ASML delivered a strong set of results for the second quarter of 2026, showing that the AI investment cycle is creating demand across several parts of the semiconductor industry.
The Dutch semiconductor equipment company reported €9.3 billion in quarterly net sales, a gross margin of 54.0%, and net income of €2.9 billion. All three figures point to a business growing while maintaining high profitability.
Revenue Growth Accelerated
ASML’s Q2 net sales increased from €7.7 billion in 2025 to €9.3 billion in 2026, representing year-on-year growth of approximately 21.3%.
The company generates revenue from two main sources: systems sales and installed base management, which includes services and upgrades for equipment already operating in customers’ factories. System sales remained the company’s largest source of revenue. However, service and field option sales grew much faster.
During Q2, customers were particularly interested in upgrades that could increase the productivity of machines already installed in their factories. Many of these improvements are software-led and require relatively little machine downtime. They can therefore “give customers an almost immediate increase in production capacity,” Chief Financial Officer Roger Dassen said in a video transcript accompanying the results.
Profitability Improved Faster Than Revenue
ASML’ operating income rose by approximately 29.7%, from €2.7 billion to €3.5 billion, outpacing revenue grwoth. Two factors may explain most of the difference.
Operating expenses increased much more slowly than revenue. ASML’s factories and engineering teams carry substantial fixed costs, which do not rise in proportion to sales. R&D spending increased 9% to €1.3 billion, while selling and administrative expenses were broadly unchanged. As a result, a larger share of additional revenue flowed through to operating profit, lifting the operating margin to 37.1% from 34.6%.
Gross margin also improved modestly, supported by stronger Installed Base Management sales. Service and field-option sales increased 32%, compared with approximately 17% growth in system sales. Customers require maintenance, replacement parts, software updates and equipment upgrades throughout the operating lives of their machines. These upgrades can improve production with limited downtime and contributed positively to ASML’s gross margin.
Basic earnings per share rose even faster, increasing from €5.90 to €7.59. The increase was driven primarily by higher profits, with share repurchases providing an additional benefit by reducing the weighted-average number of shares outstanding. ASML repurchased approximately €1.1 billion of shares during the second quarter under its 2026–2028 share buyback program.
China Remains Important but Risky
Management expects China to account for approximately 20% of ASML’s 2026 sales. Based on the midpoint of the company’s full-year guidance, that would represent roughly €8.8 billion in revenue.
However, demand should not be confused with ASML’s ability to supply every product. US lawmakers have proposed legislation aimed at tightening and aligning allied export controls on semiconductor manufacturing equipment. Any additional restrictions would ultimately depend on measures adopted by the Netherlands and other relevant governments. The company cannot export its most advanced EUV systems to China, while some advanced DUV systems and transactions with particular entities require government licences.
China can remain an important market for permitted DUV systems, but tighter restrictions could affect future sales.
A Stronger Outlook Extends Beyond 2026
ASML expects Q3 sales of between €11 billion and €12 billion, with a gross margin between 55% and 57%. For the full year, it projects revenue of €43 billion to €45 billion and a gross margin of 54% to 56%.
Demand visibility also extends beyond the current year. Management said ASML was close to receiving all the EUV orders needed for 2027, even as it prepares to increase Low-NA EUV production capacity by approximately 30% in 2027 relative to 2026.
The company has already received a substantial number of EUV orders for 2028 and is investigating another major capacity increase. These plans are not guaranteed outcomes, but they suggest customers are making unusually long-term investment commitments.
The main risks include weaker-than-expected AI spending, order delays, export restrictions, supply-chain limitations and slower adoption of new technologies such as High-NA EUV.
AI investment cycle is no longer influcing only a narrow group of advanced processor manufacturers. It is creating demand across a much wider semiconductor ecosystem—and ASML is converting that demand into highly profitable growth.
