BE Semiconductor Industries NV

AEX:BESI

Q3-2025 Earnings Call

[Operator]

Good morning, good afternoon, ladies and gentlemen, and welcome to Besi's conference call and audio webcast to discuss the company's 2025 third quarter results. You can register for the conference call or log into the audio webcast via Besi's website, www.besi.com.

Joining us today are Mr. Richard Blickman, Chief Executive Officer; and Mrs. Andrea Kopp, Senior Vice President, Finance. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded and cannot be reproduced in a whole or in part without permission from the company.

I will now hand the word over to Mr. Richard Blickman, Mr. Rich Blickman, go ahead.

[Richard Blickman, executive]

Thank you. Thank you all for joining. I'd like to remind everyone that on today's call, management will be making forward-looking statements. All statements other than statements of historical facts may be forward-looking statements. Forward-looking statements reflect Besi's current views and assumptions regarding future events, many of which are, by nature, inherently uncertain and beyond Besi's control. Actual results may differ materially from those in the forward-looking statements due to various risks and uncertainties, including, but not limited to factors that are discussed in the company's most recent periodic and current reports filed with the AFM. Such forward-looking statements, including guidance provided during today's call speak only as of this date. Besi does not intend to update them in light of the new information or future developments nor does Besi undertake any obligation to update the forward-looking statements.

For today's call, we'd like to review the key highlights for our third quarter and 9 months ended September 30, 2025, and update you on the markets, our strategy and outlook. First, some overall thoughts on the third quarter. Besi reported Q3 '25 revenue and operating results within prior guidance in an assembly equipment market showing early signs of recovery. Order levels improved significantly Q3 '25 with bookings of EUR 174.7 million, increasing by 36.5% and 15.1% versus Q2 '25 and Q3 '24, respectively. For the quarter, revenue decreased by 10.4% and 15.3% versus Q2 '25 and Q3 '24, respectively, reflecting continued weakness in mainstream assembly markets, particularly mobile and automotive applications and lower hybrid bonding revenue.

Operating income was at the high end of guidance, reflecting higher-than-anticipated gross margins and operating expense developments, slightly better than forecast. The improved order outlook this quarter was principally due to a broad-based increase in die attach bookings by Asian subcontractors for mostly 2.5D data center applications and renewed capacity purchases by leading photonics customers. We also noticed improvement in more mainstream electronics and automotive applications. A push out to Q4 '25 of certain anticipated hybrid bonding bookings limited even stronger order development during the call -- during the quarter.

Besi's results for the first 9 months of 2025 reflected similar trends experienced in Q3 '25 with revenue of EUR 425 million and orders of EUR 434.6 million, decreasing by 6.4% and 6.5%, respectively, versus the comparable period of the prior year. In general, weakness in mobile and automotive applications this year has been partially offset by significantly increased die attach orders by Asian subcontractors for AI-related computing applications. Year-to-date '25, net income of EUR 88.8 million decreased by 27.6% versus the comparable 2024 period, primarily due to lower revenue, lower gross margins realized principally due to adverse ForEx effects, and higher interest expense net related to our senior note issuance in July '24.

Liquidity remained strong with cash and deposits of EUR 518.6 million, at September 30, increasing EUR 28.4 million or 5.8% versus June 30 this year, due to cash flow from operations more than doubling versus the second quarter of this year. In addition, we completed our EUR 100 million share buyback program, October '25, and authorized a new EUR 60 million program with an anticipated completion date of October 2026.

Next, I'd like to discuss the current market environment and our strategy. TechInsights currently forecasts assembly market growth of 1.8% in 2025, which is below last quarter's forecast of 9%, driven by a push out of the anticipated assembly upturn to 2026. Forecast growth is focused primarily on AI and data center logic and memory applications. TechInsights now expect cumulative growth in the period 2026-'29 of 42% based on continued advancements in AI use cases, new product introductions in the 2026-'28 period, and a cyclical recovery in mainstream assembly applications. We expect to exceed market growth rates given our leadership position in advanced packaging.

The semiconductor market has shown signs of normalization with inventory to booking ratios improving from above 2 in 2022 to below 1.5 currently. In addition, interconnect unit growth has also rebounded, improving from a low of roughly minus 20% in October 2023 to approximately plus 7% currently. These indicators point to a more positive assembly equipment environment as we look ahead to 2026.

