31JUL

ASML Q1 sales hold, China collapses to 19 per cent

4 min read

09:24UTC

ASML reported €8.8bn in Q1 2026 net sales on 15 April, but China's share of system shipments fell from 36 per cent in Q4 2025 to 19 per cent in a single quarter as tightened US DUV export restrictions bit.

← Back to The pause ends, and the map moves west Jump to analysis ↓

ConflictDeveloping

Key takeaway

ASML's raised guidance cannot disguise the US export policy's structural reset of its R&D funding model.

ASML's Q1 2026 release from Veldhoven landed with: net sales of €8.8bn, net income of €2.8bn, gross margin of 53.0 per cent, and earnings of €7.15 per share. China accounted for 19 per cent of system sales in the quarter, down from 36 per cent in Q4 2025, a revenue drop of roughly €1.8bn driven by tightened US Deep Ultraviolet lithography export controls. ASML raised its full-year 2026 guidance to €36-40bn. The stock fell 6 per cent on results day, and a bipartisan group of US lawmakers proposed a bill within days of the report to tighten DUV sales to Chinese chipmakers further.

Chief Executive Christophe Fouquet said the 2026 guidance "accommodates potential outcomes of ongoing discussions around export controls", a phrasing that writes export policy into the company's forward numbers as a known risk rather than a contingent one. The raised guidance is the defensible counter-reading: underlying demand for EUV and qualified DUV tools remains strong enough to absorb a seventeen-percentage-point shift in geographic mix, and ASML's near-monopoly position on EUV production is not materially changed by a China revenue reset. On that view the share-price reaction prices political risk rather than operational weakness.

ASML's historical R&D funding model cross-subsidised leading-edge EUV development through mature-node DUV shipments, a significant share of which went to Chinese chipmakers. A seventeen-percentage-point shift in one quarter is a structural step-change rather than a trajectory, and if the proposed US bill becomes law the cross-subsidy shrinks further. European semiconductor sovereignty at the leading edge rests on a firm whose R&D cash flow is being reshaped by export controls set in Washington, and the Commission has no comparable capital instrument to replace the lost Chinese revenue inside the European industrial base .

Brussels has stopped restating the end-of-decade target of twenty per cent global semiconductor market share since the Intel Magdeburg cancellation and the GlobalFoundries Crolles suspension , and Italy's €211m photonic chips state aid is closer to a pivot than a replacement. With ASML's Chinese revenue thinning and no European alternative supplier of EUV scanners, the leading-edge layer of European semiconductor capacity now depends on a single firm whose quarterly numbers are a readout of US trade policy as much as of its own order book.

Deep Analysis

In plain English

ASML, based in the Netherlands, makes the machines that manufacture the world's most advanced computer chips. No other company makes the most advanced version of this equipment. The US has been restricting what ASML can sell to China, and those restrictions tightened in early 2026, meaning ASML sold far fewer machines to Chinese chipmakers than before, reducing China's share of ASML's revenue from 36 per cent to 19 per cent in a single quarter. The company's other customers in the US, South Korea and Taiwan are buying enough to keep overall revenue strong. The concern is that losing Chinese revenue reduces the cash available to develop the next generation of even more advanced machines.

Source Landscape

This story draws on neutral-leaning sources from United States

United States

The approximately 1.8 billion euro quarterly China revenue decline, annualised, represents roughly 7 billion euros in lost annual run-rate. Against ASML's raised full-year 2026 guidance of 36-40 billion euros, this is material but not existential.

The EU Chips Act co-financing for ASML's Eindhoven campus approved in 2024 was reported at approximately 900 million euros over five years, roughly 180 million euros annually, against a 7-billion-euro annual run-rate loss. The Commission has no capital instrument currently available to replace the Chinese DUV revenue at scale inside the European industrial base.

ASML's R&D spend in 2025 was approximately 4.5 billion euros; the China revenue shift compresses the margin available for that investment without cutting into it at current guidance levels, but a further restriction round from the proposed US bipartisan bill would reduce that cushion further.

