ASML — Q2 2026 Financial Report Analysis

Overview

ASML's second quarter of 2026 (three months to June 28) brought €9.33 billion in total net sales, up 21.3% from €7.69 billion a year earlier, and net income of €2.92 billion, up 27.4%. Both sales and gross margin came in above the company's own guidance, which management attributed "primarily" to "higher than expected Installed Base Management sales" — the service contracts and field upgrades ASML sells for machines customers already own. The bigger news was the outlook: ASML raised its 2026 sales forecast to €43–45 billion and guided the third quarter to €11.0–12.0 billion, a step up of 18–29% on Q2.

ASML is a Dutch company and the world's only maker of EUV (extreme ultraviolet) lithography machines — the systems that print the smallest, most advanced circuit patterns onto silicon wafers. Leading-edge chipmakers such as TSMC, Samsung, SK hynix and Intel depend on them. It also sells older DUV (deep ultraviolet) lithography machines used for less advanced chip layers. Because chipmakers order these machines to expand future capacity, ASML's results are an early read on how much the whole industry plans to spend. All figures below are US GAAP (ASML's primary reporting standard) and in euros.

At a glance

• €2.76 billion in service and upgrade sales, +31.8% year on year — this, not new machines, is what pushed the quarter above guidance; the fleet of installed ASML machines keeps growing and customers are paying to make existing tools faster.
• 37.1% operating margin vs 34.6% a year ago — operating margin is the share of sales left after paying for production, research and overhead, before interest and tax. Sales grew 21% while R&D rose only 9%, so more of each euro fell to profit.
• €11.0–12.0 billion Q3 sales guidance vs €7.52 billion in Q3 2025 — management expects the second half to be far bigger than the first, with the full-year midpoint implying roughly €14.4 billion in Q4 alone.

The quarter in numbers

Source: ASML Q2 2026 press release and US GAAP financial statements (6-K filed July 15, 2026). Gross margin is gross profit — sales minus the direct cost of building and servicing the machines — as a share of sales.

Bookings are not in this report. Net bookings — the value of new orders signed in a quarter — used to be the most-watched ASML number, because orders placed today typically turn into revenue a year or more later. ASML no longer publishes a quarterly bookings figure: none of the four documents in this filing (press release, financial statements, investor slides, Dutch statutory interim report) contains one. The only order commentary is qualitative: CEO Christophe Fouquet said "our order intake remained extremely strong in the first half of the year" and that customer commitments are "providing ASML with increased visibility into longer-term demand." Investors now have to read demand from the guidance and the capacity plans below rather than from a hard order number.

What drove the quarter

Services and upgrades did the overshooting. Installed Base Management sales rose to €2.76 billion from €2.49 billion in Q1 and €2.10 billion a year ago. The statutory report attributes the first-half increase to "the growing installed base of systems, and strong demand for productivity upgrades" — chipmakers paying ASML to squeeze more wafers per hour out of machines they already own, which is a fast way to add capacity while waiting for new tools. ASML guides this line at around €2.9 billion again in Q3.

EUV is now well over half of machine sales. ASML only breaks system sales down by technology for the half-year. In the first half of 2026:

EUV rose from 52% to 61% of system sales. High NA EUV — ASML's newest, most expensive generation — went from one machine to three, and the investor presentation highlights Intel qualifying High NA on "select Intel 18A product layers," its first use on a high-volume logic product. ASML said first-half sales growth came from "higher sales volumes for EXE and NXE systems, a favorable EXE and NXT immersion product mix, and higher net service and field option sales," partly offset by lower volumes of immersion DUV machines (the NXT line).

Memory buyers have caught up with logic. System sales to memory chipmakers rose 53.2% in the first half to €6.40 billion, while sales to logic chipmakers fell 10.0% to €6.44 billion. Memory went from 37% to 50% of system sales. That fits the regional data: South Korea — home of Samsung and SK hynix, the two largest memory makers — jumped 60.5% to €7.09 billion and became ASML's largest market at 39% of first-half sales. Management links demand to AI: "Ongoing AI-related investments and continued progress in AI technologies are driving demand for advanced Logic and Memory chips."

Costs grew slower than sales. Q2 R&D was €1,276.6m (+9.4%) and SG&A €302.7m (+1.3%), against 21.3% sales growth. That is the main reason operating margin widened by 2.5 points while gross margin moved only 0.3 points.