Besi continued to make progress in its wafer-level assembly activities in the third quarter, securing new customers and orders for both its hybrid bonding and TC Next systems. Hybrid bonding adoption expanded with the placement of orders in the third quarter '25 by a new foundry customer. Progress also continues on integrated hybrid bonding production lines with internal operating 6 Kinex lines with 30 hybrid bonding tools. Future hybrid bonding demand is also supported by recent announcements from AMD and Broadcom in collaboration with OpenAI.

In addition, high-level discussions with major memory players are ongoing as HBM4 assembly processes start to take shape. TC Next progress continued with the new order received from a fourth customer. The outlook for Besi's business in the second half of this year has improved based on third quarter order trends and continued order momentum to date in the fourth quarter.

The improved outlook reflects increased demand for advanced packaging capacity necessary to support the rapid expansion of data centers, software and next-generation semiconductor devices required by the industry-leading AI players. Advanced packaging is one of the key ways to achieve AI system differentiation, develop innovative consumer edge AI devices and provide the most energy-efficient data center performance.

Now a few words about our guidance. For the fourth quarter this year, we anticipate that revenue will increase by approximately 15% to 25% versus the third quarter of this year, due to increased bookings levels. Besi's gross margin is anticipated to range between 61% and 63%. Operating expenses are expected to increase by 5% to 10% versus the third quarter due primarily to higher R&D expenses.

That ends our prepared remarks. I would like to open the call for questions. Sorry, operator.

[Operator]

[Operator Instructions] Our first question comes from Didier Scemama from Bank of America.

[Didier Scemama, analyst]

I just wanted to ask you a bit more about 2 things. The usual questions really. On the hybrid bonding and TCB Next side, maybe just give us a sense of your conversation with foundry customers, but also DRAM customers. How you're thinking about the bookings for those type of tools in the fourth quarter? And then also related to the point you made earlier on this recent announcement by OpenAI and AMD. We know that AMD has been a major customer of your hybrid bonding systems via TSMC. Can you tell us a little bit more about that whether the capacity is in place or whether you expect a material improvement in orders from TSMC to support that ramp?

[Richard Blickman, executive]

Thanks, Didier. If you allow me not to go into specific customers, I'm very happy to answer a bit more in general terms. First of all, the hybrid bonding adoption for logic is continuing quarter-by-quarter. And we see that with adding another customer with several machines. And also as we guide for the fourth quarter, we expect orders. One is a larger one, as we have discussed also in the previous call and that may be related to those end products, which you just referred to.

At the same time, the adoption for HBM stacking is all pointing towards a critical evaluation year 2026. The big 3 in that market -- all 3 of them have publicly announced that hybrid bonded devices should be available in their program by the end of next year. So that will be, as we have expected for many years, 2026-'27, that should be the adoption time using this hybrid bonding technology with all its advantages versus the TC solutions, so reflow and clarity, we will share as quarters go on, and that should result in probably first orders for some initial capacities.

The orders received so far, as we shared in previous quarters are from 2 of the 3, who are evaluating in many different designs using the hybrid bonding technology stacking the 12 and 16, and they even go up much further, simply to achieve data on a comparable basis, on performance and of course, on cost. So that's the bigger picture in those 2.

Then the chiplet architecture, adding more different devices and different structures is also continuing. And we see ever more customers. So if you look at the total count now, around 16, having hybrid bonders for different type of applications, and all developing applications in early stages apart from the major volume in Taiwan and what we also discussed the capacity having been set up in the U.S. by one customer, but the others are testing, qualifying and publishing data on using the hybrid bonding. So that's for the hybrid bonding.

If we look at TC Next, the key issue in TC are basically there are 2 issues. One is going to a fluxes solution. Our system is prepared for adding that to the system. And at the same time, more accuracy required for bond pad pitches below 20 micron. Recent additional data has been published by IMEC in Belgium, that on our system, successful products have been refloat down to below 10-micron bond pad pitch, even 7-micron bond-pad pitch. So that should fill the gap between the necessary hybrid bonding and the reflow process as the world is using today above 20-micron bond pad pitch. And as you can see, another customer has been added, they all prepare for those 2 criteria required for next-generation TC.

