UBS has released a report stating that ASML Holding NV's first-quarter 2026 results met expectations, and the company's upward revision of its 2026 revenue guidance demonstrates high business visibility. UBS continues to rate ASML as "Most Preferred," citing strong business momentum and an attractive valuation, while noting that risks such as geopolitical factors still require attention.
In the first quarter of 2026, ASML reported sales of €8.77 billion, which were 1% above general market expectations and also exceeded the midpoint of the company's own guidance range of €8.2–8.9 billion. The gross margin reached 53%, at the upper end of the company's 51%–53% guidance range, primarily driven by logic and memory chip customers expanding capacity through upgrades and new equipment installations, which boosted growth in the installed base management. As a result, operating profit for the first quarter of 2026 was 4% higher than consensus estimates.
Regionally, system sales in China decreased by 56% quarter-on-quarter, accounting for 19% of the group's system sales, while South Korea represented 45%. This aligns with management's earlier statement that China is expected to contribute around 20% of the group's revenue by year-end. Despite quarterly fluctuations, UBS believes long-term demand from China remains strong. If rising geopolitical risks prompt customers in the region to further advance purchases, it could serve as a potential upside driver for ASML in 2026. UBS emphasized that ASML's peers hold more optimistic expectations for the Chinese market than ASML itself.
Looking ahead, ASML expects second-quarter 2026 revenue to be in the range of €8.4–9.0 billion, with a gross margin of 51%–52%. UBS assesses that second-quarter performance may slightly lag behind market expectations. At the same time, the company has raised its full-year 2026 revenue guidance from €34–39 billion to €36–40 billion, implying a growth rate of 10%–22%, with a midpoint of 16%, matching current market consensus. UBS noted that ASML typically revises its annual revenue guidance upward during the second-quarter or first-half earnings period; the fact that it raised guidance in the first quarter underscores high business visibility.
The company anticipates stronger demand for deep ultraviolet (DUV) immersion systems, mainly from markets outside China, indicating a broadening of growth drivers that are expected to accelerate throughout 2026. In its first-quarter report, ASML management mentioned only that order intake was strong, without providing further details. Importantly, the CEO provided equipment supply guidance for 2026 and 2027, projecting the production of at least 60 low-NA EUV systems in 2026 and at least 80 in 2027. Current market consensus expects 74 low-NA EUV systems to be produced in 2027, suggesting room for a slight upward revision. This growth is largely supported by robust demand from logic and memory chip customers.
Management highlighted that capacity constraints among ASML's customers may persist beyond 2026, and long-term supply agreements—reportedly 3–5 years for DRAM, compared to typically 1 year during supply shortages—support demand visibility. UBS indicated that, based on first-quarter 2026 memory system sales, full-year memory system sales growth in 2026 could exceed 50% year-on-year.
Between 2026 and 2027, increases in ASML's equipment production capacity will be constrained by cleanroom availability rather than demand. UBS believes that if cleanrooms become operational at a faster pace, ASML's low-NA EUV system deliveries in 2027 could exceed the baseline of 80 units. This trend is critical for ASML's stock performance.
Overall, UBS considers that, since first-quarter 2026 results met expectations and 2026 guidance was raised to align with market consensus, ASML's stock price reaction may be muted in the short term. However, commentary regarding the 2027 outlook forms a core support for the investment thesis. Should customer cleanrooms come online more quickly, further upward revisions to performance guidance are possible.
UBS remains optimistic about ASML, citing its strong business momentum, stable industry demand, and historically high capacity gaps among customers. Spending in both the logic and memory chip segments is expected to remain robust, with potential upside for the DUV business exceeding expectations. ASML's current stock price trades at 33 times expected 2027 earnings, slightly below its 10-year and 2-year forward P/E averages. Moreover, compared to peers, ASML's valuation is at a historically low premium level. As a result, UBS maintains its "Most Preferred" rating on ASML.