ASML Holding NV (ASML) Q3 2026 earnings review
ASML's profit doubles, but it trims its older-machine sales target
ASML sold more upgrades than it planned, while its factories cannot build enough new machines for its customers. Sales rose 55% from a year ago to a record and the gross margin reached 57.5%. Chief executive Christophe Fouquet said customers want to place orders for the end of the decade, so ASML is looking for ways to add capacity beyond the step planned for 2028.
| Sales | €11.66 billion +55% from a year ago |
|---|---|
| Gross margin | 57.5% 51.6% a year ago |
| Profit per share | €12.93 €5.48 a year ago, including a one-off investment gain |
| Full-year sales outlook | Raised to €44–45 billion middle of the range: 36% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because the demand Fouquet describes is now on the balance sheet: customer deposits for later deliveries climbed to €9.3 billion from €3.6 billion, and the outlook rose again. The bad news: finance chief Roger Dassen lowered the growth target for the older DUV tools, so by our math the fourth quarter must ship more immersion machines than in any of the past six quarters.
The question now is whether customers' interest in orders for 2029 and 2030 becomes firm contracts, or the same late-cycle rush that ended in delays before. The backlog ASML publishes in January will tell.
🐂 Bull Case
Upgrades for Installed Machines Push Margin Past 57%
ASML earns a second income from the thousands of lithography machines already running in customers' factories: service contracts and upgrades that make an existing tool print more wafers per hour. The company calls this Installed Base Management. Chief executive Christophe Fouquet said the quarter reflected "continued strong demand for productivity upgrades".
Those sales reached €3.3 billion, about €390 million above the plan, finance chief Roger Dassen said. Upgrades are mostly software and parts, so they carry a higher margin than a new machine, and they pushed the gross margin to 57.5% against a plan of 55–57%.
- Gross margin: 57.5%, up 5.8 percentage points from a year ago
- Cost of making products: 42.5% of sales, down from 48.4%
- Research spending: 10.1% of sales, down from 14.7%, because sales outgrew a flat budget
- Full-year gross margin outlook: about 56%, from 51–53% in January
This matters because an upgrade turns a customer's existing floor space into extra capacity within months, so chipmakers short of tools buy it first. Dassen now expects upgrade and service sales to grow about 50% this year, up from more than 30% in July, and that is why the margin outlook moved again.
What to watch: fourth-quarter upgrade and service sales against the €3.7 billion plan. A figure above it would mean the margin step holds into 2027 before any price increase arrives.
Customers Prepay for Machines Due in 2028
ASML stopped publishing quarterly orders after 2025, so the balance sheet is now the best public reading of demand. Customers pay a deposit when they order, and ASML records deposits for deliveries more than a year away as non-current contract liabilities.
That line jumped to €9.3 billion from €3.6 billion in a single quarter, after shrinking through 2025. Fouquet said customers expect their own supply to fall short "at least until 2028" and that "some customers are expressing an interest in placing orders with us for 2029 and even 2030".
This matters because a deposit is money, not a forecast, so the "order book momentum" Fouquet describes now has a number behind it. Operating cash flow of €11.8 billion, more than twice net income, came largely from these deposits. Fouquet concluded that "30% in 2027, 30% in 2028 will not allow us to meet our customer demand", so ASML is looking for more factory capacity for 2028. A deposit still secures a slot, not a delivery date.
What to watch: the year-end order backlog ASML publishes in January. A rise from €38.8 billion would show the deposits are new orders rather than earlier orders paid sooner.
Buybacks Nearly Quadruple as Cash Returns
ASML spent €4.1 billion on its own shares in the quarter, nearly four times the amount in each of the first two quarters under its 2026–2028 programme. The company also repaid €1.0 billion of debt and pays a quarterly dividend of €1.88, up from €1.60 a year earlier.
Cash and short-term investments ended the quarter at €12.7 billion against €2.0 billion of debt, so the chip-tool maker can keep this pace while it builds new factory capacity. Dassen named both levers, dividends and buybacks, as the way it will keep returning cash.
What to watch: fourth-quarter repurchases. A figure near this quarter's would mean the deposit-driven cash inflow is going to shareholders rather than sitting on the balance sheet.
