ASML Q3 Profit Rises on AI Demand as China Warning Tempers Outlook

ASML Holding NV (Zorrox: ASML) delivered a stronger-than-expected third quarter, powered by brisk orders from chipmakers racing to expand capacity for artificial intelligence. Margins held firm and bookings topped forecasts, reinforcing ASML’s dominance in advanced lithography. Even so, management’s caution on China demand kept a lid on exuberance and sharpened focus on the 2026 trajectory.

SOLID QUARTER SUPPORTED BY ROBUST ORDERS

Net sales reached €7.5 billion with net income of €2.1 billion, landing comfortably within guidance. Gross margin printed 51.6%, a touch ahead of expectations. Bookings totaled €5.4 billion, with roughly two-thirds tied to EUV systems — the industry’s must-have tools for leading-edge nodes used in AI and high-performance computing.

Demand from global foundries and IDM customers stayed resilient. ASML shipped 66 new lithography systems and six used tools, while its installed base business — services and field upgrades — generated nearly €2 billion in recurring revenue. With no direct rival in high-end EUV, ASML remains the pacing item — and bottleneck — for the sector’s capacity expansion.

AI MOMENTUM OFFSET BY CHINA WEAKNESS

AI capex from major chipmakers in the U.S., South Korea, and Taiwan continues to backstop orders, even as traditional computing slows. Management, however, flagged a meaningful step-down in China sales from 2026 as tighter export controls bite. After several years in which China contributed outsized growth, that mix is set to normalize.

Executives said they do not expect total sales to slip below 2025 levels, citing strength elsewhere and broader regional investment. The message: growth persists, but the center of gravity is shifting toward Western and allied Asian capacity.

GUIDANCE AND CAPITAL RETURN

ASML reaffirmed its 2025 view, pointing to roughly 15% net sales growth and a gross margin near 52%. Fourth-quarter revenue is guided to €9.2–€9.8 billion, with both logic and memory supporting top-line momentum.

Capital returns remain disciplined. The company announced an interim dividend of €1.60 per share and executed ~€148 million of buybacks during the quarter under its ongoing repurchase plan. CEO Peter Wennink emphasized that the secular story is intact: AI and HPC are catalyzing a powerful, multi-year investment cycle — albeit one that must be navigated through policy and regional volatility.

INVESTOR OUTLOOK

Results underline ASML’s status as Europe’s most valuable tech franchise and a primary beneficiary of the AI buildout. The China caution, though, is a reminder that geopolitics still shapes near-term cadence. The core question for investors is how smoothly ASML can rotate from China-heavy growth to broader diversification without denting orders or margins.

With a deep backlog, sticky service revenue, and cost discipline, the setup remains constructive. But at elevated multiples, any wobble in bookings or gross margin mix can travel quickly through the share price.

TIPS FOR TRADERS

• Anchor on quarterly bookings and backlog momentum; they lead revenue inflection for ASML (Zorrox: ASML).

• Track updates on China revenue mix and export-control impacts heading into 2026.

• Watch gross margin versus tool mix (EUV/DUV) and logistics costs for profitability signals.

• Map AI capex from top foundries/IDMs; their build plans tend to front-run order spikes.

• Consider earnings-adjacent options hedges; guidance shifts and policy headlines can swing implied volatility.