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Today's observation
ASML delivered a record-breaking third-quarter earnings report.
In the third quarter of 2026, the company's net sales reached €11.662 billion, representing a year-over-year increase of approximately 55% and landing at the upper end of the previously provided guidance range of €11 billion to €12 billion; net profit amounted to €4.96 billion, up approximately 133% year-over-year; basic earnings per share stood at €12.95, significantly exceeding the market expectation of approximately €10.70.
But what’s most noteworthy in this earnings report isn’t just the record revenue and profits—it’s that management’s outlook on future demand has shifted further.
ASML stated that demand from customers for advanced logic and memory chip capacity continues to grow, and the company’s current planning for equipment deliveries in 2027 and 2028 is insufficient to fully meet customer needs. Some customers are not only increasing their equipment orders for 2028 but also requesting to reserve equipment for 2029 and even 2030.
This indicates that the impact of AI semiconductor capital expenditures is continuing to propagate upstream from NVIDIA GPUs and data center servers to wafer manufacturing equipment. TSMC, Samsung, Intel, SK Hynix, and Micron need to expand capacity in advanced logic, DRAM, and HBM, which ultimately translates into demand for EUV, DUV, and inspection equipment.
The issue ASML currently faces is no longer about whether it has orders, but whether it can produce, install, and maintain these devices quickly enough. In the third quarter, the company sold 113 new lithography machines, a 31.4% increase from the second quarter; net system sales reached €8.4 billion, including €4.1 billion from EUV equipment—comprising one High-NA EUV machine—and €4.3 billion from non-EUV equipment.
Installation management and service revenue reached €3.289 billion, a 19.1% increase from the second quarter and nearly €400 million higher than the company’s original forecast. The primary reason for the gross margin rising to 57.5% this quarter was strong customer demand for productivity upgrades to existing EUV and DUV tools.
However, the higher-than-expected profit includes a factor that requires separate attention. ASML disclosed that approximately €500 million of this quarter’s net profit came from the revaluation of its initial investment in Mistral AI. This represents a revaluation of investment value, not operating profit directly generated from lithography equipment sales.
Therefore, the operating performance of this earnings report remains very strong, but the earnings per share of €12.95 cannot be fully understood as continuing operations profit.
After the earnings report, ASML's American Depositary Receipts fell approximately 3.9%. On the same day, the Nasdaq Index also declined 1.9%, as higher-than-expected U.S. inflation pushed up Treasury yields, putting general pressure on the AI and semiconductor sectors. Thus, ASML's decline reflects both a market reassessment of its valuation and profit quality, as well as reduced risk appetite for tech stocks overall.
Data per minute
• Net revenue for the third quarter of 2026 was €11.662 billion, representing approximately a 55% year-over-year increase and setting a new record high;
• Net profit of €4.96 billion, representing a year-over-year increase of approximately 133%;
• Basic EPS was €12.95, above the market expectation of approximately €10.70;
• Approximately €500 million in profit this quarter came from the increased valuation of the Mistral AI investment;
• Gross profit of €6.7 billion, with a gross margin of 57.5%, an increase of 3.5 percentage points compared to the second quarter;
• Net system sales of €8.4 billion, including €4.1 billion in EUV equipment revenue and €4.3 billion in non-EUV equipment revenue;
• 113 new lithography machines were confirmed for sale this quarter, compared to 86 in the second quarter;
• Installation management and service revenue amounted to €3.289 billion, a 19.1% increase from the second quarter and nearly €400 million higher than the company’s original forecast;
• In the system sales structure, logic chip customers account for 54%, and memory chip customers account for 46%;
• The company expects storage business system revenue to grow by approximately 75% and logic business to grow by approximately 10% in 2026;
• The company expects full-year EUV revenue growth of more than 45%, non-EUV system revenue growth of approximately 20%, and installed base services growth of approximately 50%;
• Q4 revenue guidance is €14.2 billion to €15.2 billion, with a midpoint of €14.7 billion;
• Gross margin for Q4 is expected to be approximately 57%, with installed base management and service revenue projected at around €3.7 billion;
• Full-year 2026 revenue guidance has been narrowed and raised from €43–45 billion to €44–45 billion;
• Gross margin for the full year is expected to be approximately 56%, with annual revenue growing by approximately 36% year-over-year;
• The company expects the Chinese market to account for approximately 20% of total revenue in 2026;
• Free cash flow for the third quarter reached €11.4 billion, including advance payments from customers for future orders;
• The company repurchased approximately €4.1 billion in shares during the third quarter and will pay a mid-year dividend of €1.88 per share.
