ASML (ASML) Q2 2026 earnings review
The AI Order Wave Hits the P&L: Guidance Raised by €6 Billion
ASML's Q2 was a beat, but the real story is what comes next. Total net sales of €9.3 billion and a 54.0% gross margin both came in above guidance, driven by €2.8 billion in Installed Base sales—€300 million more than the company expected. Net income reached €2.9 billion (+27% YoY), with EPS of €7.59 up 29%. Then the bombshell: full-year 2026 revenue guidance jumped from €36-40 billion to €43-45 billion—a €6 billion raise at midpoint in a single quarter—with gross margin guidance up 3 points to 54-56%. The Q3 guide of €11-12 billion implies 53% YoY growth, an unprecedented step-up. ASML also paid the €2.70 final 2025 dividend, raised the 2026 interim dividend 17.5% to €1.88, and bought back €1.1 billion in shares.
🐂 Bull Case
Management says 2027 EUV orders are 'pretty much already close' to fully received, and large 2028 EUV orders are in hand. Customers signing long-term agreements with their own customers gives ASML visibility it has never had, backing +30% EUV and immersion capacity additions for 2027 with another +30% under investigation for 2028.
Gross margin guidance jumped 3 points to 54-56% for the year (55-57% in Q3). The drivers are structural: software-led upgrades that require little machine time, better fixed-cost coverage on higher volume, and a favorable EUV/immersion mix.
🐻 Bear Case
First-half operating cash flow was negative €0.5 billion against €5.7 billion of net income. Accounts receivable more than doubled since December, from €3.0 billion to €7.3 billion. Record earnings on paper, cash going the other way—this needs resolution in H2.
The guide implies an H2 of roughly €26 billion (+50% YoY) and a derived Q4 around €14.4 billion (+48% YoY). Memory revenue growing 75% this year is a price-cycle phenomenon; if AI capex digests, ASML will have just added 30% capacity into a downdraft.
⚖️ Verdict: 🟢
Bullish. A guidance raise of this magnitude, backed by orders rather than hope, and with margins expanding, is rare for a company this size. It stops short of a 5 because cash conversion has decoupled from earnings and the implied H2 ramp leaves zero room for execution slippage.
Key Themes
Memory Is Now Half the Business, Growing 75%
Management stated on the call that Memory revenue will grow about 75% in 2026, with advanced foundry Logic up about 25%. The printed H1 numbers back the shift: Memory system sales rose 53% YoY to €6.4 billion and now equal Logic (49.8% of system sales vs 27% in FY2024). DDR and HBM prices signal a clear supply shortfall, all memory customers are accelerating capacity plans, and the latest nodes carry higher litho intensity in both EUV and advanced immersion. South Korea consequently absorbed 43% of Q2 system shipments (61% H1 sales growth)—a concentration worth watching.
Capacity Roadmap: +30% in 2027, Another +30% Studied for 2028
This is the quarter's biggest structural disclosure, and it is in the printed interim report, not just the call: ASML will ship around 65 Low NA EUV systems in 2026 (EUV revenue up ~45%) and plans to add 30% capacity for 2027 (~85 units), with another 30% for 2028 under investigation (~110 units). DUV immersion follows the same pattern: ~130 systems in 2026, +30% planned for 2027, +30% investigated for 2028. Critically, 2027 EUV order coverage is already nearly complete. Capacity plans of this size, pre-sold a year ahead, effectively de-risk 2027 revenue.
Installed Base: The Software-Led Upgrade Engine
Installed Base sales of €2.8 billion beat the company's own plan by €300 million and drove both the revenue and margin beats. The trend is accelerating: from a €2.0-2.1 billion quarterly run-rate in 2025 to €2.5 billion in Q1 and €2.8 billion in Q2, with ~€2.9 billion guided for Q3. Management guides the business to grow over 30% this year. The key detail: much of the upgrade portfolio is software-led, delivering instant productivity gains without consuming machine time—capacity-starved customers 'will take whatever they can get,' and these sales carry high margins.
