hisham.
Hisham
Thank you Victor and thanks to everyone for attending our first quarter 2026 results conference call. We’ll 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 and A session. I will now turn it over to you, Paul.
Paul Hagen (Chief Financial Officer)
Thank you Sam 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 863 million euro, which was at the high end of our guided range of 830 million plus or minus 4% on a constant currency basis. Revenue increased by 16% year on year and by 26% compared to Q4 2025. Equipment sales increased by 14% at constant currency and were left by ALD, Spares and Services continued to deliver 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 stronger spares demand in an environment of elevated FAB utilization rates. In terms of customer segments, revenue is 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 largest 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 are 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 mixed including an increased sales contribution from China which rebounded 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 as GA 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 own growing focus on cost control. For the full year, we continue to expect as a generated percentage of sales to drop below 9%. Net RMB increased 11% year on year at constant currency. In Q1, We 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 the currency translation gain of 10 million euro in Q1.26 compared to a translation loss of 14 million in the first quarter of last year As a reminder, we hold a large part of our cash in US 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 7 million euros in the first quarter, up 2 million euro in the year ago period. 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 billion. Free cash flow was 48 million euros, negative, mainly reflecting a working capital outflow and a 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 38 million Euro in the first quarter, up from 13 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 150 to 250 million Euro, 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 hichemen.
Hisham
Thank you Paul let’s now continue with the 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 buildout. 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 larger quantity, 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 on 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 700 million euro in Q4 of last year to a level approaching 1 billion euros 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 continue to increase ALD and epitaxy intensity. As we progress through the year, we expect momentum to build further with ongoing capacity addition at 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 computer 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 broadened position in epitaxy 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 of 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 into high volume manufacturing. With GATE all around now in production and ramping, customers have more room to include additional performance boosters and for asm that translates into more functional layer 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 suggests 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 high volume manufacturing in 2027 and 2028, we expect 1.4 nanometer 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 and D engagement in memory continue to expand, including development work around new ALDI and epitaxy applications that support the transition to 4F Squared and PERI FinFET DRAM. As we highlighted at investor day, the transition to 4X Squared is expected to drive a step up in ALD and epitaxy intensity and expand our served available market by approximately 400 to 450 million USD based on 100k 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 industrials. That said, we have seen some pockets of strength in selected area, particularly in power application 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 strengths. 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 980 million Euro 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.
Paul Hagen (Chief Financial Officer)
Thank you, Hisham. Let’s now move on to the Q&A and A session 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
Thank you. This is the Chorus Call conference operator we will now begin the question and answer session. Anyone who wishes to ask a question may press N1 on their touchtone telephone. To remove yourself from the question queue, please press N2. Please pick up the receiver when asking questions. Anyone who has a question may press N1 at this time. We will pause for a moment as participants are joining the queue. First question is from Andrew Gardiner, City
Andrew Gardiner (Equity Analyst)
Good afternoon, Hisham Good afternoon Paul. Thanks for taking the question. Hisham, if I could 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 isn’t perfect to quantify it for us yet. Previously you’d been willing to talk about your performance relative to the wafers have 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? Thank you.
Hisham
Thank you very much for the question. Yes, we talked about that in our previous conference call that we were going to at least perform as good as the Wafer Fab Equipment (Wafer Fab Equipment (WFE)) market or better. Yes, we have seen improvement in the WFE market. I mean we follow very closely what Gartner and VLSI 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 …
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