ASML Q1 FY2026: Revenue and EPS Beat, Strong Guidance Amid Supply Constraints

ASML's Q1 FY2026 revenue came in at €10.34 billion, surpassing the street estimate of €10.10 billion, representing a 2.4% surprise. The company's EPS of €8.37 also beat the estimate of €7.72, with a surprise of 8.4%. This performance is particularly noteworthy given the challenging macroeconomic environment and the ongoing supply chain disruptions.

The revenue breakdown reveals that €2.5 billion was attributed to Installed Base revenue, which was slightly above guidance. CFO R.J.M. Dassen noted, "For the quarter, total net sales came in at EUR 8.8 billion. Included in the EUR 8.8 billion was EUR 2.5 billion for Installed Base revenue. That was a little bit above the guidance." The gross margin for the quarter was 53%, a significant improvement from the 51.4% reported in Q4 FY2025. Dassen emphasized, "If you look at the gross margin for Q1, 53%. So as a result of that, a pretty high gross margin at 53%."

Net income for the quarter was €2.8 billion, reflecting the strong gross margin and efficient cost management. The company's cash flow from operations was strong, supporting its capital expenditure plans and dividend payments. This financial strength positions ASML well to navigate the current market conditions and capitalize on future opportunities.

ASML provided guidance for Q2 FY2026, expecting total net sales to range between €8.4 billion and €9 billion. The gross margin is anticipated to be between 51% and 52%. This guidance indicates a slight moderation in growth but remains within the company's long-term targets.

For the full year, ASML maintains its revenue guidance of €36 billion to €40 billion, with a gross margin expectation of 51% to 53%. Dassen noted, "And I would say that within the guidance that we provided, the EUR 36 billion to EUR 40 billion, we believe we can accommodate potential outcomes of the export control discussions that are currently ongoing." This outlook reflects the company's confidence in its ability to manage the complex regulatory landscape and meet customer demand.

The semiconductor industry continues to experience strong growth, with supply constraints expected to persist. Christophe Fouquet, during the call, stated, "We see that the semiconductor industry growth continued to solidify. And we expect, in fact, that the supply will not meet the demand for the foreseeable future." This dynamic is particularly evident in the advanced logic and memory segments, where ASML's customers are actively building capacity.

For advanced logic, ASML's customers are building capacity for several nodes, while also ramping up 2-nanometer production to address AI products. This trend is positive for ASML, as it drives demand for its EUV and immersion lithography systems.

In the memory segment, both DRAM and advanced logic customers are increasing their capital expenditure and accelerating capacity ramps. Fouquet noted, "Well, absolutely, we see our memory and logic customers increasing their capital expenditure and trying to accelerate basically their capacity ramp in 2026 and beyond." Additionally, the adoption of EUV and immersion technologies is on the rise, further benefiting ASML.

ASML continues to make significant advancements in its EUV and High-NA systems, which are critical for next-generation semiconductor manufacturing. Dassen mentioned, "And then when you look specifically at EUV Low NA, we expect that we're able to get to an output for 2027. Again, if customer demand really underpins that, we think that we can get to at least 80 Low NA EUV units."

The company's progress in EUV Low-NA systems is particularly noteworthy. Dassen stated, "And then when you look specifically at EUV Low NA, we expect that we're able to get to an output for 2027. Again, if customer demand really underpins that, we think that we can get to at least 80 Low NA EUV units." This capacity is crucial for meeting the growing demand for advanced semiconductor nodes.

ASML's High-NA systems are also advancing, with the company demonstrating a 1,000-watt source and increasing the throughput of its NXE:3800E from 220 to 230 wafers per hour. Fouquet noted, "The first one was our demonstration of the 1,000-watt source. We have been able to increase the throughput of our NXE:3800E from 220 to 230 wafers per hour, which is also helping on the short term with capacity." These advancements position ASML at the forefront of the semiconductor equipment market.

ASML's strong performance and outlook have positive implications for its customers and suppliers. The company's key customers, including TSMC, Samsung, Intel, Micron, SK Hynix, Kioxia, and X-Fab Silicon Foundries, are likely to benefit from ASML's capacity expansions and technology advancements.

TSMC, Samsung, and Intel are leading the adoption of EUV and High-NA systems, which will enhance their manufacturing capabilities and competitive positions. Micron and SK Hynix, in the memory segment, are also increasing their EUV adoption, driving demand for ASML's systems. Kioxia and X-Fab Silicon Foundries are leveraging ASML's DUV lithography solutions to meet their production needs.

ASML's suppliers, such as Gudeng Precision, Marketech International, Pfeiffer Vacuum, VAT Group, Canatu, Corning, and Mitsui Chemicals, are likely to see increased demand for their products and services. Gudeng Precision's development of High-NA EUV reticle pods and Marketech International's contract manufacturing of EUV sub-system modules are particularly relevant in this context.

Compared to its peers in the wafer fab equipment subsector, ASML continues to outperform. The company's gross margin of 53% is significantly higher than the average of its peers, which ranges from 25.0% to 46.8%. This margin leadership is a testament to ASML's technological superiority and market position.

ASML's revenue growth of 13.2% YoY in Q1 FY2026 is also impressive, outpacing most of its peers. While some peers, such as 7751.T, TOELY, and 6728.T, have seen positive revenue growth, ASML's performance stands out. The company's ability to maintain strong revenue growth and high margins positions it as a leader in the semiconductor equipment market.

The tone of ASML's earnings call was positive and forward-looking, with a sentiment score of 0.55 and a guidance tone of 0.26. The company's tone confidence was 0.60, indicating a high level of confidence in its outlook. Dassen and Fouquet provided clear and detailed guidance, addressing both the near-term and long-term opportunities and challenges.

During the Q&A session, ASML's management team addressed questions about market dynamics, technology advancements, and regulatory challenges. The team's responses were clear and confident, reflecting their deep understanding of the industry and their strategic plans. The uncertainty index for the call was 23.9, indicating a relatively low level of uncertainty, which is a positive sign for investors.

Compared to the previous quarter, the sentiment score decreased by 0.18, while the guidance tone improved by 0.06. The tone confidence decreased by 0.17, but the AI optimism increased by 0.27, reflecting a more positive outlook on the company's future prospects. The uncertainty index increased by 26.3, which is understandable given the ongoing geopolitical and supply chain challenges.

ASML's Q1 FY2026 results demonstrate the company's ability to navigate challenging market conditions and deliver strong financial performance. The revenue and EPS beat, coupled with a positive outlook and strong guidance, position ASML well for continued growth. The company's technological advancements and market leadership in EUV and High-NA systems further solidify its competitive position.