[Didier Scemama, analyst]

Very well. As a follow-up, I just wanted to check also another thing. So my understanding is that this OpenAI AMD chip and let's forget the name of the customer, but it's 3, if not 2-nanometer design. So are you ready to ship your 25-nanometer accuracy system in support of that customer? And I've got a quick follow-up as well.

[Richard Blickman, executive]

Well, for hybrid bonding, the current, let's say, the majority of systems shipped so far is 100-nanometer accuracy. And the 50 will be shipped for evaluation, qualification towards the end of this year. And that is in preparation for design structures below 2 nanometers as we understand from customers. So that's still some time out. Today, it's all 100-nanometer basically the benchmark technology used for many applications and not just for 1 customer. So we will see in the course of the coming quarters, a broader adoption for different types of devices and one of them has been announced publicly and the MI450. There's also a next one above 500, and they all use hybrid bonding as far as we are informed.

[Didier Scemama, analyst]

Perfect. And then my final question, Richard, at this time of the year, it depends sometimes it's in Q4, sometimes it's in Q1, you start to get a feel for some flagship smartphone design upgrades, which typically leads to orders for you guys? Any feel for what it could mean for the new models that come in the later part of '26. Could that be orders for you in Q4 or in Q1? Or is it too early to say?

[Richard Blickman, executive]

No. The typical pattern for these new models is ordering Q4, Q1 with then market launch in September. So delivery of systems in June, for qualification July, August. So we should understand much more in Q4 and when we released the numbers in Q1 end of February, where this is heading. So if you follow the public domain, there's a lot of information about what will happen in this next generation, probably different cameras, also foldable. That means different design of the infrastructure in these units, and that could lead to a next round. But also this year in the generation for 2025, many let's say volume related, but also slightly new versions in these modules in these phones have led to a very positive business, albeit at lower levels than at the peak years 2021, '22.

So the key is to understand what really changes, our new machines required. And as soon as new machines are required, that means an extra round. Currently, you can simply conclude that a lot is being manufactured on systems already installed. And in many cases, retrofits have done the job in bringing successful the latest models to market.

[Operator]

Our next question comes from Sandeep Deshpande from JPMorgan.

[Sandeep Deshpande, analyst]

My question is regarding your business with older customers, such as in the smartphone market, the autos market, et cetera. There seems to be some signs of life in the smartphone market. But the question I have is that will those signs of life translate into orders for you given that sometimes your orders are very much related to next-generation product and whether that needs to wait until the new product comes out next fall? Or is it likely to happen because of the volumes? Or is that too early to say because it can happen because of the volumes. And I have one quick follow-up.

[Richard Blickman, executive]

Some are related to volume. So with the success which we have read in the public domain recently, that means, yes, more volume and that means shortages in certain areas and that is definitely helping. But as you said rightly, the key is to understand what are the real changes for the next model. And that typically becomes more clear towards the end of Q4, Q1, and then we have a much better understanding is there next year, going to be a ramp in those applications? Or is it at similar levels? That's typically how it has developed over the past many cycles.

Automotive, the developments in automotive are mostly at new power modules also quite complicated modules. They're all for hybrid cars. That's what we hear. Volume is still, yes, let's say, moderate, not any expansion to mention, but that is also clear from the announcements of the major customer in that space. So there you can say still the turn of tide is to be expected early next year. Let's hope so.

But yes, our success is always in these new technologies. So automotive, we mentioned also last quarter, we don't see further decline. We see a stabilization, and we see new products where we are included also new technologies for instance, in soft solder in bonding those high-powered devices. So that's typically what the status is in automotive.

[Sandeep Deshpande, analyst]

One quick follow-up on the comment you made in your opening remarks on TC Next. You said you've got -- you've got an order for another customer in TC Next, I mean can you help us understand totally how many customers you have on TC Next? And is this, I mean, based on how you are seeing it play out. I mean clearly it's early days yet, but could this become a major new revenue stream for you?

[Richard Blickman, executive]

Yes. Well, let's hope so that, that will be the case. That's what we are aiming at. There are 2, again, markets. You can say the logic markets, and that is where you first reach the smaller bond pad pitches, so below 20 micron. And that is where the concept the TC Next is aiming at the first place. But at the same time that system is uniquely capable to stack those dies in HBM application. And also it's prepared to add the units required for fluxless application.

