Second quarter revenue rose 21% to €9.3bn (€8.9bn expected), with a gross margin of 54%. Operating profit rose 30% to €3.5bn.
Free cash flow rose from of €0.3bn to €1.3bn, and there was net cash on the balance sheet of €5.6bn.
An interim dividend of €1.88 was announced, and around €1.1bn worth of shares were bought back over the quarter.
For the coming quarter, revenue is expected to be between €11-12bn, with gross margins of 55-57%. For the full year 2026, revenue is expected between €43-45bn (previously €36-40bn), with gross margins of 54-56% (previously 51-53%).
The shares rose 6.6% in early trading.
Our view
ASML has delivered another statement quarter. The biggest surprise came from customers upgrading and servicing equipment already on factory floors, a sign that chipmakers are pushing existing capacity while preparing for the next wave of investment. But this is more than a short-term scramble. AI demand is pulling investment forward across both advanced computing and memory chips, giving ASML clearer sight of customer demand well beyond this year.
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.
The story has now shifted from whether demand will arrive to whether ASML can expand production fast enough to meet it. Management is responding with ambitious capacity plans, directly addressing one of the main concerns that has been rumbling in the background.
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 dropped down to around 20% of sales. The good news is that sales are now growing, from this rebased level, in line with the rest of the business.
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.
ASML is an exceptional business and has been a major beneficiary of the AI hardware boom over the past 6-12 months. That strength has driven the price-to-earnings multiple close to multi-year highs, suggesting plenty of optimism is now reflected in the valuation.
We think the premium is sustainable and expect profit forecasts to keep moving higher, too. But the re-rating has already delivered an important part of the opportunity, putting pressure on earnings growth to do the heavy lifting from here. The key risk to our view is any slowdown in the pace of AI infrastructure investment.
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
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.