ASML Holding NV Earnings - Q1 2026 Analysis & Highlights
ASML Holding NV reported strong Q1 2026 results driven by exceptional demand for advanced lithography equipment, particularly EUV systems for AI-related infrastructure investments, with management raising full-year revenue guidance and emphasizing capacity expansion plans to meet unprecedented customer demand while maintaining gross margin expectations despite significant hiring and operational scaling.
Key Financial Results
Total net sales of €8.8 billion in Q1 2026, within guidance.
Net system sales of €6.3 billion, comprising €4.1 billion from EUV systems (including two High NA systems) and €2.1 billion from non-EUV systems.
Installed base management sales of €2.5 billion, slightly above guidance.
Gross margin of 53% at the high end of guidance, primarily driven by high-margin components in installed base business.
Net income of €2.8 billion, representing 31.4% of total net sales, with earnings per share of €7.15.
Operating expenses in line with guidance, with R&D expenses of €1.2 billion and SG&A expenses of €0.3 billion.
Effective tax rate of 17.1% for Q1, with expected annualized rate of approximately 17% for full year 2026.
Cash, cash equivalents and short-term investments of €8.4 billion at quarter end.
Negative free cash flow of €2.6 billion in Q1, largely driven by timing of down payments.
Business Segment Results
Net system sales split nearly equally between logic at 49% and memory at 51%.
EUV revenue expected to increase significantly this year, driven by advanced logic and DRAM market dynamics.
Non-EUV revenue expected to grow from previous expectations of flat performance, due to continued customer demand for deep UV lithography supporting expansion plans.
Installed base management revenue expected to grow significantly, driven by service revenue from expanding EUV installed base and customer demand for performance upgrades.
Capital Allocation
Dividend of €1.60 per ordinary share paid as third interim dividend over 2025.
Total dividend for 2025 of €7.50 per ordinary share, representing a 17% increase compared to 2024.
Final dividend proposal of €2.70 per ordinary share to the annual general meeting.
Share repurchases of approximately €1.1 billion in Q1 2026.
Industry Trends and Dynamics
AI-driven infrastructure investment is the primary growth driver for the semiconductor industry, increasing demand for advanced logic and memory chips.
Demand continues to outpace supply for the foreseeable future, creating constraints across end markets from AI to mobile and PCs.
Memory customers report being sold out for the remainder of the year, with supply limitations expected to persist beyond 2026 despite significant capacity additions.
Logic customers adding capacity across multiple advanced nodes to support demand, while continuing to ramp the 2-nanometer node for next-generation HPC and mobile applications.
Supply limitations expected across advanced nodes beyond 2026 in the logic business.
Both memory and logic customers increasing capital expenditures and accelerating capacity expansion plans, supported by long-term agreements with their own customers.
Continued adoption of EUV and immersion deep UV on new process nodes further increases demand for lithography.
DRAM has experienced major adoption of EUV in 2025, with US DRAM customers also shifting strongly toward EUV for performance and capacity benefits.
EUV adoption in DRAM reduces multi-patterning requirements, which also saves fab space and improves capacity efficiency.
Competitive Landscape
Foundry market characterized by huge demand outweighing supply, leaving room for players beyond the market leader.
Samsung expanding foundry capacity in Taylor with real plans requiring ASML shipments.
US foundry player already has significant capacity, so limited shipments expected from this player in 2026.
Multiple players in foundry market will guarantee more innovation, which is beneficial for the ecosystem.
Macroeconomic Environment
Export control discussions ongoing, with 2026 guidance bandwidth accommodating potential outcomes.
China business expected to remain at approximately 20% of total business at midpoint, with this view unchanged.
Immersion growth coming primarily from non-China customers, as China remains at expected 20% level.
Growth Opportunities and Strategies
Low NA EUV productivity roadmap improvements enabling at least 330 wafers per hour at the start of the next decade, supported by 1,000-watt source demonstration.
NXE:3800E system upgrade providing 10 wafers per hour increase, with 230 wafers per hour available immediately to all customers.
NXE:3800F system raising wafer per hour specification from 250 to 260 wafers per hour, with shipments starting in 2027 and full volume in 2028.
High NA platform has processed over 0.5 million wafers and achieved over 80% availability.
High NA can replace complex multi-patterning processes, with single High NA exposure replacing three or four Low NA exposures for some use cases.
High NA can reduce process steps by a factor of 10 for some critical layers.
High NA targeting line pitches of 18 nanometer for logic and contact pitches below 28 nanometer for DRAM.
High NA can support single exposure for at least three nodes in logic and DRAM.
Customers testing High NA on product wafers and moving closer to high-volume manufacturing.
3D integration becoming important for customer density delivery, with ASML creating activities to support customers in this area.
Wafer-to-wafer bonding adoption by DRAM and logic customers, where ASML's lithography and metrology products can help customers adopt new technology.
Advanced packaging entry with XT:260 tool showing good traction.
Hybrid bonding discussions ongoing with customers for potential future support.
Productivity upgrades for installed base allowing customers to get capacity immediately through software switches and qualification.
Supply chain preparation enabling capability of 90 Low NA systems and 600 total deep UV systems.
Zeiss optics supply chain improvements with much better positioning than in previous ramps.
ASML facility capacity expansion supporting increased manufacturing of EUV and deep UV tools.
NXE:3800E tool maturity improvements enabling progress on cycle time in manufacturing.
Financial Guidance and Outlook
2026 total net sales guidance of €36 billion to €40 billion, narrowed and increased from previous guidance.
Gross margin guidance of 51% to 53% maintained for full year 2026, with revenue weighted to second half of the year.
Q2 2026 total net sales expected between €8.4 billion and €9 billion.
Q2 2026 installed base management sales expected around €2.5 billion.
Q2 2026 gross margin expected between 51% and 52%.
Q2 2026 R&D expenses expected around €1.2 billion and SG&A around €0.3 billion.
At least 60 Low NA EUV systems planned for 2026 output.
Immersion system output close to 2025 levels despite slow start.
At least 80 Low NA EUV systems planned for 2027, with move rates increasing quarter-by-quarter.
Deep UV and application products scaling in alignment with EUV capacity increases.
ASML expected to grow in 2026.
EUV revenue expected to raise significantly this year.
2027 EUV tool mix expected to be primarily E models with some F models, but hardly any D models.
Average selling prices (ASP) expected to improve in 2027 due to more favorable product mix compared to 2026.
Customers providing high visibility on expansion plans for 2026 and beyond.
Significant fab scale being built by customers allowing for substantial expansion capacity.
ASML not expecting to be a bottleneck for customer capacity needs.
Long lead time items secured providing flexibility for future capacity expansion.
EUV capacity more than doubled from 2025 to 2027 with at least 80 systems.