The development is in both directions. So time will tell. And as I said earlier, '26 is going to be a critical year for adoption of hybrid bonding in HBM stacking, depending on what -- how that split will be at some point for HBM4. Most will be as everyone expects in refill process DC, but there are different variations in those processes. As we all know, the 3 use a different process, but that's less critical. So the machine typically for HBM3 is not -- that's why it's in an early stage, but an important year ahead of us to see where these applications can lead to major volumes.

[Operator]

The next question comes from Ruben Devos from Kepler Cheuvreux.

[Ruben Devos, analyst]

I had one on photonics. These orders, are they tied to I guess optic pilots? Or are they for, let's say, the pluggables inside the AI data centers? And...

[Richard Blickman, executive]

Sorry, you had more part to your question or...

[Ruben Devos, analyst]

Yes. Well, just a follow-up on the photonics like these customers have resumed capacity purchases, I understood. Like is it for new platforms? Or is really expansions on the installed base? Yes, that's the first one.

[Richard Blickman, executive]

Well, it's for pluggables. So the connectors in the data centers. And it's partly add-ons, but it's 5 customers as we explained in the previous quarter and they're all ramping up and very much on our systems. So we have a major market share in that area. So -- yes, we expect that also to continue in Q4 because it's all tied to data center expansions.

[Ruben Devos, analyst]

Okay. Just thinking about sort of the mix shift that has taken place since, let's say, 2021 when you sort of had the peak in mobile, I think it was 40% of your business and 20% compute and now approaching the end of '25. How do you think of that mix from what you've seen already so far? And particularly now in Q3, you see more momentum with orders obviously up particularly the OSATs ordering. Like how would you characterize maybe that shift mix today? And do you see, in general, like how do you assess the investment appetite basically from the OSATs now for compute as what it was maybe a decade ago in mobile?

[Richard Blickman, executive]

That's a very good question. In a big picture, the world clearly for the last decade was very much focused on mobile. Every year, next generation, every 3, 4 years, a major, let's say, new, whether it's from 4G to 5G and before that 3 and then also the cameras and the movies and all that has been a constant driver. And that still is today. So you can expect the 6G, but also the connection to wearables. And what we haven't mentioned yet is the increasing development in wearables in the glasses. It started with Google glasses, now Meta glasses, where we are also very much involved. So you see that developing along -- yes, let's say, the development I would sometimes characterize in mankind using those devices.

Now we are in an AI phase, and that's more data using, again, yes, data in whatever more intelligent ways. And that is shifting then the percentage of revenue. Already last year, 43% was related to computing and data center high-power computing as opposed to many years before that, it was somewhere in the mid-20s. So that's all a very positive development. We were, for many years, characterized that we were very much dependent upon the high-end smartphone cycles. Currently, that is far less. We have more -- we have major drive in the whole AI world and with different technologies. So we look upon it in that sense with continued engagement in the forefront of the development of communication devices. And then we have automotive, which has dropped to below 20%, which was the average level, somewhere between 15% and 20%. So that's in a broader brush how our business is developing.

[Operator]

The next question comes from Charles Shi from Needham & Company.

[Yu Shi, analyst]

Congrats on the pretty strong guidance for fourth quarter. Maybe I want to go back to the major hybrid bonding order you expected that could arrive in Q3, but now it looks like it's going to be a little bit later, given the push out. So the question was -- question is this, how much confidence you have in getting that particular large order in the current quarter because last time, I think, quite frankly, we were a little bit disappointed by the push out, but really hope that this time it's real and it's coming.

[Richard Blickman, executive]

Well, you can also qualify that a bit in our own success in building machines. So at the very beginning, the throughput time to build these machines was over 9 months, closer to a year. And now since these 100-nanometer machines have become more standardized, we can turn them around in a 6-month period, which has the benefit for customers to align that more closely with their end customer demand and also the logistics. So what we understood is that the initial delay because of certain manufacturing or building construction issues at that customer. And that is why the placement is somewhat delayed. That is our current view supported by all the information directly from the customer.

[Yu Shi, analyst]

Got it, Richard. So it sounds like 2 factors there, customer clean room delay and also the fact that you will improve the manufacturing cycle time. So they are not really -- they don't really need to place order well in advance, did I understand correctly.