🐻 Bear Case
Older DUV Machines Must Ship a Record Quarter
ASML sells two families of lithography machines: EUV, the newest and most expensive, and DUV, the older type that still prints most layers of a chip. Fouquet said the DUV ramp had moved "back to a very strong year" and that ASML plans "to ship about the same number of tools as last year".
The numbers say less for the DUV business as a whole. Dassen lowered the full-year growth target for sales outside EUV to about 20% from the 25% he gave in July, even as he lifted the total for the company.
- DUV immersion machines shipped: 40 this quarter, after 17 and 23 in the first two quarters
- Needed in the fourth quarter for about 130 in the year: about 50 by our math, more than in any of the past six quarters
- Sales outside EUV implied for the fourth quarter: about €6.2 billion, 44% above this quarter by our math
- Value of the lowered target: about €640 million by our math
This matters because the higher outlook now leans on upgrades and EUV, while the DUV leg carries a steeper fourth-quarter step than it did in July. A shortfall there would not break the year, but it would show that ASML's factories, not customer demand, set the ceiling.
What to watch: immersion units shipped in the fourth quarter. Fewer than about 50 would mean part of this year's DUV plan slides into 2027, where capacity is already short.
A €510 Million Paper Gain Lifts Profit
Net income of €5.0 billion includes a €509.7 million gain from marking up ASML's stake in Mistral AI, the French artificial-intelligence company it invested in last year, after it bought a further tranche this quarter. Dassen named the item in his summary, but it is a revaluation, not an operating result.
Without the gain, profit rose about 110% from a year ago rather than 134%, by our math. The net margin was about 38% instead of 42.5%. The tax rate also slipped to 16.1% from 17.8%, so the quarter's true profit step is smaller than the headline suggests.
What to watch: the fourth-quarter net margin with no investment gain. A figure above 38% would confirm that the operating profit step, not the Mistral mark-up, drove this quarter.
China Share Jumps While Export Rules Stay a Risk
China took 23% of ASML's system sales this quarter, up from 14% in the second quarter, or about €1.9 billion by our math. Export rules already bar EUV sales there, so this is DUV business, and ASML lists new export restrictions among the factors that could move its results.
Dassen kept China at about 20% of this year's total sales. Because that figure counts service and upgrades too, by our math it implies roughly €8.9 billion of China revenue in 2026, so the fourth quarter must again carry a heavy China shipment schedule.
What to watch: China's share of fourth-quarter system sales. A share near this quarter's level would mean the DUV ramp depends on China at the moment it is most exposed to export rules.
Risks This Quarter Didn't Answer
Four standing concerns received either no new number this quarter or one that does not settle them, so each stays open until the disclosure named below arrives.
- Capacity race: ASML now wants more than a 30% capacity step for 2028 while customers push order interest to 2029–2030; the January backlog figure will show whether firm orders back the build.
- Customer fab readiness: no update on cleanrooms gating shipments; the fourth-quarter unit count is the reading.
- Restructuring: the technology-organisation cuts announced in January have no stated cost and no completion date; the annual report's restructuring note should give both.
- Order intake: still undisclosed quarterly, so the order momentum Fouquet cites cannot be checked against a number before January.
👓 Other Themes
High NA Gets Production Dates From TSMC and Samsung
High NA is ASML's next EUV machine, which prints finer lines than today's tools. Fouquet said TSMC asked ASML to lead an industry group on larger 12-inch photomasks for it and confirmed High NA for volume production around 2030; Samsung will use it "starting in 2028"; Intel is running more layers on it. There is no revenue read yet; the plan matters for orders after 2028.
Higher Prices Will Not Show Before 2027
ASML finished negotiating higher prices for its machines with its main customers, Dassen said, a move he calls value-based pricing. The effect is "not really visible in 2026"; it appears partly in 2027, and "The full impact of that you will start to see in 2028 and beyond". The 57.5% margin this quarter therefore owes nothing to pricing, which leaves another lever for later years.
💲 Other KPIs
Money owed by customers grew faster than sales: up 65% from a year ago against sales up 55%. Receivables are unpaid invoices plus the leases ASML holds on some tools. They now equal 85% of a quarter's sales, up from 38% at year-end, which is why operating cash came from deposits rather than collections.