MSX View
Currently, ASML holds a unique position in the entire AI infrastructure supply chain. NVIDIA, AMD, and custom AI chip companies are responsible for designing processors, TSMC, Samsung, and Intel handle the manufacturing of advanced chips, while Micron, SK Hynix, and Samsung produce HBM and advanced DRAM. Regardless of which chip company ultimately captures market share, as long as demand for advanced logic and memory capacity continues to grow, the need for lithography equipment will ultimately reach ASML.
This positions ASML as a relatively upstream equipment supplier in AI capital expenditures, serving multiple chip companies. In this quarter’s system revenue, logic accounted for 54% and memory for 46%. Management expects memory system revenue to grow by approximately 75% in 2026, significantly outpacing the ~10% growth rate for logic. This is driven not only by increased demand for HBM but also by the adoption of more EUV processes in advanced DRAM.
As DRAM processes continue to shrink, chip manufacturers need to increase the number of critical lithography layers. ASML is benefiting not only from equipment demand driven by memory manufacturers expanding wafer capacity, but also from the increased number of lithography steps required per advanced DRAM wafer.
A more significant signal is that customer demand has already extended to 2029 and 2030. The planned production capacity for 2027 and 2028 is no longer sufficient to fully meet demand, indicating that advanced lithography equipment will remain in relatively tight supply for at least the next two years. ASML previously planned to increase capacity by approximately 30% in 2027, based on a baseline of around 65 Low-NA EUV tools in 2026, and also intended to expand DUV immersion equipment production by about 30%. The company is currently studying the possibility of exceeding the previously discussed 30% capacity increase for 2028.
This will have two directional impacts:
On one hand, supply constraints strengthen ASML's pricing power. Management has already completed price increase negotiations with customers for certain key products, with the impact beginning to materialize in 2027 and becoming more pronounced from 2028 onward. As long as demand continues to outstrip supply, higher equipment prices and increased production volumes have the potential to jointly drive revenue and gross profit growth.
On the other hand, rapid production expansion also incurs additional costs. ASML needs to increase manufacturing facilities, train technical staff, and require core suppliers such as Zeiss to expand in tandem. The company expects Q4 revenue to be significantly higher than Q3, but gross margin has slightly declined from 57.5% to approximately 57%, primarily due to increased expansion costs.
Therefore, ASML's next priority is to address its delivery capacity. High-NA EUV represents a longer-term growth driver. The confirmation of revenue from one High-NA tool this quarter signifies that this technology is gradually transitioning from research and development and customer validation into commercialization.
Management stated that Intel has already completed over one million wafer exposures using High-NA EUV systems; Samsung plans to introduce High-NA into mass production by 2028, while TSMC plans to adopt it by 2030. The current fleet availability of High-NA equipment has reached nearly 90%. These timelines indicate that High-NA revenue will not surge immediately in the short term, but once major customers enter mass production, it could simultaneously increase ASML’s average selling price per device, service revenue, and long-term customer retention.
Excluded. China’s business remains another key variable. The company expects China to account for approximately 20% of 2026 revenue, with demand primarily coming from mature-node logic and memory capacity. Management believes domestic demand in China remains strong, but actual revenue still depends on export control policies from the Netherlands and the United States, as well as ASML’s ability to continue providing spare parts, software updates, and maintenance services for existing equipment.
Therefore, this quarter's earnings report can be summarized into three key points:
First, demand for AI continues to spread toward advanced logic, DRAM, and wafer manufacturing equipment, with no clear signs of major customers significantly cutting capital expenditures.
Second, ASML's core constraints for 2027 and 2028 have shifted from orders to capacity; the speed of expansion will determine how much revenue the company can realize.
Third, a gross margin of 57.5% and an EPS of €12.95 are very strong.
Key areas to monitor next include whether Low-NA EUV and DUV capacity can ramp up as planned, whether installation and upgrade revenues can remain high, whether High-NA can enter mass production according to customer timelines, and whether China operations are affected by new export restrictions.
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Risk disclaimer: Macroeconomic conditions and U.S. stock market volatility are significant; the content of this article is for academic and research observation purposes only by MaiTong Research Institute and does not constitute any investment advice.