ASML reported a 13% rise in first quarter revenue to €8.8bn (€8.5bn expected), with a gross margin of 53%. Operating profit rose 15% to €3.2bn, (€3.0bn expected).
There was a free cash outflow of €2.6bn and there was net cash on the balance sheet of €5.7bn.
A final dividend of €2.70 was announced and around €1.1bn worth of shares were bought back over the quarter.
For the coming quarter, revenue is expected between €8.4-9.0bn, with gross margins of 51-52%. For the full year 2026, revenue is expected between €36-40bn (previously €34-39bn), with gross margins of 51-53%.
The shares were broadly flat in early trading.
Our view
ASML continues to paint a picture of strong demand for AI infrastructure. Key customers are expanding capacity, demand continues to outstrip supply, and market signals support our view that we are entering a multi-year cycle for AI hardware.
Netherlands-based ASML is the market leader in lithography machines used to make semiconductor chips. Without these, you wouldn't have the chips that power the latest phones, computers and AI data centres. It continues to push the boundaries of the most advanced tech, and competitors look a long way off catching up.
This tends to be a cyclical sector, meaning there are peaks and troughs as companies look to match multi-year hardware investments with shifting demand. A cutting-edge AMSL machine can cost upward of €380mn, so these aren’t decisions that are taken lightly. That means trust in the manufacturer is key and opens another avenue for high-margin revenue through servicing and upgrades.
The China story is important. ASML’s latest tech is largely barred from sale into China due to both US and Dutch restrictions. Older versions have seen strong demand for the past few years, but that’s expected to slow significantly in 2026. Other geographies are making up the shortfall for now, with China expected to drop to around 20% of sales.
Under the hood, ASML is a capital-light business. Despite being a manufacturer, it’s investing more than double in research and development compared to buying property and equipment. That’s the key to keeping it ahead of the competition in the next wave of cutting-edge technology.
We don’t get order numbers anymore, but last we heard back in January, the total backlog stood at €38.8bn. There’s usually a lag between orders and revenue flowing, which is why 2026 is expected to see slowing profit growth (c.20%) before a reacceleration in 2027 (c.30%).
ASML is a best-in-class business with good long-term opportunities. Looking at the valuation, it’s rebounded from last year's lows, and we think it has a good chance of entering a sustained period of positive sentiment.
Profit forecasts have risen in recent months, as we expected. That’s positive, but it means at least some of the upside we saw has already been priced in. We are still constructive on the name from here, but with a slightly lower conviction than earlier in the year. The key risk to our case centres around any slowdown in the AI buildout.
Environmental, social and governance (ESG) risk
The semiconductor sector is medium-risk in terms of ESG. Overall, this risk is managed adequately in Europe and North America but has considerable room for improvement in the Asia-Pacific region. Its reliance on highly-specialised workers means labour relations is one of the key risk drivers. Other risks worth monitoring include resource use, business ethics, product governance, and carbon emissions.
According to Sustainalytics, ASML’s management of material ESG issues is strong.
It is targeting net zero emissions across the value chain by 2040 with credible near-term targets in place for direct and indirect emissions. Its manufacturing sites have received an internationally recognised certification, which suggests a strong environmental management system. There’s also a commitment to reducing hazardous waste.
ASML requires a highly skilled workforce and scores well on employee management, with turnover falling from 6% to 3.6% in 2023. Despite its dominant position it has not had any significant antitrust controversies, with its market position protected by innovation and complexity rather than anticompetitive practices.
ASML key facts
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This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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