Executive Summary & TL;DR
ASML reported strong Q3 2026 financial results, highlighted by substantial quarter-over-quarter revenue growth and profitability expansion driven by accelerating customer investments in AI-related leading-edge logic and memory. Net sales of €11,662 million (+25.0% QoQ) came in towards the top end of management's guidance (€11.0B–€12.0B) and virtually in line with consensus estimates (€11,710 million). Diluted GAAP EPS reached €12.95, significantly outperforming consensus estimates (€10.66–€10.87), though this result was bolstered by a €500 million non-operating revaluation gain on Mistral AI. Excluding the Mistral gain, operational EPS of ~€11.64 still represented a strong beat against expectations.
Key Takeaways
- Installed Base Management Outperformance: Installed Base Management sales surged to €3,289 million (+19.1% QoQ), beating management guidance of ~€2.9 billion due to intense customer demand for productivity and field upgrade packages.
- Margin Expansion: Gross margin expanded 350 bps QoQ to 57.5%, outperforming the guided range of 55%–57% on high-margin upgrade mix and operating leverage.
- Capacity Deficit to Customer Demand: Planned capacity expansion (+30% in 2027 relative to 2026) will not fully meet customer demand for 2027 and 2028, prompting ASML to evaluate additional expansion beyond +30% for 2028, with customers already inquiring about 2029–2030 tool deliveries.
- Upward Guidance Revision: Management tightened FY2026 net sales guidance upward to €44.0B–€45.0B (previously €43.0B–€45.0B) and gross margin guidance to ~56% (previously 54%–56%).
Investment Stance: Constructive. Structural AI demand creates unprecedented visibility into lithography tool utilization and long-term tool demand. While supply constraints and trade controls pose operational friction, ASML's monopoly positioning in EUV and expanding Installed Base sales provide strong pricing power and earnings resilience.
Top Watch Items: Supply chain capacity expansion feasibility for 2028+, export control updates, and normalization of high-margin upgrade revenue.