Inventories barely moved: up 1% from a year ago while sales grew 55%. Stock now covers about one quarter of sales, down from about one and a half quarters a year ago. ASML is shipping what it builds, which supports the fourth-quarter plan only if parts keep arriving at the faster pace.
The share count fell 1.1% from a year ago, to 383.5 million from 387.6 million, so buybacks added little to profit per share this quarter. The quarter's larger repurchase came late enough that most of its effect lands in the fourth-quarter average.
🔮 Guidance
New. The plan calls for a record quarter: about 51% growth from a year ago at the middle of the range, and 26% above this quarter. It matches what the full-year range leaves after nine months, by our math. ASML has landed inside or above its quarterly range for four quarters, by about 3% above the middle on average; if the pattern holds, the quarter lands near €15.2 billion.
New. Upgrade and service sales would be about 73% above a year ago and 13% above this quarter. By our math the figure equals what Dassen's roughly 50% full-year growth leaves for the quarter, so the two statements agree. These upgrades carry the margin outlook below.
New. A touch below this quarter's 57.5%, because new machines, which carry a lower margin than upgrades, make up more of the fourth quarter's sales. By our math the full-year figure of about 56% leaves nearer 58% for the quarter; the difference sits inside the rounding of "around".
New. The same quarterly level ASML has set all year. Research spending came in at €1.17 billion this quarter, a touch under the plan. At about 8% of the sales the fourth-quarter plan implies, by our math, it would be the smallest share in years.
New. Overhead of about €0.4 billion against €353 million this quarter; the step-up from the earlier €0.3 billion level began with the third-quarter plan. At about 3% of planned sales it stays small.
Raised. The bottom of the range moved up €1 billion and the middle €500 million, to about 36% growth. Third raise of the year and the smallest: +€1.5 billion, +€6.0 billion, +€0.5 billion. Dassen said EUV sales grow "over 45%" this year, upgrade and service sales about 50%, and sales outside EUV about 20%.
Raised. The middle moved up one point after a three-point move in July; the year began at 51–53%. Dassen credited volume, the EUV and immersion mix, and upgrades. Nine months stand at 55.0%, so by our math the fourth quarter needs about 58%, consistent with its own outlook of around 57%.
Unchanged. Nine months ran at 16.7% and this quarter at 16.1%, helped by the investment gain, so the year should land at or a little below the figure.
Raised slightly. EUV sales of about €12.0 billion through September, by our math from the quarterly mix, leave about €4.8 billion for the fourth quarter. That compares with €4.1 billion this quarter on a similar machine count, so the plan relies on higher-value systems, such as High NA, or on more units.
Cut. The target came down five points, worth about €640 million by our math. Through September these sales reached about €9.2 billion, leaving about €6.2 billion for the fourth quarter, 44% above this quarter. The step still relies on about 50 immersion machines in the quarter.
Raised. From more than 30% in July to about 50%, which means about €12.3 billion for the year and about €3.75 billion in the fourth quarter by our math, the same as the quarterly plan. Upgrades, not service, drive the change, Dassen said.
❓ Key Questions
How much High NA revenue sits in the fourth-quarter plan?
By our math the EUV target leaves about €4.8 billion for the quarter, up from €4.1 billion this quarter on a similar machine count. Only higher-value High NA systems or extra units close that gap, and ASML has not said which.
Why did customer deposits for later deliveries nearly triple?
Non-current contract liabilities rose by €5.7 billion in one quarter. ASML has not said whether that reflects new orders for 2028 and beyond, larger deposits per order, or new payment terms; each reads differently for demand.
What did the restructuring cost, and is it finished?
The January plan to cut 1,700 net positions carried an unstated charge, estimated into second-quarter results. No amount or completion date has followed, so the clean level of operating costs is unknown.
How does China at 20% of the year fit 23% of quarterly systems?
China was 19%, 14% and 23% of system sales this year, about €4.0 billion by our math, against roughly €8.9 billion implied for the full year. Either service and upgrades carry much of it, or the fourth quarter ships heavily to China.
How many 2027 EUV slots are under firm order?
Capacity rises about 30% next year. Fouquet said customers want 2029 and 2030 slots, but ASML stopped reporting quarterly orders, so the share of 2027 output already under contract is unknown until January.