[Richard Blickman, executive]

Yes. So we are currently installing machines at that same customer and those machines have been built in 6 plants. And that is also one of the factors.

[Yu Shi, analyst]

Got it. So maybe a little bit of a more technical question. Regarding the Gen 2, the 50-nanometer accuracy tool, well, you have been very consistent. I think over the last 2 years that you expect to deliver the tool, maybe the end of 2025, that time line hasn't really moved. But at the same time, people have high expectation about Besi and probably were wondering why the schedule didn't move up. And was that more of a customer road map issue or more of a little bit of technical challenges on your side? Can you kind of shed some light on what's happening there with the 50-nanometer tool.

And I think on a related question, I think when your schedule didn't really move in, do you worry about a little bit increased competition. I think on the HBM side, competition -- the landscape -- competitive landscape is well-known, lots of regional players there. But in logic side, do you see any increased competition there, especially at the leading foundry customer?

[Richard Blickman, executive]

Well these are very good questions. The first question on the timing of the 50-nanometer requirement, that's purely customer road map. And that road map has not changed. The road map is '27 onwards. And so that tool has to be ready by the end of '26 as we have shared, that is not being pulled forward. The adoption of hybrid bonding is ever more confirmed and we see that with additional orders, additional customers. It's definitely logic oriented because that is where the most critical and the smallest geometries are requiring this technology. On HBM stacking, it is a bit less in a sense, the bond pad pitch is not that of a great issue. But there, it's more the heat factor, so the performance of the device, which is driving using hybrid as opposed to a reflow process.

On the competitive landscape, let's -- there from the beginning, a Japanese competitor has been already for 8 years sort of side by side. So far, our concept is certainly leading with a market share of over 80%, even some people say 90%. There has not been a change in that landscape. We have successfully moved the generation from 1 to 1 plus, so 150, 200-nanometer down to 100-nanometer. As far as we know, also from a cost of ownership, throughput, our system is certainly in the lead. On the HBM, it's a different competitive lens, more Korean based. Exciting will be in the course of this year, how the evaluations will, let's say, develop in terms of side-by-side comparisons that will take place in Korea at the 2 major Korean customers. So that will give us a better understanding of the competitive landscape. So that's in a nutshell, Charles, where we're at.

[Yu Shi, analyst]

Got it. So in logic, no real change. In HBM, it's always a little bit of -- in some flux. But thanks for the color.

[Operator]

The next question comes from Andrew Gardiner from Citi.

[Andrew Gardiner, analyst]

I wanted to come back to the market slide that you put up every quarter in your deck. You've highlighted that tech insights have reduced expectations for this year. And I can see as well for next year, those have come down. I fully accept Besi is going to outgrow the market given your positioning in some of these areas. But expectations are pretty high out there at the moment for your revenue growth into next year. I'm just wondering if you can shed a little bit of light on how you are seeing things. You've talked about orders in the near term, but any indications from customers as to their thoughts into next year and what could help you to drive such outsized revenue growth into next year?

[Richard Blickman, executive]

Well, always a very good reference is the order run rate. So if you look at the last quarter, third quarter, also our guidance in broad terms for the fourth quarter, that leads to levels, which, yes, quarterly run rates give an indication on a yearly model. If you look at our revenue, let's say, if you take the guidance for revenue Q4, you take the midpoint and you add it up with the first 9 months, and then you look at the run rate in orders.

And also, let's say, where those orders are coming from and you -- I think you also shared it in that sense. Then we are benefiting from a part of the market, which grows significantly more than the average assembly equipment market. So the TechInsights numbers are for the overall markets, and it could very well be that the mainstream market for less, let's say, complicated devices is growing far less than for the advanced, which has always been the case.

So based on -- yes, the current run rate, one -- yes, should see that development. And also with the adoption of hybrid bonding gaining more traction more broadly, and also TC for that matter. Yes, that's a bit different than the forecast, which you see from the TechInsights. But in this industry, I've never seen any forecast, which is on the dot. It's usually either much too high or it is too low, it's a difficult time.

If you also see this in respect of what's happening in the whole industry, and that in relation to the world, there -- yes, it's not that straightforward. Well, it's never been that straightforward. But anyway, so my message is our statements, we expect based on the current evidence and trends that we should be able to outgrow what is currently forecasted for the market.

