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ASML (ASML) is trading lower after reporting its Q1 results this morning. The supplier of EUV lithography systems used to manufacture advanced chips beat EPS and revenue expectations, bouncing back from an EPS miss last quarter, with revenue increasing 13.2% yr/yr to €8.77 bln. It also raised its FY26 revenue guidance to €36-40 bln from €34-39 bln. However, its Q2 guidance came in below expectations at €8.4-9.0 bln.

• Despite the softer Q2 guide, ASML noted semiconductor growth continues to solidify, driven by AI infrastructure investment, with demand for advanced logic and memory still expected to outpace supply for the foreseeable future.
• That dynamic is creating constraints across end markets, from AI to mobile and PCs, pushing customers to add capacity more aggressively, particularly in memory. Logic customers are also ramping advanced nodes.
• As customers expand capacity, adoption of EUV and immersion DUV is increasing across advanced DRAM and logic, supporting stronger lithography demand. ASML said order intake remains very strong and that it continues to work closely with customers.
• Additionally, based on demand trends and order intake, ASML is increasing the move rates for its HBM products, raising low-NA EUV capacity to at least 80 systems next year, and scaling DUV and applications products accordingly.
• System sales were €6.3 bln, including over €4.1 bln from EUV systems, and were split fairly evenly between logic (49%) and memory (51%).
• Gross margin of 53% came in at the high end of guidance, supported by high-margin components within the installed base business. ASML also reaffirmed its FY26 gross margin outlook of 51-53%.
• On China, ASML continues to expect revenue contribution to remain around the midpoint, or roughly 20%. Importantly, it still raised its guidance, with the improvement driven primarily by better immersion trends outside China, along with some additional EUV upside.

Briefing.com Analyst Insight

ASML beat Q1 expectations and raised its FY26 revenue guidance. It also spoke constructively about the longer-term outlook for semiconductor growth, saying it continues to solidify as AI infrastructure investment ramps. Additionally, as customers continue to add capacity amid ongoing supply constraints, demand for advanced lithography continues to build, reinforced by commentary around strong orders and ASML's own capacity expansion plans. Despite that, shares are trading lower, which appears to mostly reflect the softer Q2 guidance. ASML also reaffirmed its margin outlook despite the higher revenue guide, noting that ramp-related costs such as hiring and training are offsetting some of the near-term benefit. Overall, the call and report did little to disrupt the longer-term story, but the downside Q2 guide appears to be prompting some investors to take a bit off the table after the stock's strong run and valuation setting a high bar.