ASML Falls Post-Earnings, Chip-Making Expansion Anchors Outlook

Semiconductor manufacturing equipment maker ASML Holding (NASDAQ: ASML) took off in 2025, and hasn’t looked back much since. Shares delivered a total return of nearly 56% last year, and 2026 has seen more of the same. The stock is up more than 35% on the year, despite shares falling 2.4% after ASML's latest earnings report.

Given the stock's recent gains, ASML's encouraging results, and its long-term outlook, the stock remains constructive. Here's what investors need to know.

ASML Earnings: Solid Beats, Mixed Guidance

In Q1 2026, the Dutch advanced lithography maker saw sales rise by 13% year over year (YOY) to €8.77 billion (approximately $10.35 billion). This figure nudged past analyst estimates of $10.24 billion. The firm also substantially beat on the bottom line, posting diluted earnings per share of €7.15 (approximately $8.44). That figure rose by 19% YOY, handily surpassing estimates of $7.68 per share.

However, guidance for Q2 was light. At the midpoint, ASML forecasts revenue of €8.7 billion (approximately $10.27 billion). Meanwhile, analysts were looking for a figure of €9.08 billion (approximately $10.72 billion).

Despite this, it's often not worth reading too much into ASML’s misses. Due to the very high price of its machines, sales can be lumpy quarter to quarter. Notably, the company’s most advanced high-NA extreme ultraviolet lithography machine costs around $400 million. Thus, if the firm expected to sell just one more of these machines next quarter, its guidance would be nearly in line with expectations.

This makes ASML's annual guidance a fairer measuring stick, as quarterly lumpiness can be corrected over longer periods. Here, the company impressed, forecasting midpoint full-year 2026 sales of €38 billion (approximately $44.84 billion). This was a solid increase over the firm’s previous midpoint guidance of €36.5 billion (approximately $43.07 billion). Furthermore, the figure beat estimates of €37.75 billion (approximately $44.55 billion).

Still, the full-year guidance beat was relatively small, and the company's Q2 guidance fell short. Investors often overweigh near-term guidance, as there is typically a greater level of certainty expected from these numbers.

These factors likely contributed to the stock’s post-earnings fall, as investors had already baked in strong financial performance. Going forward, two important dynamics worth understanding include ASML's constrained sales capacity and developments around China.

Manufacturing Buildouts Support Strong Multi-Year Demand

ASML’s sales capacity is currently constrained due to the limited ability of its customers to buy equipment. Due to very high demand, ASML's logic and memory chip customers lack “clean room” space to install the company’s machines. Adding significant clean room space requires ASML’s customers to build new fabrication facilities—a process that can take years. Expansions are coming, but it will take time.

Notably, Taiwan Semiconductor Manufacturing (NYSE: TSM) expects to spend around $54 billion on capital expenditures (CapEx) in 2026. This would be a very significant increase of 32% YOY versus its 2025 CapEx. Meanwhile, Micron Technology (NASDAQ: MU) forecasts that its CapEx will increase by 81% YOY to $25 billion, with the number expected to move even higher in 2027. The 2026 CapEx projection for Samsung Electronics (OTCMKTS: SSNLF) is $28 billion, while the figure sits at $24.5 billion for SK Hynix. Many of these new facility expansions will not come online until 2027 or 2028.

The demand for ASML’s machines is there, but ASML’s ability to convert this demand into sales is currently limited, as customers have nowhere to put them. However, as those clients build more facilities, the problem should fade over time. This is one of the key factors supporting ASML’s long-term outlook.

China Sales Drop, MATCH Act Looms

On the other side of the equation, sales from China dropped by approximately 23% YOY, falling to 19% of total revenue. This comes from a normalization in demand, as Chinese customers looked to buy more machines in 2025 ahead of export controls. However, it’s possible that ASML’s business in China could weaken further due to newly proposed legislation.

A bipartisan group in Congress recently introduced the Multilateral Alignment of Technology Controls on Hardware (MATCH) Act. The proposed legislation seeks to ban the sale of deep ultraviolet (DUV) lithography machines—which are less advanced than its extreme ultraviolet (EUV) machines—to China. DUV makes up a large amount of ASML’s Chinese sales, as it has never sold EUV there. Thus, a ban on DUV sales would significantly impact ASML’s remaining ability to sell in China. However, the firm notes that its guidance range for 2026 “accommodates potential outcomes of ongoing discussions around export control.”

ASML: Chip Equipment Stalwart Up Against High Expectations

ASML remains in a strong position, especially regarding long-term demand trends. The situation in China is a significant risk, but whether the MATCH Act passes remains up in the air. In mid-April 2026, ASML appears neither substantially undervalued nor overvalued. And after its latest earnings, analysts at major investment banks maintained their Buy ratings.