Rising investment in artificial intelligence infrastructure is pushing demand for chip equipment giant ASML orders further into the future.
ASML reported third-quarter results on Wednesday, with net profit significantly beating market expectations and the company once again raising its full-year guidance 鈥?the third consecutive quarter it has lifted its outlook. More notably, some customers have begun expressing interest in placing orders for equipment as far out as 2029 and even 2030, while the company's existing supply plans for 2027 and 2028 can no longer fully meet market demand.
Facing a widening supply-demand gap, CEO Christophe Fouquet said the company is evaluating whether to raise 2028 capacity beyond the previously announced 30% expansion plan to address persistently climbing demand.
The market's reaction to these results and the outlook will serve as an important reference for near-term semiconductor sector sentiment. Earlier this week, chip stocks suffered a global selloff after Broadcom CEO Hock Tan compared industry investor sentiment to a casino, sparking concerns about the sustainability of the AI boom.
Profit and Gross Margin Both Beat Expectations
ASML's third-quarter total net sales reached 11.66 billion euros, slightly below the analyst average estimate of 11.7 billion euros, but net profit came in at 4.96 billion euros, well above the market's 4.11 billion euro expectation. Gross margin was 57.5%, also exceeding the anticipated 56.1%.
In a statement, Christophe Fouquet described the third-quarter total net sales as "record" and noted the result landed at the high end of the guidance range. Installed Base Management sales reached 3.3 billion euros, above guidance, driven primarily by strong demand for productivity upgrades, which was also a key factor behind the gross margin beat.
During the quarter, ASML sold a total of 113 new lithography systems and 8 used systems, up from 86 and 5 respectively in the prior quarter. Cash and short-term investments totaled 12.7 billion euros at period end. Additionally, the company declared an interim dividend of 1.88 euros per share, payable on November 4, and repurchased approximately 4.1 billion euros of its own shares in the third quarter.
Fourth-Quarter and Full-Year Guidance Both Top Analyst Estimates
Looking ahead, ASML expects fourth-quarter net sales between 14.2 billion and 15.2 billion euros, above analysts' prior estimate of approximately 13.97 billion euros; fourth-quarter gross margin is expected at about 57%, also above the market's 56.4% expectation.
At the full-year level, the company narrowed its net sales guidance range and raised the lower bound, expecting full-year net sales between 44 billion and 45 billion euros, compared with the previous range of 43 billion to 45 billion euros. The full-year gross margin forecast was raised to approximately 56%, up from prior guidance of 54% to 56% and above the market's previous expectation of 54.9%.
In terms of specific business growth, ASML expects its EUV (extreme ultraviolet lithography) business to grow more than 45% this year, while its non-EUV business is expected to grow approximately 20% year-over-year.
Supply-Demand Gap Widens, Capacity Expansion Plan Upgraded Again
ASML is the world's only manufacturer of EUV lithography machines, equipment essential to producing the most advanced chips, with order-to-delivery cycles exceeding one year. As a result, its order data is viewed by the market as an important leading indicator of capital expenditure trends at major chipmakers such as TSMC, Samsung, and Intel.
According to Bloomberg, ASML said in July that it planned to increase 2027 capacity for its next-generation high-end product 鈥?low NA EUV lithography machines 鈥?by 30%, corresponding to an annual shipment target of approximately 85 units, while also evaluating further expansion in 2028. The company has now made clear that even under this plan, supply in 2027 and 2028 will still not be able to fully meet demand.
Christophe Fouquet said in the statement: "Our customers continue to raise the short-term and medium-term equipment demand forecasts they develop together with us, primarily driven by their assessment of the scale and duration of AI-related investments. Given such strong demand visibility, some customers are expressing interest in placing orders for 2029 and even 2030." The company said it will explore possible paths to further increase 2028 capacity beyond its previous 30% expansion target.
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