ASML Q3 earnings report

Dutch semiconductor equipment giant ASML on Wednesday looked to calm concerns over 2026 growth as it warned that it expects a “significant” sales decline in China.

Guidance was key for the firm after shares sank in July when it warned that while it would still prepare for growth in 2026, it could not confirm it at the time due to increasing macro-economic and geopolitical uncertainty.

On Wednesday, the firm said it does not expect 2026 total net sales to be below 2025 and added that it will provide more details on its outlook in January.

It also maintained its forecast for annual sales to increase around 15% this year in comparison to 2024, with a gross margin of around 52%.

Shares were last trading 3.5% higher and the stock is up 24% year to date.

The company continues to benefit from the AI boom with investments helping fuel orders of 5.4 billion euros ($6.28 billion) in the third quarter. However, CEO Christophe Fouquet warned that the firm expects customer demand and sales in China to decline significantly next year compared to 2024 and 2025.

“Strong news” about commitment to AI has helped reduce some of the ongoing uncertainties that the company flagged in the previous quarter, Fouquet said in video transcript published Wednesday.

“We also see that AI could create a lot of value in our products moving forward. So we continue to see a very strong opportunity on our technology roadmap,” the CEO added.

The news on China is “a little concerning” considering that the U.S. select committee is potentially considering more restrictions, Ben Barringer, global technology analyst at Quilter Cheviot, told CNBC’s “Europe Early Edition” Wednesday.

“The bookings number has been quite volatile over this year, so a little bit of stability is, I think, quite good. Again, the lower bound they’ve put on 2026, I think, is decent,” Barringer said, adding that the focus is increasingly on 2027 rather than 2026, as market participants accept that next year will be a low growth year for ASML.

Barringer said an earnings report from ASML’s biggest customer TSMC, due on Thursday, will be key as crunches in computing capacity and AI infrastructure are expected to continue to increase demand for ASML’s advanced lithography systems.

ASML, which recently became the most valuable listed firm in Europe, is among the companies in the semiconductor industry which have been impacted by tightening U.S. chip export restrictions to China and U.S. President Donald Trump’s threat of tariffs on the sector since he took office.

Here’s how ASML did versus LSEG consensus estimates for the third quarter:

• Net sales: 7.516 billion euros versus 7.79 billion euros expected
• Net profit: 2.125 billion euros vs 2.11 billion euros expected

The company forecasts fourth-quarter sales will range between 9.2 billion euros and 9.8 billion euros and expects a gross margin between 51% and 53%.

Analysts have recently been bullish on the chip giant with Morgan Stanley, UBS and Jefferies among the banks upgrading the stock. Morgan Stanley analysts said the expansion of AI chip foundries and an increase in semiconductor chip manufacturing in China were expected to drive growth. Meanwhile, ahead of the earnings release, UBS pointed to better-than-expected smartphone and PC sales and AI-led memory growth.

ASML is also expected to benefit from Nvidia and Intel’s $5 billion deal as semiconductor equipment demand increases. On Wednesday, Chief Financial Officer Roger Dassen pointed to the company’s recently announced partnership with French AI firm Mistral as a way for ASML to “get closer and closer to the AI world.”