ASML Earnings Beat Forecasts as AI Chip Demand Exceeds Planned Supply Through 2028

Key Takeaways

• ASML reported record third-quarter revenue of €11.66 billion and net income of €4.96 billion, with profit comfortably exceeding expectations.
• The company warned that currently planned production capacity will not fully satisfy customer demand in either 2027 or 2028.
• Customers are already discussing equipment orders for 2029 and 2030, prompting ASML to consider expanding capacity beyond its previously planned 30% increase.
• ASML stock fell approximately 3.8% as a slight revenue miss, elevated valuation and a broader semiconductor selloff offset the strong profit and outlook.

ASML reported record third-quarter profit and raised its full-year sales outlook as chipmakers accelerated equipment purchases to meet rapidly expanding demand for artificial-intelligence processors.

The Dutch semiconductor-equipment company generated €11.66 billion in revenue and €4.96 billion in net income during the third quarter. Its gross margin climbed to 57.5%, exceeding both company guidance and market expectations.

Basic earnings reached €12.95 per share, compared with €7.59 in the second quarter. Expressed in US dollars, earnings were approximately $14.50 per American depositary receipt, comfortably above the $12.17 Wall Street estimate.

However, ASML’s US-listed shares fell approximately 3.8% to $1,650. Revenue narrowly missed some analyst forecasts, while concerns about high technology valuations and rising interest rates weighed on the broader semiconductor sector.

ASML Q3 Earnings Results

ASML’s third-quarter revenue increased approximately 55% from €7.52 billion a year earlier and 25% from the second quarter.

Net income more than doubled from roughly €2.13 billion in the third quarter of 2025 and rose 70% sequentially. Gross profit reached €6.7 billion, producing the company’s strongest margin in recent quarters.

The quarter was not a completely clean beat. Revenue came in slightly below the €11.71 billion to €11.85 billion range reflected in several analyst surveys. The shortfall was small, however, and was offset by much stronger profitability.

Part of the profit increase came from an approximately €500 million revaluation gain related to ASML’s investment in French artificial-intelligence company Mistral AI. Even allowing for that benefit, the underlying result remained strong because gross margin substantially exceeded expectations.

Service and Upgrade Demand Pushes Gross Margin to 57.5%

Installed Base Management revenue reached €3.29 billion, almost €400 million above ASML’s guidance.

The business includes maintenance, software, field options and productivity upgrades for lithography equipment already operating in customers’ factories. These services generally produce higher margins than selling newly manufactured systems.

Chipmakers are upgrading existing EUV and deep ultraviolet machines to increase wafer output while they wait for additional systems. That demand helped ASML’s gross margin rise from 54% in the second quarter to 57.5%.

Net system sales totaled approximately €8.4 billion. EUV equipment generated around €4.1 billion, including revenue from one High-NA EUV system, while non-EUV machines contributed approximately €4.3 billion.

ASML recognized sales of 113 new lithography systems, up from 86 in the second quarter, as well as eight used systems.

The higher shipment volume illustrates how quickly ASML is increasing production. The more significant development, however, was management’s warning that its current expansion plans are still insufficient.

AI Chip Demand Is Set to Exceed ASML’s Planned Supply

ASML said customers continue to raise their short- and medium-term equipment forecasts because they now expect AI infrastructure investment to remain elevated for longer.

Based on those updated forecasts, the company no longer expects its planned production capacity to meet customer demand in either 2027 or 2028.

ASML previously planned to increase production capacity for Low-NA EUV and DUV immersion systems by approximately 30% in 2027. It was also studying a further 30% increase for 2028.

The company is now investigating whether it can expand 2028 capacity beyond that level.

Customers including TSMC, Samsung and Intel require ASML’s machines to manufacture the advanced logic and memory chips used in AI accelerators, servers and high-bandwidth memory products. As Nvidia, AMD, Broadcom and other chip designers receive more orders, foundries and memory producers must invest in additional manufacturing capacity.

ASML occupies a uniquely powerful position in this supply chain because it is the only commercial supplier of EUV lithography systems. These machines use extremely short-wavelength light to print the smallest circuit patterns required for advanced semiconductors.

That technological monopoly means there is no straightforward alternative if ASML cannot produce machines quickly enough.

Customers Are Already Discussing Orders for 2029 and 2030

Some customers have begun discussing orders for delivery in 2029 and even 2030.

