Peer ASML Reports Earnings Amid AI Demand and China Export Controls

What happened

ASML reported Q2 2026 earnings with net sales of €8.8 billion and net profit of €2.61 billion, representing a 14% revenue increase and 8.8% profit growth year-over-year. The company raised its full-year 2026 revenue guidance to €36–40 billion, up from a previous range of €34–39 billion. China's share of ASML's system sales dropped sharply from 36% in Q4 2025 to 19% in Q1 2026, with the region expected to account for roughly 20% of full-year 2026 sales. This decline reflects the impact of proposed U.S. legislation, including the MATCH Act, which aims to restrict exports of ASML's deep ultraviolet (DUV) lithography tools to China. To meet surging demand driven by AI chip manufacturing, ASML plans to ship 60 low-NA EUV tools in 2026, a 25% increase compared to 2025, and has outlined capacity plans for up to 80 tools in 2027. The company closed 2025 with a backlog of $45.06 billion and activated a €12 billion share buyback program through 2028 while raising its dividend 17% to €7.50 per share.

Why it matters

For Lam Research, ASML's earnings offer critical insight into the health and direction of the semiconductor equipment industry. ASML's monopoly position as the sole manufacturer of EUV lithography systems makes it a leading indicator for capital equipment spending across the chip manufacturing supply chain. The company's raised revenue guidance and strong backlog signal robust wafer fabrication equipment (WFE) demand, which typically benefits Lam Research through corresponding orders for etch and deposition tools required in the same advanced manufacturing nodes. ASML CEO Christophe Fouquet's statement that supply will not meet demand for the foreseeable future and that memory customers are sold out for 2026 suggests sustained investment cycles among Lam's key customers, including Samsung, SK Hynix, Micron, TSMC, and Intel. However, the sharp decline in China revenue at ASML foreshadows similar headwinds for Lam Research, as both companies face the same U.S. export control regime. China represented a meaningful portion of Lam's revenue in recent quarters, and further restrictions on DUV tools and related process equipment could pressure near-term sales while forcing the company to rely more heavily on growth from U.S.-aligned markets and AI-driven capacity expansion.

Bigger picture

ASML's results highlight a fundamental shift in the global semiconductor equipment landscape, where geopolitical forces are reshaping demand patterns as dramatically as technological innovation. The semiconductor equipment industry is experiencing a bifurcation into U.S.-allied and China-aligned ecosystems, with export controls accelerating this split. ASML's ability to offset a 17-percentage-point decline in China's revenue share with AI-driven demand from memory makers and logic foundries demonstrates the scale of investment flowing into AI infrastructure. The company's $45 billion backlog and sold-out 2026 capacity for memory customers underscore the intensity of this cycle, driven by high-bandwidth memory (HBM) production for AI accelerators and data center expansion by hyperscalers. For the broader WFE sector, ASML's capacity constraints-despite plans to ship up to 90 EUV tools annually without adding physical capacity-signal that lithography remains a structural bottleneck in scaling AI chip production. This dynamic creates both opportunities and risks for equipment peers like Lam Research: strong demand for complementary etch and deposition tools in advanced nodes, but potential revenue volatility as China sales decline and customers concentrate spending in fewer, larger fabs aligned with U.S. export policy. Analysts now expect ASML to exceed its 2030 revenue target of €44 billion, with some forecasting €60 billion, suggesting a multi-year upcycle that could lift the entire equipment sector if geopolitical headwinds stabilize.

What to watch

Investors should monitor several key developments in ASML's upcoming earnings calls and public disclosures that will directly impact Lam Research's outlook. First, watch for updates on the MATCH Act and any additional U.S. export restrictions targeting DUV tools and service support, as these will define the floor for China-related revenue across the equipment sector. Second, track ASML's booking figures for new EUV orders, which serve as a leading indicator for WFE spending in advanced nodes where Lam competes. Third, observe commentary on the pace of capacity expansion and supply chain readiness, as bottlenecks in lithography directly constrain demand for downstream process equipment. Fourth, note any customer-specific guidance, particularly regarding memory makers ramping HBM production and logic foundries expanding for AI chips, as these segments drive Lam's growth in conductor etch and deposition. Finally, watch for updates on ASML's 2027 capacity target of 80 EUV tools and whether the company signals potential to exceed that figure, as this would indicate sustained multi-year demand for complementary equipment. Any shifts in the timeline or magnitude of China revenue declines will also be critical, as they will shape expectations for Lam's exposure to similar geopolitical risks.