ASML Holding reported record third-quarter sales and profit on Wednesday, offering a bright spot amid a broader chip sell-off. The company said AI-driven customer demand is now running ahead of its planned capacity through 2028, signaling a multi-year equipment cycle.
Revenue rose 55% year-over-year to €11.66 billion, matching market expectations. Net income more than doubled to €4.96 billion, surpassing analyst forecasts of €4.13 billion. Basic earnings per share reached €12.95, and gross margin climbed to 57.5%, above the company's guidance range of 55%-57%.
Despite the strong results, ASML's stock remains about 14% below its June record. The Nasdaq-listed shares closed Tuesday down 1.9% at $1,717.76 and were around $1,715.60 in overnight trading. Amsterdam-listed shares fell 4.2% on Tuesday to €1,509.60, as investors sold semiconductor names. Options markets had implied a 4.6% move in the US ADR after earnings, underscoring the high expectations embedded in the stock.
Margins Deliver the Clearest Q3 Beat
The headline revenue number was close to consensus, but profitability was stronger. Installed Base Management revenue, which covers service and field-option sales, reached €3.29 billion, up from €2.76 billion in the second quarter. ASML sold 113 new lithography systems, compared with 86 three months earlier.
That service strength helped push gross margin to 57.5%, well above the 55.9% level analysts had expected. The result supports a bullish margin argument already building on Wall Street. BofA Securities analyst Didier Scemama wrote ahead of the numbers that a 5% rise in average selling prices without higher input costs could lift earnings per share by "around 10%." BofA has a Buy rating and a $2,915 target on the ADRs.
AI Demand Now Runs Ahead of ASML Supply
The most important disclosure was not the Q3 beat but ASML's view of demand beyond this year. Chief executive Christophe Fouquet said customers were raising short- and medium-term equipment forecasts because of expectations for the size and duration of AI investment. Some customers are showing interest in orders for 2029 and 2030.
More strikingly, ASML now expects its planned supply for both 2027 and 2028 will not fully meet customer demand. The company is examining ways to lift 2028 capacity beyond the 30% increase it had outlined. That matters because ASML had planned a 30% increase in Low-NA EUV and DUV immersion capacity for 2027.
That strengthens the case that spending by advanced logic and memory customers is becoming a multi-year equipment cycle rather than a short-lived AI surge. JPMorgan analysts said demand remained "very very strong" after meeting ASML's CFO in September.
ASML Raises 2026 Outlook as Valuation Remains the Test
ASML now expects fourth-quarter revenue of €14.2 billion to €15.2 billion with gross margin around 57%. It also tightened its 2026 sales forecast to €44 billion-€45 billion from €43 billion-€45 billion and lifted the margin outlook to around 56%.
Those upgrades matter after the strong rally. Investors have rewarded ASML for its near-monopoly in extreme-ultraviolet lithography, but that has also raised the bar for every earnings report. The shares trade at roughly 30 times forward earnings, leaving limited room for signs that AI capital spending is slowing.
This article is for informational purposes only and does not constitute financial advice.