Consensus view: SEMI's 2025 semiconductor equipment market report noted that DUV lithography equipment, the category subject to US export restrictions targeting China, had historically generated 20-30 per cent of ASML's annual revenue from Chinese customers and served as indirect cross-subsidy for EUV research and development.

SEMI's position is that export restrictions on mature-node equipment are counterproductive for Western semiconductor supply chains because they reduce the revenue base funding leading-edge equipment development without materially slowing China's mature-node capacity buildout, which can source domestic DUV alternatives at lower performance tiers.

Counter-view: The Center for Strategic and International Studies semiconductor policy programme has argued that the net sovereignty effect of DUV restrictions on European strategic capability is ambiguous.

ASML's EUV monopoly is intact and unaffected by China restrictions; the concern is that sustained decline in DUV cross-subsidy revenue may slow the pace of EUV generation advances at a point when TSMC and Intel are heavily dependent on ASML's roadmap for their own leading-edge process economics. The EU Chips Act co-financing for ASML's Eindhoven R&D campus, approved in 2024, provides partial mitigation but at a scale well below the annual Chinese DUV revenue it is intended to offset.

Key tension: ASML's raised full-year 2026 guidance to 36-40 billion euros reflects strong underlying EUV demand from TSMC, Samsung and Intel, and that demand is real.

But the raised guidance also demonstrates that ASML has absorbed the DUV restriction as a known cost baked into forward numbers, which means further restrictions, including the proposed US bipartisan bill on DUV services and spares, would represent a compounding hit on top of an already-priced step-change rather than a replacement for it.

First Reported In

Update #3 · Sovereignty summit, minus the sovereigns

ASML Investor Relations· 23 Apr 2026

Read original →

Causes and effects

This Event

ASML Q1 sales hold, China collapses to 19 per cent

Europe's only leading-edge lithography supplier has lost roughly €1.8bn of quarterly Chinese revenue that historically cross-subsidised EUV research. A bipartisan US bill to tighten DUV rules further, proposed within days of the results, signals the decoupling is not yet complete.

Led to

ASML Q2 guidance lands €300m below consensus

ASML's Q1 2026 China share collapse (ID:2727) from 36 to 19 per cent directly informs the Q2 2026 guidance that came in €300m below analyst consensus.

Occurred 1 May 2026

Read story →

TSMC ships gear to Dresden fab for 2027

ASML's China revenue collapse under US DUV controls (ID:2727) underscores why the Dresden mature-node fab does not close the leading-edge AI accelerator gap.

Occurred 5 Jun 2026

Read story →

Different Perspectives

Shipping and insurance underwriters

Underwriters can price Houthi strikes because the group announces its targets, but an unclaimed drone at Damietta and a mandatory Iranian insurance scheme both deny them a pattern to price against. War-risk premiums are increasingly being set by the absence of a claimant, not the scale of the damage.

Jordan

Azraq absorbed its fourth Iranian strike in seven weeks, again drawing no direct Jordanian retaliation, only an American one. Amman's exposure, hosting US basing without the Patriot density of Gulf allies, has not changed even as the war around it widens.

Houthi movement

The Houthis' 20 July blockade of Saudi-linked shipping is the injury Riyadh's new 43-nation coalition directly answers, yet the group itself was never asked to join and remains outside every proposal on the table. Sanaa-aligned commentators call the coalition a paper reassurance for insurers rather than a deployable force.

Egypt's Cabinet

Egypt confirmed the Damietta blaze was an attack, not an accident, on soil the war had never touched before. Cairo now faces an unclaimed threat to a facility supplying roughly 7% of its domestic gas, with no author to hold accountable and no pattern yet to defend against.

Oman

Muscat is running the only channel Iran will use, a voluntary Hormuz fee modelled on Malacca, but stayed out of Saudi Arabia's new naval coalition entirely. Oman's mediating leverage depends on treating Hormuz as shared and non-exclusive, the opposite of what Tehran is now demanding of it.

Iraq's Prime Minister

Al-Zaidi cancelled his first official Riyadh visit and convened the Coordination Framework, the coalition that keeps him in power and whose factions sit inside the PMF that Saudi jets just struck. He is caught between a five-year Saudi investment relationship and armed groups inside his own state he does not fully control.