Prediction: This AI Growth Stock Will Continue to Crush the S&P 500 in 2026

ASML reported Q3 2025 net sales of 7.5 billion euros, guiding for approximately 32.5 billion euros for the full year with a gross margin above 52%, while reaffirming its ambitious 2030 financial targets. The company's stock has significantly outperformed the S&P 500 year-to-date, largely driven by the critical role and increasing sales of its extreme ultraviolet (EUV) lithography machines, which are essential for advanced AI chip manufacturing and are expanding margins. Despite this strong performance, ASML anticipates significantly lower demand from China in 2026 due to trade policies, a notable headwind given China's substantial contribution to recent system sales, though the company expects overall 2026 net sales not to fall below 2025 levels.

Analysis

ASML reported Q3 2025 net sales of 7.5 billion euros and provided full-year 2025 guidance of approximately 32.5 billion euros, aligning with initial forecasts and projecting a gross margin above 52%. The company's stock has significantly outperformed the S&P 500, rising 45.7% year-to-date, primarily driven by the critical role and increasing sales of its Extreme Ultraviolet (EUV) lithography machines. These advanced systems are essential for manufacturing sophisticated AI chips and are contributing to expanding margins.

EUV machines are transforming ASML's business, with 9 units, including one high-NA system, generating 3.6 billion euros in sales in the latest quarter, representing nearly all of ASML's quarterly revenue. These systems, averaging 400 million euros each, enable the production of sub-3 nanometer nodes crucial for AI applications by chip designers like Nvidia and AMD. ASML has reaffirmed ambitious 2030 targets of 44-60 billion euros in revenue and 56-60% gross margin, underscoring long-term confidence in EUV's market penetration.

Despite strong performance, ASML anticipates a potential slowdown in near-term growth, with 2026 net sales not expected to exceed 2025 levels. This outlook is primarily due to a projected significant decline in demand from Chinese customers in 2026, a critical factor given China represented 42% of ASML's system sales volume in the latest quarter. Geopolitical trade policies, particularly the Netherlands aligning with U.S. export controls, are directly impacting ASML's ability to sell advanced units to China.

Key Decisions for Investors

• Monitor ASML's continued global adoption of EUV technology, especially high-NA systems, as this is crucial for long-term growth and margin expansion in advanced AI chip manufacturing.
• Closely assess the evolving geopolitical trade policies and their impact on ASML's sales to China, as this represents a significant near-term headwind and a potential drag on 2026 growth projections.
• Evaluate ASML's current valuation against its reaffirmed 2030 financial targets and its essential, monopolistic position in the semiconductor equipment supply chain, balancing near-term geopolitical risks with long-term AI-driven demand.