ASML Announces 2006 Second Quarter Results, Record Sales and Profit

-- Net sales of EUR 942 million versus Q1 2006 at EUR 629 million

-- Operating profit of EUR 238 million or 25.2 percent of sales versus Q1 2006 at EUR 114 million or 18.2 percent of sales

-- Net profit of EUR 167 million or 17.7 percent of sales versus Q1 2006 at EUR 80 million or 12.7 percent of sales

-- Cash generation from operations of EUR 330 million, of which EUR 253 million was used for share buyback program

-- Net bookings valued at EUR 1,083 million with 93 systems including 78 new and 15 refurbished systems versus Q1 2006 net bookings of 62 systems including 47 new and 15 refurbished systems

"ASML continued its strong execution in Q2 2006, marking a recordquarter for sales and profit, while bookings grew 50 percent above Q1level," said Eric Meurice, president and CEO. "We further increasedour technology lead this quarter by bringing to market eightTWINSCAN(TM) XT:1700i immersion systems, the industry's only availableimmersion system capable of 45-nanometer volume manufacturing. ASMLhas now shipped a total of 21 immersion systems to date, enabling ourcustomers' continuous progress with immersion process development. Wealso reinforced our market position in Japan where we currently havethree immersion systems installed."

Operations Update

In Q2 2006, net sales increased by 23 percent year-on-year and 50percent from the previous quarter to EUR 942 million as ASML shipped58 new and 14 refurbished systems for sales of EUR 841 million andgenerated revenue from field option and service sales of EUR 101million. In Q1 2006, ASML shipped 39 new and 12 refurbished systemsfor sales of EUR 553 million and generated revenue from field optionand service sales of EUR 76 million.

The average selling price for a new system in Q2 2006 increased toEUR 13.7 million from EUR 13.5 million in the previous quarter. Theaverage selling price for all ASML systems sold in Q2 2006 increasedto EUR 11.7 million from EUR 10.8 million in the previous quarter,also due to a higher percentage of new systems in the Q2 2006 mix.

Q2 2006 net bookings versus Q1 2006 increased by 50 percent to 93systems valued at EUR 1,083 million, including 78 new systems with anaverage selling price of EUR 13.2 million.

As of July 2, 2006, ASML's backlog value was EUR 1,830 millionwith 127 systems and an average selling price of EUR 14.4 millioncompared with April 2, 2006 backlog value of EUR 1,596 million with106 systems and an average selling price of EUR 15.1 million. The Q2backlog's lower average selling price is due to a higher number ofi-line and KrF systems in the product mix to satisfy customer capacityrequirements.

Gross margin was 40.4 percent in Q2 2006 versus 40.0 percent in Q12006. Operating profit was EUR 238 million in Q2 2006 versus EUR 114million in Q1 2006. Net profit in Q2 2006 increased to EUR 167 millionor EUR 0.35 per ordinary share.

Q2 2006 research and development (R&D) costs were EUR 92 millionnet of credit, an increased investment compared with Q1 2006 R&D costsof EUR 87 million, to sustain ASML's technology leadership and enablegrowth.

Selling, general and administrative (SG&A) expenses remained flatat EUR 51 million in Q2 2006 compared with Q1 2006, while Q2 2006sales increased by 50 percent in the same period.

ASML generated cash from operations of EUR 330 million in Q2 2006resulting from increased net profit and continued tightly managedworking capital. As previously disclosed, ASML's share buyback programthat was announced on April 19, 2006 was completed on July 13, 2006 ofwhich EUR 253 million has been paid in Q2 2006. ASML ended Q2 2006with EUR 1,731 million in cash and equivalents, an increase of EUR 60million compared with the previous period.

In June, 2006, ASML achieved top customer satisfaction ratingsamong large suppliers of semiconductor wafer processing equipment,according to VLSI Research, an independent industry research firm thatsurveyed customers representing 95 percent of the world's totalsemiconductor market. ASML's satisfaction ratings by customerssurpassed every lithography competitor for the fourth year in a row.

