Story Stocks^®

ASML (ASML) is little changed following its Q3 results this morning. The EUV lithography equipment manufacturer beat EPS expectations by a wide margin, while revenue increased 55.2% yr/yr to €11.66 bln, roughly in line with expectations. ASML also guided Q4 revenue above expectations, forecasting €14.2-15.2 bln, and now expects its planned equipment supply for both 2027 and 2028 will not fully meet customer demand. The muted reaction suggests elevated expectations and broader weakness across tech stocks, as results still point to robust demand.

• ASML said the semiconductor industry remains strong, driven by AI adoption across an expanding range of applications. The company expects lithography to remain central to semiconductor innovation, with an increasing number of critical lithography exposures required for advanced Logic and Memory processes. ASML noted improving customer visibility into the size and duration of AI-related investments, with some customers expressing interest in placing orders for 2029 and 2030.
• Net system sales increased 51% yr/yr to €8.4 bln, including €4.1 bln from EUV systems, with one High NA EUV system, and €4.3 bln from non-EUV systems. Logic accounted for 54% of system sales and Memory for 46%. New lithography systems sold increased 71% yr/yr to 113 from 66, while total system sales included 17 EUV systems (+89% yr/yr) and 40 DUV immersion systems (+5% yr/yr).
• Gross margin expanded 590 bps yr/yr and 350 bps sequentially to 57.5%, exceeding guidance, primarily due to strong demand for high-margin productivity upgrades. Installed Base Management revenue increased to €3.3 bln from €2.8 bln in Q2, exceeding guidance by nearly €0.4 bln. Operating margin also expanded to 44.4% from 37.1% in Q2. ASML expects Q4 gross margin around 57%.
• Looking ahead, ASML expects FY26 Memory system sales to grow around 75% yr/yr, compared with approximately 10% growth in Logic. Memory growth is being driven by customer capacity expansion and increasing EUV adoption at advanced DRAM nodes. Across its portfolio, ASML anticipates EUV system sales growth exceeding 45%, non-EUV system sales growth around 20%, and Installed Base Management revenue growth around 50%, contributing to expected total revenue growth of approximately 36% for FY26.

Briefing.com Analyst Insight

Overall, this was a strong quarter from ASML. The muted reaction likely reflects continued weakness across semiconductor stocks and elevated expectations, particularly with revenue coming in line with expectations. However, the outlook remains particularly strong, with Q4 revenue guidance above expectations and improving visibility into the size and duration of AI-related investments. More importantly, ASML now expects its planned production capacity for both 2027 and 2028 will not fully meet customer demand, prompting it to explore additional capacity increases beyond 2027. Strong demand for productivity upgrades also drove meaningful margin expansion, highlighting improving profitability alongside robust sales growth. Looking further ahead, ASML plans to update its longer-term outlook at its Capital Markets Day on June 10, 2027.