ASML looks to calm fears over 2026 growth as it warns of China sales decline

ASML reassured investors regarding its 2026 outlook, stating net sales would not fall below 2025 levels, despite forecasting a significant decline in China sales for 2025 and 2026 due to export restrictions. The semiconductor equipment giant reported strong Q3 orders of 5.4 billion euros, largely driven by the AI boom, and maintained its 2024 sales growth forecast of approximately 15% with a 52% gross margin. While Q3 net sales slightly missed estimates, net profit surpassed expectations, and the company provided a robust Q4 sales forecast. Shares rose 3% on the news, reflecting investor relief over the long-term guidance and continued AI-driven demand, though analysts highlight increasing focus on 2027 given anticipated lower growth next year and ongoing geopolitical risks.

Analysis

ASML has provided a reassuring outlook for 2026, stating that total net sales are not expected to fall below 2025 levels, which contributed to a 3% rise in shares. This guidance aims to calm concerns raised in July regarding macro-economic and geopolitical uncertainties impacting future growth. The company also reiterated its 2024 forecast for annual sales to increase by approximately 15% with a gross margin of around 52%, indicating near-term stability.

Despite the positive long-term outlook, ASML anticipates a "significant" sales decline in China for 2025 and 2026, primarily due to tightening U.S. chip export restrictions. However, this headwind is being offset by strong Q3 orders of 5.4 billion euros, largely driven by the ongoing AI boom, with CEO Christophe Fouquet highlighting AI's potential to create substantial value and drive future technology roadmap opportunities.

For Q3, ASML reported net sales of 7.516 billion euros, slightly below the 7.79 billion euro consensus, but net profit of 2.125 billion euros surpassed the 2.11 billion euro expectation. The company forecasts a robust Q4 with sales ranging from 9.2 billion to 9.8 billion euros and a gross margin between 51% and 53%. Analysts from Morgan Stanley, UBS, and Jefferies have upgraded the stock, citing AI chip foundry expansion and increased semiconductor manufacturing as key growth drivers.

Key Decisions for Investors

• Monitor ASML's detailed 2026 outlook update in January for further clarity on growth drivers and potential shifts in its China sales projections.
• Assess the long-term sustainability of AI-driven demand and its capacity to continuously offset geopolitical risks, particularly regarding U.S.-China trade policies and export controls.
• Evaluate ASML's strategic partnerships and technological advancements, such as its collaboration with Mistral AI, for their potential to solidify its critical role in the evolving AI semiconductor ecosystem.