ASML Holding's lithography business booms on AI demand; company reaffirms 2026 EUV pipeline strength.
ASML Holding continues to dominate the lithography-based semiconductor equipment market, delivering strong performance in the first quarter of 2026, driven by robust demand from AI-related infrastructure and advanced semiconductor nodes. The company reported total net sales of €8.77 billion in Q1 2026, reflecting solid year-over-year growth of 13.3%. Net system sales reached €6.28 billion, while Installed Base Management contributed €2.49 billion, highlighting the growing importance of ASML's recurring revenue streams.
Traction in logic and memory equipment supported this growth, as these products are in high demand for inference, training, deployment, and model optimization required by AI data centers and high-performance computing facilities. The installed base business continues to benefit from performance upgrades and rising utilization of EUV systems, reinforcing long-term revenue visibility. Net system sales also gained from traction across DUV technologies—Argon Fluoride Immersion, Argon Fluoride Dry, Krypton Fluoride, and Mercury I-line—as well as emerging EUV processes. Since AI processes now require more complex chips, ASML's advanced equipment remains in high demand.
ASML's ability to command premium pricing for its advanced lithography tools ensures robust profitability. In Q1 2026, gross margin stood at 53% and operating margin improved to 36%. Net income increased to €2.76 billion, representing 31.4% of total net sales. Demand remained strong across key semiconductor hubs, supported by aggressive capacity expansion plans from leading chipmakers.
Looking ahead, ASML expects continued growth, projecting full-year 2026 net sales between €36 billion and €40 billion, with gross margins ranging from 51% to 53%. The company anticipates second-quarter 2026 sales between €8.4 billion and €9 billion. Accelerating investments by customers across logic and memory to match rising global chip demand provide additional tailwinds for ASML's lithography systems.
ASML is the leading player in the lithography market, particularly in the EUV space. In the broader semiconductor equipment market, however, ASML competes with Lam Research and Applied Materials. Lam Research, an established wafer fabrication equipment manufacturer with strength in the memory space, is gaining traction in both Dynamic Random Access Memory and Non-Volatile Memory divisions on the back of AI demand. Applied Materials supplies equipment used in chip fabrication, including deposition and etching tools essential for both advanced and mature nodes. As chips become more complex with AI and high-performance workloads, Applied Materials' tools aid in designing and manufacturing efficient smaller-node chips.
Shares of ASML have gained 38% year to date, compared with the Computer and Technology sector's growth of 6.2%. From a valuation standpoint, ASML trades at a forward price-to-sales ratio of 12.16X, higher than the sector average of 6.49X. The Zacks Consensus Estimate for ASML's 2026 and 2027 earnings implies year-over-year growth of 28.5% and 29.9%, respectively, with the consensus estimate for fiscal 2026 revised upward in the past seven days. ASML currently carries a Zacks Rank of #3 (Hold).