Semiconductor manufacturers normally provide long-term capacity forecasts, but placing equipment orders three or four years in advance suggests unusually strong confidence in future demand.

ASML said discussions are moving beyond 2027, with substantial order activity emerging for 2028 and early interest extending into the following two years.

This level of visibility resembles the semiconductor shortages experienced during the pandemic, when manufacturers placed orders far in advance to secure limited production slots.

However, long-term order interest is not the same as guaranteed revenue. Customers could postpone or cancel spending if AI demand weakens, financing conditions deteriorate or chipmakers build too much capacity.

ASML must therefore decide how aggressively to expand without creating excess production capability after the current AI investment cycle eventually slows.

ASML Raises Its 2026 Revenue Guidance Again

ASML increased the lower end of its full-year revenue outlook for the third time in 2026.

The company now expects annual net sales of €44 billion to €45 billion, compared with its previous forecast of €43 billion to €45 billion. Full-year gross margin is expected to be approximately 56%.

For the fourth quarter, ASML forecast:

• Net sales of €14.2 billion to €15.2 billion
• Gross margin of approximately 57%
• Research and development expenses of around €1.2 billion
• Selling, general and administrative costs of approximately €400 million

The midpoint of the fourth-quarter revenue range is €14.7 billion, above the approximately €14.0 billion analysts had expected before the report.

If ASML reaches the midpoint, fourth-quarter revenue would rise more than 26% sequentially from the record third-quarter level.

Why Did ASML Stock Fall After the Earnings Beat?

ASML’s Nasdaq-listed shares closed approximately 3.8% lower at around $1,650, despite initially trading higher following the release. The stock moved between approximately $1,635 and $1,752 during the session.

Several factors contributed to the decline.

First, revenue narrowly missed Wall Street’s forecast even though earnings exceeded expectations. At a premium valuation, a small sales shortfall can outweigh a strong profit result.

Second, the wider semiconductor sector was under pressure after hotter-than-expected US inflation increased expectations of another Federal Reserve rate hike. Higher yields tend to reduce the value investors assign to future technology earnings.

Third, investors questioned how quickly ASML can convert distant demand into actual revenue. Interest in placing orders for 2029 and 2030 is encouraging, but expanding production requires considerable investment and coordination across an exceptionally complex supply chain.

Finally, some of the quarterly profit beat came from the Mistral AI investment revaluation rather than ASML’s core operations.

China and Export Restrictions Remain a Risk

Export controls remain one of the largest uncertainties surrounding ASML’s outlook.

The company cannot sell its most advanced EUV equipment to Chinese customers, while governments in the United States and Europe continue to consider tighter restrictions covering less advanced DUV systems and related services.

China remains an important market for ASML’s mature-node equipment. Additional limitations could affect sales even as demand from TSMC, Samsung, Intel and memory manufacturers increases.

ASML must also manage a geographically concentrated customer base. A change in the capital-spending plans of one major foundry could materially affect quarterly revenue because each advanced lithography system carries a very high price.

ASML Returns €4.1 Billion Through Share Repurchases

ASML repurchased approximately €4.1 billion of its own shares during the third quarter under its 2026–2028 buyback program.

The company also declared an interim dividend of €1.88 per ordinary share, payable on November 4. Cash and short-term investments increased to €12.74 billion from €7.58 billion at the end of the second quarter.

The stronger cash position gives ASML additional flexibility to expand capacity, invest in research and development, and continue returning capital to shareholders.

What Comes Next for ASML Stock?

The earnings report reinforced ASML’s position as one of the most direct beneficiaries of the global AI infrastructure buildout.

Three indicators will be particularly important over the coming quarters:

• Whether ASML can increase 2028 production beyond its planned 30% expansion
• Whether customer interest for 2029 and 2030 becomes firm, non-cancellable orders
• Whether gross margin remains near 57% as manufacturing volume rises

Investors will also watch capital-spending guidance from TSMC, Samsung, Intel and major memory manufacturers. Their expansion plans will determine how quickly ASML’s long-term demand visibility converts into recognized revenue.

The third-quarter report showed that AI chip demand remains stronger than ASML’s production plans can currently accommodate. The stock’s decline reflected high expectations and near-term market pressure, rather than a deterioration in the company’s underlying order outlook.

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