DUV Reverses: From Planned Decline to 25% Growth
A year ago DUV was the problem child—2025 DUV sales fell 6% and the January 2026 plan assumed non-EUV would be 'flattish.' That has fully reversed. Immersion output was reaccelerated to ~130 systems (back to last year's level), DUV Dry is gaining traction and winning new customers, and metrology/inspection adoption (optical and e-beam) is growing strongly. Management now guides DUV plus metrology & inspection revenue up about 25% in 2026. Note the H1 optics: ArFi sales fell 22.5% YoY in H1, so hitting the full-year number requires the heavy DUV recovery to land in H2—consistent with the steep implied Q3/Q4 ramp.
High NA Enters Real Production at Intel
Intel has qualified High NA EUV on select Intel 18A product layers—meaning chips sold today were made on EXE machines. This is the first high-volume Logic use of the platform and, in management's words, 'the proof of the maturity of the tool.' ASML now expects to enter insertion-timing discussions with all customers. The financial contribution is still small (3 EXE systems recognized in H1 for €1.2 billion vs 1 a year ago), but the qualification removes the biggest question mark over the next-decade EUV roadmap.
€4.2 Billion of Earnings Is Sitting in Receivables
The data point that contradicts the celebratory narrative: H1 operating cash flow was negative €0.5 billion while net income was €5.7 billion. Accounts receivable jumped from €3.0 billion in December to €7.3 billion in June (+€4.2 billion), and current contract liabilities (customer down payments) fell €2.1 billion. Two mitigating facts: ASML factored €1.5 billion of receivables in H1 2025 but none in H1 2026, inflating the comparison, and Q2 itself was cash-positive (+€1.7 billion OCF) after Q1's -€2.2 billion. Still, cash and short-term investments fell from €13.3 billion to €7.6 billion in six months. Either customers are paying more slowly on the ramp, or billing is heavily back-loaded—management owes investors a bridge.
Executing a 50% H2 Ramp While Restructuring the Org
The FY guide requires roughly €26 billion of H2 revenue, +50% YoY, including a derived Q4 near €14.4 billion—by far the largest quarter in company history. This lands while ASML digests its Technology and IT transformation (the 1,700 net job reduction announced in January), whose estimated costs were booked in Q2 net income without being quantified anywhere in the printed materials. Management itself admitted immersion had 'a bit of a slow start' this cycle because plans assumed lower demand. Supply chain, install teams, and customer fab readiness all have to perform simultaneously; any slip pushes revenue into 2027.
China Math Implies a Big H2 Ramp Under Export-Control Overhang
Management reiterated China at approximately 20% of 2026 total net sales—but of a much higher base. Here is the arithmetic they did not spell out: 20% of €43-45 billion is €8.6-9.0 billion, while H1 China sales were only €2.9 billion (down 22% YoY, 16% of sales). That implies China roughly doubling in H2 to ~€5.9 billion, driven by Logic for domestic demand. Export-control discussions were live as recently as Q1 (the prior guidance range was explicitly built to absorb outcomes), so a material portion of the raised guide depends on a region where regulatory risk is highest.
The 2030 Targets Are Obsolete — Capital Markets Day Set for June 2027
ASML's standing 2030 model, set at the November 2024 Investor Day, called for €44-60 billion in revenue. The 2026 guide midpoint of €44 billion now reaches the bottom of that range four years early. Management acknowledged as much, announcing a Capital Markets Day for June 10, 2027 to 'revisit our assumptions.' Macro framing was consistent: AI adoption across an expanding application space keeps strengthening the industry outlook, with power consumption and cost flagged as the innovations the industry must solve.
Other KPIs
Reversing (positive). After Q1's -€2.2 billion, Q2 swung back to +€1.7 billion OCF and +€1.3 billion free cash flow. The quarterly series remains extraordinarily lumpy (€11.4 billion in 25Q4, then -€2.2 billion, then +€1.7 billion) because customer down payments and receivables move in multi-billion steps around big shipment quarters. The chart below shows how far reported cash generation has decoupled from steady, growing net income.