Outlook

"ASML expects unit bookings in Q3 2006 to be higher than Q3shipments. Driving this expected strong performance are theintroduction of our XT:1900i immersion product featuring 40-nanometerresolution, a relatively strong demand from the market, particularlymemory customers, and anticipated market share gains as we ramp newvolume customers and further penetrate the i-line segment with theXT:400 product range," said Eric Meurice. "Our robust Q2 backlog andQ3 2006 order expectations are supported by the need for additionalsemiconductor production capacity, consistent with industry analystestimates of 2006 semiconductor growth of 10 percent in value and 15percent in units overall, and capacity build-up for strong flashmemory growth in 2007."

ASML expects to ship 62 systems in Q3 2006 with an average sellingprice of EUR 14.5 million for new systems and an average selling pricefor all systems of EUR 12.5 million. Eighty-eight percent of the unitbacklog has Q3 and Q4 2006 shipment dates, supporting a gross marginin Q3 2006 between 39 and 41 percent.

As announced last week, ASML will ship its 500th TWINSCAN systemduring Q3 2006, demonstrating the acceptance of the unique andinnovative dual-stage TWINSCAN platform as the industry's platform ofchoice for 300-millimeter wafer manufacturing.

The company reiterates its forecast for 20 to 25 shipments of ASMLimmersion systems in 2006, preparing for customers' semiconductorvolume production ramp toward late this year or early in 2007. Thecompany also confirms that it will ship two Extreme Ultra Violet (EUV)Alpha Demo Tools in Q3, establishing another industry first for ASML.

Supported by ASML's current financial performance, R&D expenses inQ3 2006 are expected to increase to EUR 100 million net of credit fromEUR 92 million in the previous quarter as the company accelerates newdevelopments, an operating decision made possible by leveraging itssuccessful outsourcing strategy. This strategy enables ASML to rapidlyand efficiently adapt its cost structure throughout a cycle, whilecontinuously reinforcing its technology leadership.

SG&A expenses in Q3 2006 are expected to remain at EUR 51 million.

As previously disclosed, ASML has a principal amount of USD 575million of 5.75 percent convertible subordinated notes due October 15,2006. In case these notes were to convert, resulting funds could beused for additional share buyback.

About ASML

ASML is the world's leading provider of lithography systems forthe semiconductor industry, manufacturing complex machines that arecritical to the production of integrated circuits or chips.Headquartered in Veldhoven, the Netherlands, ASML is traded onEuronext Amsterdam and Nasdaq under the symbol ASML. For moreinformation, visit the Web site at ASML.com.

IFRS Financial Reporting

ASML's primary accounting standard for quarterly earnings releasesand annual reports is US GAAP, the accounting standard generallyaccepted in the United States. Quarterly US GAAP statements ofoperations, statements of cash flows and balance sheets, and areconciliation of net income and equity from US GAAP to IFRS areavailable on ASML.com.

In addition to reporting financial figures in accordance with USGAAP, ASML also reports financial figures in accordance with IFRS forstatutory purposes. The most significant differences between US GAAPand IFRS that affect ASML concern the capitalization of certainproduct development costs, the accounting of stock option plans andthe accounting of existing convertible bonds. Quarterly IFRSstatements of operations, statements of cash flows, balance sheets anda reconciliation of net income and equity from US GAAP to IFRS areavailable on ASML.com.

Investor and Media Call

A conference call for investors and media will be hosted today byCEO Eric Meurice and CFO Peter Wennink at 15:00 PM Central EuropeanTime / 09:00 AM Eastern US time. Dial-in numbers are: in theNetherlands +31 20 531 5871 and in the US +1 706 679 0473. Access isalso via ASML.com to listen to the conference call.

A presentation about 2006 second quarter results is available onASML.com.

A replay of the Investor and Media Call will be available onASML.com until August 21, 2006.

Forward Looking Statements

"Safe Harbor" Statement under the US Private Securities LitigationReform Act of 1995: the matters discussed in this document may includeforward-looking statements that are subject to risks and uncertaintiesincluding, but not limited to: economic conditions, product demand andsemiconductor equipment industry capacity, worldwide demand andmanufacturing capacity utilization for semiconductors (the principalproduct of our customer base), competitive products and pricing,manufacturing efficiencies, new product development, ability toenforce patents, the outcome of intellectual property litigation,availability of raw materials and critical manufacturing equipment,trade environment, the prevailing market price for ASML shares, andother risks indicated in the risk factors included in ASML's AnnualReport on Form 20-F and other filings with the US Securities andExchange Commission.