ASML Beats Q1 Estimates and Raises 2026 Guidance as China Revenue Collapses to 19%

ASML Holding delivered a stronger-than-expected first quarter on Wednesday, April 15, posting €8.8 billion in total net sales and raising its 2026 annual revenue forecast — but the Dutch chip-equipment giant’s stock still tumbled as investors focused on an accelerating collapse in China business and the looming threat of new US export restrictions that could hit its last remaining revenue stream in the country.

Blowout Quarter, Cautious Market

The Q1 numbers were unambiguous beats. Net sales of €8.8 billion came in roughly €300 million ahead of analyst consensus, while net income of €2.8 billion was €300 million above expectations and represented a 53.0% gross margin — the high end of the company’s guidance range. CFO Roger Dassen attributed the outperformance to a combination of strong EUV system deliveries and particularly robust demand for performance upgrades on ASML’s installed base, which now numbers several thousand lithography tools running in fabs worldwide.

For the full year, ASML lifted its 2026 revenue forecast to a range of €36–40 billion, up from its prior guidance of €34–39 billion. That revision implies confidence that the AI infrastructure buildout will keep wafer-fab equipment demand elevated even as geopolitical headwinds intensify. For Q2, ASML guided to net sales of €8.4–9.0 billion and a gross margin of 51–52%.

The order backlog stood at €38.8 billion at quarter-end, providing substantial forward visibility.

The China Cliff

The most discussed figure in the earnings release was one that did not appear in the headline numbers: China’s share of ASML’s net system revenue dropped to just 19% in Q1, sharply down from 36% in Q4 2025 and from levels above 50% just two years ago when Chinese customers scrambled to buy as many immersion DUV machines as possible ahead of anticipated restrictions.

The contraction reflects the layered effect of US and Dutch export controls. ASML has been barred from shipping its EUV systems to China since 2019 under Dutch government orders, and in late 2023 the Netherlands extended restrictions to the most advanced deep ultraviolet (DUV) tools — the TWINSCAN NXT:2050i and NXT:2100i. What remained was a residual business in older DUV systems and deep-UV service contracts, and it is that business that is now under fresh threat.

In early April, a bipartisan group of US lawmakers introduced the MATCH Act — the Microelectronics Accountability and Technology Controls for Hostile-Nations Act — which, if passed, would require the President to impose export controls on all ASML equipment sold to China, including the legacy DUV machines that currently carry no restrictions. The bill has significant support in both the House and Senate Armed Services committees, and while passage is not guaranteed, its introduction signals a clear directional pressure that spooked investors even as management tried to stay measured.

“The semiconductor industry’s growth outlook continues to solidify, driven by ongoing AI-related infrastructure investments,” CEO Christophe Fouquet said in a statement. “Our order intake continues to be very strong.” Fouquet declined to predict the legislative outcome but said ASML was “monitoring developments closely and engaging with all relevant stakeholders.”

EUV Capacity Ramp Accelerating

Away from the China uncertainty, ASML’s core business narrative remains intact and arguably more compelling than ever. CFO Dassen confirmed the company expects to ship 60 low-numerical-aperture (low-NA) EUV systems in 2026, representing a 25% increase over 2025 volumes. He went further, saying ASML could deliver 80 low-NA EUV systems in 2027 “if customer demand really underpins it” — a statement that carries significant implications for the capacity plans of TSMC, Samsung, and Intel.

The high-NA EUV ramp — ASML’s €380 million-per-unit next-generation system that TSMC and Intel are already installing — was not discussed at length, but ASML has previously indicated it expects to ship fewer than ten units in 2026 as early customers work through the complex installation and qualification process. Each high-NA tool can expose the smallest features yet achievable in silicon, enabling the 1.4nm and sub-1nm transistor generations that will underpin the AI accelerators and mobile processors of the late 2020s.

Why the AI Supercycle Insulates ASML (Mostly)

The bull case for ASML rests on a simple chain of logic: AI infrastructure demand drives compute demand, which drives wafer demand, which drives lithography demand. Every Blackwell GPU, every custom AI chip, and every inference server that comes off a TSMC, Samsung, or Intel Foundry line requires hundreds of lithography exposures to fabricate. ASML is the sole supplier of EUV systems and holds a dominant share of advanced DUV tools. There is no near-term alternative.

That structural monopoly is reflected in the company’s unprecedented backlog. At €38.8 billion, ASML holds roughly four quarters of forward revenue locked in order books. Even if the MATCH Act passed tomorrow and eliminated all China system sales — currently running at roughly €1.7 billion per quarter — the company would still be tracking toward its full-year guidance, because Western hyperscaler-driven demand has more than offset the China decline.

The financial content article that characterized ASML as “the gatekeeper of the AI era” captures the sentiment accurately. Every chip made in the world at or below the 7nm node runs on ASML equipment. Every advanced packaging process used to assemble HBM memory stacks with logic dies — the architecture underpinning AI accelerators — requires ASML’s DUV tools. The company’s pricing power, evidenced by its 53% gross margins on hardware that requires thousands of technicians to install and maintain, is extraordinary for a capital-equipment business.

Geopolitical Risk Remains the Wild Card

For all the operational strength, ASML’s stock has become a proxy trade for US-China technology policy, and the quarterly pattern is frustratingly familiar: beat numbers, raise guidance, watch the stock sell off on China headlines. The pattern recurred again Wednesday, with shares falling despite the earnings beat as investors digested the MATCH Act risk.

The practical reality is more nuanced. China’s installed base of ASML DUV machines — accumulated during the buying frenzy of 2021–2024 — will continue to generate service revenue regardless of future system export restrictions. ASML’s service business, which covers maintenance contracts, spare parts, and software upgrades, is not subject to the same export restrictions as new system sales and has historically carried margins comparable to the hardware business. The company has not broken out service revenue by geography, but analysts estimate China accounts for 20–25% of the global installed base, creating a durable if shrinking annuity stream.

The longer-term question is whether China can indigenize EUV-equivalent capability through SMEE, its state-backed equipment maker. SMEE has demonstrated rudimentary EUV prototypes, but production-worthy systems capable of competing with ASML’s NXE or NXL series are widely considered to be five to ten years away at minimum — an assessment consistent with comments from Chinese chip-industry executives at a recent conference covered by Tom’s Hardware.

What It Means

ASML’s Q1 beat and guidance raise confirm that the AI infrastructure supercycle is real and still accelerating, translating into tangible top-line growth for the equipment layer of the semiconductor stack. The China risk is real but increasingly priced in; what investors should watch is whether the MATCH Act gains legislative momentum and how quickly ASML’s Western customer base can absorb the incremental capacity. With 60 EUV systems shipping this year and a path to 80 in 2027, the supply constraint for leading-edge chips is loosening — and that is broadly good news for the AI companies betting billions on new silicon each quarter.