ASML Lifts Full-Year Outlook on Unrelenting AI Chip Demand

ASML raises 2026 revenue target to €40B after strong Q1 results, driven by AI chip capacity expansion. Announces a 17% dividend hike and details geographic sales shift.

ASML Holding NV has raised its financial targets for 2026 after a first-quarter performance that handily beat analyst expectations. The Dutch semiconductor equipment giant now sees revenue reaching as high as €40 billion this year, up from a prior top-end forecast of €39 billion, fueled by chipmakers racing to build capacity for artificial intelligence.

The company reported first-quarter net sales of €8.8 billion, with net income coming in at €2.8 billion and a gross margin of 53.0%. Management cited a structurally stable demand environment, driven primarily by the urgent expansion plans of key customers like TSMC, Samsung, and Intel to alleviate AI-related chip shortages.

Financial Targets and Shareholder Returns Revised Upwards

In response to what CEO Christophe Fouquet described as demand simply outstripping supply, ASML issued a more confident outlook. The new revenue guidance for the full 2026 fiscal year stands between €36 billion and €40 billion. For the ongoing second quarter, the company anticipates sales in a range of €8.4 billion to €9.0 billion, with a gross margin between 51% and 52%.

Shareholders are set to benefit directly from this strength. The company announced a dividend of €7.50 per share for the 2025 fiscal year, marking a 17% increase. It also bought back approximately €1.1 billion worth of its own shares during the first three months of the year.

Geopolitical Shifts and Operational Metrics

A notable shift occurred in the company’s geographic sales mix. The combined revenue share from South Korea and Taiwan dominated, accounting for nearly 70% of total sales last quarter. Meanwhile, business from China plummeted to 19%, down sharply from 36% in the prior quarter, a direct reflection of tightened export controls on advanced lithography systems.

Operationally, ASML reported a negative free cash flow of €2.6 billion for the quarter, which it attributed to the timing of advance payments from customers rather than a structural issue. Looking ahead, the company plans to ramp its production capacity for low-NA EUV systems to at least 80 units annually by 2027.

Market Performance Reflects Renewed Confidence

The stock’s market performance underscores the returning confidence in ASML’s pivotal market position. Shares currently trade around €1,228, maintaining ground near the 50-day moving average and standing more than 24% higher since the start of the year. From its 52-week low of €560, the price has more than doubled, a gain of 113% over twelve months. The February peak of €1,295 appears within striking distance if the current demand momentum from chip manufacturers holds.