[Operator]

The next question comes from Timm Schulze-Melander from Rothschild & Co Redburn.

[Timm Schulze-Melander, analyst]

Maybe just the first one. You talked about a new foundry customer to whom you've shipped a hybrid bonding tool. Could you maybe just provide some color about the application and just kind of how meaningful that might be? And then I had a follow-up.

[Richard Blickman, executive]

We are not -- let's say, we don't know the end customer in particular, but it looks like it's more in the mobile space. So that is as far as we know. Systems are ordered. They will be delivered in Q1. So then we may well know more, but customers are pretty careful in sharing end customer and end product details. Even for many, we are not allowed to see it. It's usually with code names. So our service engineers also are not able to track that, and one can understand also the reason why in IDMs, it's a bit more yes, let's say, easy because they typically have their end products, but in foundries that is a high level of -- yes, let's say, secrecy, confidential.

[Timm Schulze-Melander, analyst]

That's really helpful. And then just you referenced an order booking that slipped and looks like it's going to track into Q4 in terms of just the readiness of the customer. Could you just maybe -- is that an existing customer? Is it a chip maker? Or is it a packaging subcontractor?

[Richard Blickman, executive]

Well, it's a chip-making foundry, and it's an existing customer. So that's as much as we can share.

[Timm Schulze-Melander, analyst]

Okay. Okay. That's helpful. Because I think maybe one of the -- my last question. If we look at where the strength of sort of hybrid bonding engagement has been, it's been at those customers who are front-end chip makers and you've referenced a couple like TSMC and Intel. What would be the indication that the market is extending into subcons who don't -- the packaging specialists who don't naturally have sort of chip-making front-end capabilities. Is that something that we can anticipate sort of being in the 2026 time frame? Or is that really sort of a much longer-term kind of target that maybe follows whatever happens in high bandwidth memory?

[Richard Blickman, executive]

The largest subcon in the assembly space has taken ownership of hybrid bonding about a year ago and is in the process qualifying devices for end customers. It is very likely that you will see that trend, which has happened forever. And also, you can see it, for instance, 2.5D modules. 2.5D modules are now built at a whole range of subcontractors, the typical, the higher-end ones, and that is where the growth in our orders in the third quarter was very much coming from. So for hybrid bonding devices, you can expect a similar trend. It may take a few years, but it's all a matter of cost, and that is a normal trend.

And as I said, you see already preparation because for those subcons, the high-end devices also offer the highest margin potential. So there's a clear win situation on both ends in reducing cost and that's the trend in many of our products. It starts at IDM and it moves gradually into the subcontracting arena.

[Operator]

The next question comes from Martin Jungfleisch from BNP Paribas.

[Martin Jungfleisch, analyst]

Yes. I have 2 follow-ups from some earlier questions, please. The first one is on the hybrid bonding order. I mean would you stick to your comments that you made during Q2 results where you anticipated H2 hybrid bonding order to increase significantly compared to H2 '24? Or is there -- do you see now some orders to slip even into Q1 '26?

[Richard Blickman, executive]

No, no, no. That's a very good question. It's very much as we said a quarter ago. So there are more we expect in Q4 to come in. So it's not just the big order, which slipped from Q3, hopefully, to Q4. But there are several other customers where we expect orders in Q4.

[Martin Jungfleisch, analyst]

Okay. That sounds great. And then just secondly, on the 2.5D orders, I mean, you flagged this for the big increase in Q3. Just wondering, how sustainable are these order levels? I mean, is this driven by a single customer? Or is it multiple customers? And also what do you expect kind of this trend to continue into 2026?

[Richard Blickman, executive]

It's multiple customers. We mentioned several times that it is a group of 5, which we have been -- several we have been engaged in since over 10 years. So it started off with [indiscernible] already a decade ago, routers. And that has developed in our smaller geometries now into data center connectors. So that is a business which is growing and it's not a -- we don't expect that to be a onetime.

But in capital goods, there's always this cyclical behavior. So you have a growth period, and then you have capacity absorption. But as we guided, we expect some continuation of this trend on the short term. But with the adoption of AI, and if you look at this in a broader perspective, again, what the world is expecting in the next couple of years, to do with the AI in every different form, these data centers is expected to grow significantly. And in case we are able to maintain our market position that should lead to continued business, albeit not in a straight line, but typically in a growth pattern.

