Lithography machines are selling like hotcakes; ASML officially announces 30% capacity expansion

Original Author: Su Yang

Original Editor: Xu Qingyang

Original Source: Tencent Technology

July 15 – ASML announced its Q2 2026 financial results. Total net sales reached €9.326 billion, with net profit at €2.918 billion, both core metrics surpassing Wall Street analyst expectations.

As the most critical lithography equipment supplier in the semiconductor wafer manufacturing upstream, ASML’s surging performance reflects an ongoing arms race across the entire tech industry.

Giants like Amazon, Google, and Microsoft are pouring hundreds of billions of dollars into infrastructure, igniting massive downstream demand for high-end AI chips. Wafer fabs, both logic and memory, are accelerating capacity expansion, pushing the demand for lithography machines to a fever pitch.

Alongside its stellar Q2 report, ASML significantly raised its full-year guidance for the second time this year, boosting its 2026 total sales forecast sharply to €43-45 billion (approximately $49.1-51.4 billion).

Notably, ASML is also driving its own capacity expansion. It plans to increase production capacity by 30% in 2027, based on an approximate 2026 production plan of around 65 Low NA EUV systems, and is studying a further 30% capacity increase in 2028. Simultaneously, it plans to increase capacity by 30% in 2027, based on an approximate 2026 production plan of around 130 immersion DUV systems, and is also studying a further 30% capacity increase in 2028.

Driven by this, ASML has solidified its position as Europe's largest listed company by market capitalization. Since the start of 2026, ASML's share price has risen over 68%, doubling over the past 12 months.

Gross Margin Surges to 54%; Revenue Guidance Significantly Raised

ASML Key Financial Data

ASML achieved strong sequential and year-over-year growth across several key financial metrics in Q2, also surpassing Wall Street analyst forecasts.

Total net sales for Q2 reached €9.326 billion, a continuous increase from €8.767 billion in Q1; this represents a 21.3% year-over-year increase from €7.69 billion in the same period last year, significantly exceeding the Visible Alpha analyst consensus estimate of €8.83 billion and the LSEG consensus of €8.8 billion.

Breaking down the revenue composition, of the €9.326 billion total net sales, equipment revenue was €6.564 billion, and installed base management services revenue was €2.762 billion.

Gross profit for the quarter increased to €5.035 billion, with a gross margin of 54%, up from 53% in Q1, exceeding the company's own guidance. In terms of equipment delivery, ASML sold 86 new lithography systems and 5 used lithography systems in Q2, a notable increase from the 67 new systems sold in Q1.

"Both net sales and gross margin exceeded expectations, primarily driven by higher-than-expected installed base services sales," said Christophe Fouquet, President and CEO of ASML.

Net profit performance was also impressive. Net profit for the quarter reached €2.918 billion, a steady increase from €2.757 billion in Q1; this represents a substantial 27.5% year-over-year increase from €2.29 billion in the same period last year, significantly surpassing the market consensus of €2.6 billion.

Thanks to exceptionally strong order momentum in the first half of the year, ASML made its most aggressive forecast revision of the year. The company substantially raised its 2026 total net sales forecast from the previously announced €36-40 billion range to €43-45 billion; simultaneously, it raised its full-year gross margin guidance from 51%-53% to 54%-56%.

The magnitude of this adjustment is extremely rare in the semiconductor equipment industry, directly reflecting the urgency of downstream customers to secure supply. For the upcoming Q3, ASML provided a highly optimistic outlook, forecasting single-quarter sales between €11 billion and €12 billion, with gross margins expected to climb further to 55%-57%.

Memory and Logic Fabs Rushing to Order

ASML Business Breakdown

In Q2 2026's net system sales mix, logic chips regained dominance, accounting for 51% of revenue compared to 49% for memory chips. In the previous quarter, memory customers had historically overtaken logic customers, accounting for 51% of orders.

From a technology structure perspective, although the revenue contribution from EUV systems moderated to 57% from 66% in Q1, it remains ASML's primary revenue pillar. In terms of shipments, ASML sold 16 EUV systems in Q2, unchanged from Q1.

