ASML Posts €32.7B Revenue, 29.4% Margin vs Arm's $4.9B

ASML Holding N.V. reported full-year 2025 revenue of €32.7 billion, a significant increase from €28.3 billion in the prior year. The lithography specialist achieved a net income of €9.6 billion, resulting in a net profit margin of 29.4%. This performance underscores the company’s dominant position as the sole provider of extreme ultraviolet machines required for advanced chip manufacturing.

In contrast, Arm Holdings reported fiscal year 2026 revenue of $4.9 billion, marking a 22.8% year-over-year increase. The architecture licensor posted a net income of $904 million, yielding a 18.4% net margin. While both companies are critical to the semiconductor supply chain, ASML captures value through high-volume hardware sales, whereas Arm relies on a royalty-based licensing model for its compute platforms.

ASML shows superior profitability metrics

ASML’s financial structure reflects strong operational efficiency with a debt-to-equity ratio of 0.1x and a current ratio of 1.3x. The company generated €11.1 billion in free cash flow during the period, demonstrating the ability to fund operations and capital expenditures without excessive reliance on external financing. This cash generation supports ongoing research and development for next-generation lithography systems.

Arm Holdings maintains a similarly low debt-to-equity ratio of 0.1x but exhibits a much higher current ratio of 6.0x. Free cash flow reached $979 million, although this figure is inflated by stock-based compensation, which accounted for approximately 69% of operating cash flow. The high current ratio indicates a conservative liquidity position, providing substantial coverage for short-term liabilities.

Arm faces distinct market risks

Arm’s business model is heavily dependent on the smartphone sector, where its technology powers over 99% of global devices. This concentration creates vulnerability to shifts in consumer electronics spending and competition from open-source architectures like RISC-V. The company is attempting to mitigate this risk by expanding its licensing reach into data center CPUs, reducing reliance on mobile device volumes.

Valuation gaps highlight investor sentiment

Market participants assign a significant premium to Arm Holdings relative to ASML, reflecting different growth expectations. Arm trades at a forward price-to-earnings ratio of 125.0x and a price-to-sales ratio of 57.3x, according to data cited by Yahoo Finance. ASML commands a lower multiple, with a forward P/E of 27.9x and a P/S ratio of 16.5x, suggesting investors view its earnings potential as more grounded in current hardware demand.

ASML faces geopolitical headwinds, particularly export restrictions on high-tech equipment to China, which may limit addressable market growth. Additionally, the cyclical nature of semiconductor capital expenditure exposes the company to order delays during industry downturns. Arm’s risk profile, conversely, is driven by technological obsolescence and the pace of adoption for its newer server architectures.