[Martin Jungfleisch, analyst]

That makes sense. Can you just tell me the lead time for the 2.5D tools? Is it similar to the mainstream market? Or is it more closer aligned to the hybrid bonders?

[Richard Blickman, executive]

Somewhere in between. So we have -- that's also a good question. We can turn around equipment for mainstream in -- yes, some even in 6 weeks, 8 weeks. But this is typically 12, 16 weeks. That's why we cannot turn around the orders received in Q3 in the quarter. That's why the guidance 15 to 25 and up. So a major part will be shipped in Q1. So that's how it works. So we have machines which are more than a year -- or more than 6 months, sorry, with new developments, it's more than a year, but then it varies between the purchase lead times is 6 weeks. And yes, usually to 12 to 16 weeks, that is what the pattern. Next question, please.

[Operator]

We have time for one last question, and the question will be from Adithya Metuku from HSBC.

[Adithya Metuku, analyst]

Firstly, I just wondered if you could help us get some more clarity into 2026. When I look at your revenue run rate that you've guided to for the December quarter or the orders run rate that we've seen in the third quarter,and annualize that, I get to around 20%, 25% below consensus in terms of revenues for 2026. So I just wondered if you expect orders to pick up further in the December quarter, or will it kind of plateau the high levels you've seen in the third quarter? Any color you can give and also any color you can give on how any other drivers we should keep in mind when we think about 2026 growth and that would be helpful. And I've got a follow-up.

[Richard Blickman, executive]

Excellent. Well, first of all, we try to share in the press release that the order momentum continues into Q4. So Q3 is not the highest level. We also indicated that we see renewed drivers for growth in '26, which are linked to mobile, for instance, but also in the careful mainstream recovery where we see the early signs. But on top of that, we have the hybrid bonding continuation based on further adoption, and that could lead to a much -- yes, let's say, stronger growth in '26 than what we have so far in '25. So those are the -- and don't forget the TC Next. So those drivers could result in, as I also answered to an earlier question, in a business model more focused towards the high-growth AI arena. And at the same time, recovery for those applications where we have had in previous cycles, significant growth in new model usually applications.

So that's in a broad brush what the market could develop in '26, albeit in an environment which we all know is under -- yes, let's say, also different. China what we see is many customers are building next-generation capacities outside China. With the current geopolitical situation, you can expect new capacities built in countries like Vietnam, but also India. India, there are 5 major customers setting up assembly capacities, starting with direct product moves from what is currently built in China then built in India. That also offers additional growth in the change of infrastructure. So there are many aspects which can have an influence on how '26 will look like compared to '25. But we don't guide further than a quarter out. But since you ask what could be different in '26, then those are the aspects you can take into consideration.

[Adithya Metuku, analyst]

Understood. And then just as a follow-up. I know last quarter, you talked about price negotiations in light of the recent adverse FX moves. I wondered if you could give some clarity on how those negotiations are going and when you might be able to get back into your 64% to 68% target range that you've previously provided?

[Richard Blickman, executive]

Well, interesting enough, if you look at the dollar decline versus the euro with about 12% and a margin impact of around 3% gross margin. So we have been able to offset that partly in new features, which always allow higher pricing, but also in carefully managing our supply chain. And in that sense, the -- those developments will continue in an environment where the market is, you could say, soft. So -- and if this is the low part of the cycle, then you have a significant upside potential. Also, if you look at revenue levels, EUR 134 million this quarter, what was it exactly, which is -- our peak was above EUR 200 million.

Capacity utilization is, of course, at a different level currently. And that all has an impact on the gross margin overall. So if you compare this gross margin to peak levels, yes, the delta is larger than the 3%. I think once we reached 66%, we haven't reached 68%, it also depends on the order mix. There are certain new developments, which always have a somewhat lower margin. And over time, that improves because of, yes, the full qualification of systems. So those are all impacts on those gross margins. But still gross margins well above 62% is a reasonable margin at this time. Any last question?

[Operator]

I think we do not have any more time for any last questions, but I will hand the word back over to you, Mr. Blickman for any closing remarks.

[Richard Blickman, executive]

Well, thank you all for taking the time. And if you have any further questions, don't hesitate to contact us directly. Thank you for attending. Bye-bye.