In contrast, ArFi (immersion deep ultraviolet lithography) system revenue rebounded in Q2, its share increasing from 23% in Q1 to 29%, with sales volume rising from 17 units in Q1 to 23 units, indicating restocking demand for DUV equipment from wafer fabs.

South Korea Remains the 'Largest Customer'

Influenced by export controls and the global wave of fab construction, ASML's global shipment destinations experienced a notable shift in Q2.

For the last two consecutive quarters, South Korea has been ASML's single largest market region, contributing 43% of revenue this quarter. This indicates that memory giants like Samsung Electronics and SK Hynix maintain extremely high levels of equipment procurement investment in their domestic market.

Meanwhile, the Taiwan market saw a strong rebound, with its revenue contribution jumping significantly from 23% in Q1 to 30%. In contrast, the China Mainland market's revenue contribution declined to 14% in Q2 from 19% in Q1. However, management estimates that China Mainland's full-year contribution to total revenue will remain around 20%.

"The incremental demand from China Mainland is primarily driven by the logic chip sector, dominated by local demand," stated Roger Dassen. He noted that since ASML raised its full-year overall revenue base in Q2, this means that while the percentage remains stable, the absolute procurement amount from the China Mainland market has actually increased correspondingly with the overall market growth.

Because ASML raised its full-year overall revenue guidance in Q2, it implies that the absolute procurement value from the China Mainland market throughout the year is still steadily rising.

Among other regions, the U.S. market contributed 9% of revenue this quarter, down from 12% in Q1; Japan contributed 4%.

EUV and DUV Lithography Capacity to Increase by 30%

In a video interview following the earnings release, ASML CEO Christophe Fouquet and CFO Roger Dassen provided a deep dive into the underlying industry logic and regional market dynamics behind the performance.

Fouquet stated that due to continued supply constraints for DDR5 and HBM (High Bandwidth Memory), driving prices higher, major manufacturers are accelerating capacity expansion across the board. Furthermore, the requirements for lithography intensity (including Low NA EUV and advanced immersion tools) at the most advanced memory nodes have significantly increased, leading ASML to expect a massive 75% jump in revenue from memory customers in 2026.

Concurrently, Fouquet emphasized that driven by AI demand, major customers are starting to push for advanced node capacity expansion, with the logic chip sector also performing strongly. ASML expects revenue from advanced foundry logic business to grow by approximately 25% in 2026.

Facing unprecedented pull pressure, Fouquet revealed that ASML plans to ship approximately 65 Low NA EUV systems in 2026, driving 45% growth in its full-year EUV business revenue; meanwhile, immersion system shipments are projected to reach 130 units.

"We plan to increase EUV production capacity by 30% in 2027 compared to 2026. Looking ahead to 2028, we have already received a significant number of EUV orders from customers, prompting us to seriously evaluate the possibility of increasing EUV capacity by another 30% in 2028. Alongside the growth in EUV orders, DUV is also growing, with immersion DUV continuing to play a vital role. We plan to increase its capacity by 30% in 2027 and are evaluating a further 30% capacity increase in 2028," said Fouquet.

Regarding the strong performance of Installed Base Management (IBM) services this quarter – covering after-sales service and on-site hardware/software upgrades – CFO Roger Dassen highlighted it as an incremental growth segment not fully appreciated by the market. This business generated €2.762 billion in revenue in Q2, an 11% sequential increase, a full €300 million more than the company had anticipated.

Dassen explained that in the current industry environment, with capacity extremely tight, customers are accelerating purchases of ASML's upgrade solutions to maximize production line efficiency in the shortest possible time.

Since many upgrades are software-driven and don't require physical machine downtime or extensive conversion time, customers can achieve immediate productivity gains post-installation. As the installed base of EUV systems continues to grow, the scale of the associated IBM services business also expands. This high-margin business is expected to achieve over 30% growth in 2026, making it a key contributor to boosting the company's overall profitability.