China: shrinking, as expected under export controls

China fell from 24.1% to 15.9% of sales. ASML cannot sell EUV machines to China at all under Dutch and US export rules, and the most capable DUV immersion tools also need licences. The 22.5% drop in ArF immersion DUV sales is consistent with China — historically a heavy buyer of exactly these tools — pulling back, though ASML does not disclose technology-by-region detail to confirm the link. The filing gives no new China commentary; the risk factors repeat the standing warning about "restrictions on shipments of systems, including ordered systems, under export controls."

What the headline numbers hide

• Cash flow lags profit badly this year. Q2 operating cash flow was €1.70 billion against €2.92 billion of net income (58%), and for the first half operating cash flow was negative €482.5 million against €5.67 billion of profit. The cause is working capital: accounts receivable (money customers owe) jumped from €3.02 billion at the end of 2025 to €7.25 billion in June — up 140% in six months while H1 sales rose 17%. Part of this is timing: Q4 2025 had an unusually large €11.4 billion of operating cash inflow, largely customer payments that then unwound in Q1. And ASML sold no receivables to banks (factoring) in H1 2026, versus €1.5 billion in H1 2025, which flatters last year's comparison. Free cash flow (operating cash minus capex) was €1.32 billion in Q2 but −€1.29 billion for the half. Watch whether receivables come down in Q3; if they don't, it would suggest customers are paying more slowly.
• Shareholder payouts exceed cash generated. In Q2 ASML paid €1.04 billion in dividends and spent €1.08 billion on buybacks — €2.12 billion against €1.32 billion of free cash flow. Cash and short-term investments fell from €8.38 billion to €7.58 billion. Not a problem for a company with €21.8 billion of equity, but the payouts are being funded from the balance sheet until working capital normalises.
• EPS growth is almost all operational. Diluted EPS rose 28.5% vs net income +27.4%: buybacks cut the diluted share count only 0.9% (388.4m to 384.9m). The tax rate dipped to 17.5% from 18.1%, a small help. One headwind: profit from equity-method investments (ASML's share of earnings in companies it partly owns) fell to €41.1m from €88.8m.
• No GAAP/adjusted gap — but IFRS tells a different margin story. ASML reports no "adjusted" earnings, so there is nothing excluded. Its Dutch statutory accounts use IFRS, which capitalises development spending and amortises it later; under IFRS, first-half gross margin fell to 50.9% from 53.3% "mainly driven by an increase in amortization of capitalized development expenditures," and IFRS net income was €5.24 billion vs €5.67 billion under US GAAP. The IFRS report also says R&D includes "the recognition of the estimated costs related to the Technology transformation," without quantifying it. US GAAP is the primary standard and the one used here.
• The gross margin beat came from services. Gross margin of 54.0% beat guidance and improved from 53.0% in Q1, with the CEO pinning the beat on higher-than-expected service and upgrade sales. Q3 guidance of 55–57% implies further improvement as EUV volume rises.

Outlook

ASML's guidance, from the press release and investor slides:

The release describes this as an increased outlook; the previous range is not restated in this filing. The midpoint, €44 billion, would be about 35% above 2025's €32.67 billion. With €18.09 billion booked in the first half, the range implies €24.9–26.9 billion in the second half, and after Q3 guidance a Q4 of roughly €12.9–15.9 billion (about €14.4 billion at the midpoints) — far above any quarter shown in this filing (the highest, Q4 2025, was €9.72 billion). That is a heavily back-loaded year, so most of the guidance depends on shipping and recognising revenue on a large number of systems, including High NA, in the next six months.

The more telling forward signal is capacity. ASML is "planning to add 30% to our 2026 low NA EUV capacity of around 65 for 2027" and is "investigating to increase capacity with another 30% for 2028," with the same plan for DUV immersion (from around 130 machines a year). Management ties the expansion directly to "customer commitments across our product portfolio," and it is the closest thing to a bookings figure the filing offers. ASML will update its longer-term targets at a Capital Markets Day on June 10, 2027.

Takeaway: ASML is growing on two engines that both point the same way — EUV (now 61% of machine sales) and service/upgrades (+31.8%) — while China's share drops to 16%. The quarter's weakness is cash, not earnings: receivables more than doubled in six months and first-half free cash flow is negative, so Q3's real test is whether the promised €11–12 billion of sales arrives together with the cash.

Our read: the trajectory is clearly up — memory makers spending on AI-related capacity have made South Korea ASML's largest market, and plans to add 30% to EUV and DUV immersion output in 2027 indicate demand ASML believes will last beyond this year. The risks are concentration (Korea and Taiwan together are 67% of sales, from a handful of customers), the back-loaded guidance, and the loss of the bookings number that used to give outsiders early warning of a slowdown. Without it, the quarterly guidance and the receivables line are the best early indicators to watch.