Semiconductor equipment manufacturer ASML reported second-quarter earnings that exceeded its own guidance and raised its full-year financial outlook.
The strong performance aligns with a new report from industry association SEMI, which forecasts global semiconductor manufacturing equipment sales will reach a record US$165.9 billion in 2026, up 23.2% from the previous year.
Much of this growth is fueled by investment in AI infrastructure, which requires more complex chip designs and higher capital spending.
Q2 financial results
In the quarter ending June 28, 2026, ASML reported net sales of €9.3 billion (~$10.7 billion) and net income of €2.9 billion (~$3.34 billion). The company posted a gross margin of 54% and an operating margin of 37.1%. Net system sales made up €6.6 billion (~$7.59 billion), split almost evenly between logic customers (51%) and memory customers (49%).
View All The Installed Base Management segment brought in €2.8 billion (~$3.22 billion) in revenue, about €300 million (~$345 million) above the company’s guidance. During the earnings call, ASML CFO Roger Dassen said the stronger-than-expected performance was “driven primarily by additional upgrade business” as customers sought quick productivity gains through software and hardware upgrades.
Analyst scrutiny on pricing and margins
On the earnings call, analysts focused on ASML’s pricing power and profit margins. François Bouvignies, an analyst at UBS, asked whether there was “any scope for pricing adjustments for Low-NA over time to ensure that the system pricing remains aligned with the incremental value you give to customers.”
Dassen responded, “The current environment provides more flexibility for pricing than what you would have had in different days.” He added that, because orders take a long time to process, any pricing changes will be reflected gradually as new orders are placed.
Didier Scemama, a senior analyst* *at Bank of America, also asked how ASML’s gross margins might change in the second half of the year, given changes in product mix and more software upgrades. Management said that a good mix of immersion and extreme ultraviolet (EUV) tools, plus higher volumes covering fixed costs, should support margins in the third and fourth quarters.
Capacity expansion and supply chain management
To meet growing demand, ASML plans to expand its manufacturing capacity. The company said it expects to increase capacity for both Low-NA EUV systems and deep-ultraviolet (DUV) immersion systems by 30% in 2027 and is considering a further 30% increase in 2028.
Joe Quatrochi, an analyst at Wells Fargo, asked if producing about 85 tools next year is the most ASML and its supply chain can handle. Dassen said the current plan matches what customers want and what the supply chain can support. “If more is needed, just as we’ve done in the past couple of quarters, we’re going to roll up our sleeves and see if more can be done,” Dassen argued.
Krish Sankar, an analyst at TD Cowen, asked whether ASML is waiting for official purchase orders before committing to the planned 2028 capacity increase. Management said the company is preparing the supply chain based on customer demand signals, rather than waiting for signed contracts.
Broader semiconductor equipment market
ASML’s own forecasts match SEMI’s mid-year outlook. SEMI expects total semiconductor equipment sales to keep rising through 2028, possibly reaching $229.5 billion. The Wafer Fab Equipment segment, which includes ASML’s lithography machines, is expected to grow by 23.1% to $143.9 billion in 2026.
Ajit Manocha, president and CEO of SEMI, commented, “AI is accelerating demand for more powerful and efficient chips, driving increased investment across the semiconductor capital equipment market.” SEMI also expects spending on memory equipment to grow sharply, with DRAM equipment sales projected to rise 39% to $38.8 billion in 2026.
Outside wafer fabrication, semiconductor test equipment sales are expected to rise by 31% to $15.3 billion. China, Taiwan, and Korea are likely to stay the top regions for semiconductor equipment spending through 2028.
Memory and logic market drivers
ASML CEO Christophe Fouquet said the company expects revenue from memory customers to jump by 75% in 2026, driven primarily by capacity expansions for manufacturing high-bandwidth memory (HBM) and DDR memory.
Stéphane Houri, an analyst at ODDO BHF, asked, “How much is coming from HBM-driven lithography intensity versus volume addition?” Fouquet attributed the demand to both higher HBM and DDR production volumes and the increasing number of EUV and immersion lithography layers required by newer memory nodes.
In the logic sector, ASML said it expects advanced foundry-related sales to increase by more than 25% this year as manufacturers add capacity for existing 3-, 4-, and 5-nm nodes while preparing for future transitions to 2- and 1.4-nm production.
The company also announced that Intel Foundry is using its next-generation High-NA extreme ultraviolet technology on the Intel 18A process node to manufacture commercial processors.
Financial outlook and capital allocation
Looking ahead, ASML expects third-quarter 2026 net sales of €11.0 billion (~$12.7 billion) to €12.0 billion (~$13.80 billion), with a gross margin of 55% to 57%. R&D expenses are expected to total about €1.2 billion (~$1.3.8 billion), while selling, general, and administrative costs are projected at about €0.4 billion (~$0.46 billion). Citing strong demand, the company raised its full-year 2026 revenue forecast to between €43 billion (~$49.45 billion) and €45 billion (~$51.75 billion), with an expected gross margin of 54% to 56%.
ASML is also returning capital to shareholders, buying back €1.1 billion (~$1.27 billion) in shares during the second quarter as part of its 2026–2028 buyback program. The company also announced an interim dividend of €1.88 (~$2.16) per ordinary share, to be paid on August 5, 2026. It plans to update its long-term financial and strategic outlook at its next Capital Markets Day in June 2027.
Note: a conversion rate of €1= $1.15 was used across the article.
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