ASML Holding NV Earnings - Q1 2026 Analysis & Highlights
ASML Holding NV reported strong Q1 2026 results driven by robust demand for advanced lithography equipment, particularly EUV systems for AI-related infrastructure investments, with significant capacity expansion plans announced for 2026 and 2027 to meet unprecedented customer demand.
Key Financial Results
Total net sales of €8.8 billion in Q1 2026, within guidance.
Net system sales of €6.3 billion, comprising over €4.1 billion from EUV system sales including two High NA systems and over €2.1 billion from non-EUV system sales.
Installed base management sales of €2.5 billion, slightly above guidance.
Gross margin of 53% for Q1, at the high end of guidance, primarily due to 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.
Cash, cash equivalents and short-term investments of €8.4 billion at quarter end.
Q1 free cash flow of negative €2.6 billion, largely driven by timing of down payments.
R&D expenses of €1.2 billion and SG&A expenses of €0.3 billion** in Q1.
Effective tax rate of 17.1% for Q1, with expected annualized rate of approximately 17% for full year 2026.
Business Segment Results
Net system sales split nearly equally between logic at 49% and memory at 51%.
EUV revenue expected to rise significantly in 2026, driven by advanced logic and DRAM market dynamics.
Non-EUV revenue expected to grow from previous expectations of flat performance, due to continued demand momentum for deep UV lithography.
Installed base management revenue expected to grow significantly in 2026, 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
Growth outlook for semiconductor industry continues to solidify, driven primarily by AI-related infrastructure investment.
Demand for advanced logic and memory chips increasing across many areas due to AI investments.
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 ramping the 2-nanometer node for next-generation HPC and mobile applications.
Supply limitations expected across advanced nodes beyond 2026 in logic business.
Both memory and logic customers increasing capital expenditures and accelerating capacity expansion plans supported by long-term agreements with their own customers.
Further adoption of EUV and immersion deep UV on new process nodes by advanced DRAM and logic customers, increasing demand for lithography.
Major adoption of EUV in DRAM in 2025, with US DRAM customer shifting strongly toward EUV for performance and capacity benefits.
DRAM has been characterized as a "perfect storm" for ASML due to capacity build-up and major EUV adoption.
Competitive Landscape
Multiple players entering foundry business, with Samsung and Intel pursuing capacity expansion plans.
Market leader has been tremendously innovative, and multiple players in the market will guarantee even more innovation.
Three players in foundry market will probably guarantee more innovation, which is ultimately good for the ecosystem.
Macroeconomic Environment
AI-related infrastructure investment driving semiconductor industry growth.
Ongoing discussions around export control with expected bandwidth in 2026 guidance to accommodate potential outcomes.
Growth Opportunities and Strategies
Execution on output plan of at least 60 Low NA EUV systems in 2026.
Immersion system output close to 2025 levels despite slow start.
Raising Low NA EUV capacity to at least 80 systems next year (2027) based on demand and order intake developments.
Scaling deep UV and application products in alignment with capacity expansion.
Updated Low NA EUV productivity roadmap reflecting improvements to short-term and long-term plans.
Ability to reach at least 330 wafer per hour on Low NA EUV at start of next decade, enabled by continued source power improvement and recent 1,000-watt source demonstration.
NXE:3800E system upgrade providing 10 wafer per hour increase with 230 wafer per hour available immediately to all customers.
NXE:3800F system raising wafer per hour specification from 250 to 260 wafers per hour, with shipping 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 in some use cases.
High NA can reduce process steps by factor of 10 for some critical layers.
Target line pitches of 18 nanometer for logic and contact pitches below 28 nanometer for DRAM with High NA.
High NA can support single expose for at least three nodes in logic and DRAM.
Customers testing High NA on product wafers and moving closer to bringing High NA into high-volume manufacturing.
Shift in product mix towards more demand for advanced lithography products and increase in litho intensity.
Strong productivity roadmap on Low NA combined with High NA introduction supporting further cost of technology reduction for customers.
Entering advanced packaging with XT:260 tool with continued good traction.
Supporting customers in 3D integration through holistic lithography products combining metrology and process control tools.
Wafer-to-wafer bonding technology expected to be used by DRAM and logic customers.
Working on multiple fronts to increase capacity, including supply chain preparation for 90 Low NA capability and 600 total deep UV capability.
Supply chain improvements, particularly with Zeiss on optics where major challenges existed in previous ramps.
Maturity of NXE:3800E tool improving, allowing great progress on cycle time in factory.
Shorter cycle time enabling more tools to be produced.
Working with customers on productivity upgrades to installed base, allowing immediate capacity provision through software switches and qualification.
Productivity improvements in tools, with NXE:3800E moving from 220 to 230 wafers per hour and F model reaching 160 wafers per hour in 2027.
80 Low NA EUV tools in 2027 providing double the wafer per hour capacity compared to 2025 shipments of 44 tools.
Helping customers upgrade installed base to meet capacity needs in most economical way.
Executing on availability, productivity, unit numbers capacity and upgrading installed base on all fronts.
Financial Guidance and Outlook
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 expected around €0.3 billion.
2026 revenue guidance updated to between €36 billion and €40 billion, narrowing and increasing expected revenue range.
2026 gross margin expected between 51% and 53%, with revenue weighted to second half of year.
Immersion capacity increase primarily flowing to non-Chinese customers, with China remaining at midpoint around 20% of business.
Immersion expected to reach close to 2025 levels after supply chain challenges.
EUV revenue expected to increase further beyond previous expectations.
Deep UV and immersion demand expected to scale with EUV demand, particularly for non-Chinese customers.
2027 EUV tool mix expected to be primarily E models with some F models, with no D models.
ASP expected to improve in 2027 due to favorable mix shift from 2026 to 2027.
F model ASP expected to correlate with throughput improvement, with historically strong correlation between throughput and ASP.
Long-term market analysis to be revisited at next year's Capital Markets Day, particularly regarding DRAM capacity additions.
DRAM capacity additions likely above previously discussed numbers at least for current year.
Gross margin drivers for future periods include EUV productivity improvements, High NA volume, installed base improvements, and deep UV opportunities.
No intention for EUV to become a bottleneck, with multiple capacity expansion tools available.
Long lead time items secured to provide flexibility for future expansion.
EUV capacity more than doubled from 2025 to 2027 with at least 80 systems.
Technology Development and Product Innovation
High NA platform maturation progressing with customers presenting strong papers on use cases in logic and DRAM.
Resist progress allowing target line pitches of 18 nanometer for logic and contact pitches below 28 nanometer for DRAM.
Positive impact of AI confirmed on customer demand for advanced products, especially EUV systems in advanced memory and logic.
Litho intensity increasing due to EUV adoption reducing multi-patterning requirements and fab space needs.
High NA adoption expected in future following Low NA EUV adoption, with same logic of single expose and process simplification.
