ASML’s €12 Billion Buyback Can’t Mask a Margin Squeeze and a New US Export Hammer

ASML beats Q1 estimates but warns on Q2 margins; record orders from Samsung and SK Hynix offset by new US bill targeting China service revenue.

ASML is firing on all cylinders with its share repurchases and a raised full-year outlook, yet the mood around Europe’s largest tech company remains deeply divided. The Dutch chip-equipment giant is juggling a record order book from Asian memory giants against a softer second-quarter margin forecast and a fresh legislative threat from Washington that could upend its lucrative service business in China.

The Margin Math That Has Investors Nervous

The first quarter delivered solid results. Revenue climbed 13 percent year on year to €8.8 billion, with a gross margin of 53 percent — both figures beating management’s own expectations. But the guidance for the current quarter has taken the edge off the optimism. ASML expects second-quarter revenue in a range of €8.4 billion to €9.0 billion, with gross margin slipping to between 51 and 52 percent. The midpoint of that revenue band undershot analyst estimates, triggering profit-taking that sent the stock down roughly three percent on Monday to close at €1,186 in Amsterdam.

The sequential decline in system volumes and margin explains the cautious market tone. For the full year, however, the picture is more constructive. ASML has raised its 2026 revenue target to between €36 billion and €40 billion, with gross margin pegged at 51 to 53 percent. The long-term investment case remains intact, but the near-term margin weakness is weighing on sentiment.

Samsung and SK Hynix Rush to Fill the Order Book

Behind the robust full-year outlook lie concrete orders from Asia’s memory-chip heavyweights. Samsung has ordered around 20 EUV lithography machines for its Pyeongtaek P5 fab, and when DUV tools are included, the total order comes to roughly 70 units. SK Hynix has signed a supply contract worth approximately 12 trillion won, also covering about 20 EUV machines. Both conglomerates are accelerating their capital spending on AI memory, providing a strong tailwind for ASML’s order book.

The stock has recovered some ground since Monday’s dip, trading at €1,216.80 on Tuesday — a gain of nearly 2.7 percent from the previous session. Since the start of the year, the shares have advanced roughly 23 percent, leaving little room for disappointment.

The MATCH Act: A New Washington Wrench

Far more consequential than the quarterly margin blip is a new bipartisan bill introduced in the US Congress. The Multilateral Alignment of Technology Controls on Hardware Act — or MATCH Act — would go well beyond existing export restrictions. Until now, US-led curbs have targeted EUV machines, which ASML has never shipped to China. The MATCH Act would also prohibit exports of older DUV immersion systems — precisely the tools Chinese chip fabs have still been able to buy.

More alarming still, the legislation would sweep in ASML’s service business. Maintenance contracts and spare parts for already installed equipment — a high-margin revenue stream — would be affected. Analysts are divided on the potential damage. One estimate puts the revenue at risk in the low single-digit percentage range; another sees up to ten percent knocked off earnings per share.

China’s Share of Revenue Is Already Shrinking

The timing of the legislative push is particularly awkward. China’s share of ASML’s system revenue has already fallen sharply, from 36 percent in the fourth quarter of 2025 to 19 percent in the first quarter of 2026. The company had penciled in around 20 percent for the full year — a forecast that predates the MATCH Act. In 2025, China was ASML’s single largest market, accounting for 33 percent of total revenue. That cushion is rapidly deflating.

CEO Christophe Fouquet acknowledged that the wide band in the annual guidance — €36 billion to €40 billion — is designed to accommodate various scenarios around ongoing export-control discussions. How far those talks will weigh on the second half of the year remains an open question.

Buybacks and Dividends Keep Flowing

Despite the headwinds, ASML is pressing ahead with its capital-return program. The current buyback scheme, running from 2026 through 2028, authorizes up to €12 billion in share repurchases. In the first quarter alone, the company spent roughly €1.1 billion buying its own stock. Late last month, ASML was acquiring shares daily at prices between roughly €1,186 and €1,231 each, for a daily outlay of about €15.9 million.

On Tuesday, the company also paid its final dividend for the 2025 financial year, with the record date set for April 27. The combination of payouts and buybacks sends a clear signal: ASML is returning cash to shareholders while simultaneously scaling up its growth investments.

Analyst Views Remain Split

Deutsche Bank reaffirmed its buy recommendation in mid-April. Freedom Capital upgraded the stock from “Hold” to “Strong Buy” on April 16. The average price target among several analysts stands at approximately $1,688, converted from euros. Whether that target holds depends heavily on whether the MATCH Act becomes law — and how deeply it cuts into ASML’s service margins. For now, the company is betting that Asian memory demand and its own buyback firepower can outweigh the gathering storm from Washington.