Accelerating. Up 28.6% YoY, outpacing net income growth of 27.4% thanks to the buyback: basic share count fell 1.0% YoY to 384.5 million. H1 EPS of €14.74 is up 23.9% versus H1 2025.
H1 cash returns comprised €1.66 billion in dividends and €2.08 billion in buybacks (~1.7 million shares) under the new €12 billion 2026-2028 program. The first 2026 interim dividend was set at €1.88 per share, up 17.5% from last year's €1.60 quarterly rate, payable August 5. In parallel, ASML established a €10 billion Euro Medium Term Note programme in March (nothing issued yet) and repaid €0.7 billion of debt in Q1.
Up 9.4% YoY (US GAAP). Spending concentrates on EXE (High NA) for future Logic/DRAM nodes, the NXE:3800F and NXE:4200G platforms, next-generation 3D integration (XT:260), and metrology/inspection (YieldStar 550, eScan 2200 multibeam). Q2 R&D also absorbs the unquantified estimated cost of the Technology transformation; Q3 R&D is guided back to around €1.2 billion.
Guidance
Accelerating, sharply. The €11.5 billion midpoint implies +53% YoY and +23% QoQ—against +21% YoY in Q2 and +13% in Q1. ASML has never guided a sequential step of this size; it reflects the pull-forward of customer capacity plans in both Logic and Memory. Installed Base sales of ~€2.9 billion (+48% YoY), R&D ~€1.2 billion, and SG&A ~€0.4 billion round out the quarter.
Accelerating. The third raise this year: €34-39 billion in January, €36-40 billion in April, now €43-45 billion—+16% at midpoint in one quarter. The range implies 32-38% growth over 2025's €32.7 billion. The derived H2 is €24.9-26.9 billion (+50% YoY at midpoint), and the derived Q4 is roughly €14.4 billion (+48% YoY)—both figures are our calculations, not company statements. Achievement depends on the H2 shipment ramp and the implied China recovery landing on schedule.
Accelerating. Raised a full 3 points from the 51-53% held since January, with Q3 guided at 55-57%—which would be the highest quarterly margin in company history. Drivers per the CFO: higher-margin Installed Base mix (software-led upgrades), better fixed-cost coverage at higher volume, and positive EUV/immersion mix. Annualized effective tax rate stays around 17%.
Not revenue guidance, but the closest thing ASML now provides to a multi-year outlook since dropping quarterly bookings disclosure. With 2027 EUV orders nearly fully received and 'a large number' of 2028 EUV orders already placed, the plan points to continued double-digit growth beyond 2026. The 2028 step is explicitly still under investigation—treat it as an option, not a commitment.
Key Questions
The Receivables Bridge
Accounts receivable more than doubled to €7.3 billion in six months while H1 operating cash flow went negative. How much reflects the halt in factoring versus stretched payment terms on the ramp, and when does this convert to cash?
Cost of the Technology Transformation
Q2 net income includes an 'estimate of the cost' of the Tech and IT transformation, but no figure was disclosed in any printed material. What was booked in Q2, and what is the total expected charge?
China Doubling in H2
Holding China at ~20% of a €43-45 billion year implies roughly €5.9 billion of H2 China revenue versus €2.9 billion in all of H1. What license coverage and shipment schedule underpins that, given export-control discussions were live a quarter ago?
Backlog Coverage of the Raise
Order intake was described as 'extremely strong' but no longer quantified. What portion of the €6 billion guidance raise is covered by signed orders with 2026 delivery dates versus planned output not yet contracted?
The Binding Constraint for 2027
Adding 30% to both EUV and immersion output in one year is unprecedented. Is the gating factor ASML's supply chain, optics from Zeiss, or customer fab readiness—the bottleneck management itself flagged two quarters ago?