ASML (ASML) Q3 2025: EUV Orders Reach €3.6B as AI Drives Segment Shift
ASML’s Q3 2025 results highlight a decisive shift in demand toward advanced EUV systems, with €3.6B in EUV bookings reflecting AI-driven infrastructure buildouts and broadening customer adoption. Management signaled a normalization in China demand after an exceptional run, while technology and capital allocation moves—including the Mistral AI partnership—underscore a strategic pivot to software-enabled productivity and next-generation lithography. Investors should watch for margin mix volatility and supply chain agility as the company navigates a more diversified but less predictable demand landscape into 2026.
Summary
- AI Investment Broadens Customer Base: Recent order strength and technology adoption reflect a more distributed AI-driven demand.
- China Normalization Reduces Tail Risk: Management expects a step down in China sales, shifting mix toward higher-margin EUV.
- Technology Roadmap Accelerates: INA and 3D packaging launches position ASML for deeper lithography intensity in future nodes.
Performance Analysis
ASML delivered Q3 net sales of €7.5B, with system sales heavily weighted toward logic (65%) and a strong €2.1B contribution from EUV (Extreme Ultraviolet) tools. EUV bookings reached €3.6B, a signal of intensifying demand for leading-edge logic and DRAM capacity as AI infrastructure investment ripples through the semiconductor ecosystem. Non-EUV system sales contributed €3.4B, while install-base management—a recurring revenue stream from servicing and upgrading deployed tools—added €2B, reflecting stable utilization across the installed fleet.
Gross margin landed at 51.6%, consistent with guidance, though mix effects remain a watchpoint as high-NA (numerical aperture) EUV tools are margin-dilutive in early ramp. R&D expense was slightly below plan at €1.1B, as timing of spend shifted, but management reiterated commitment to a “formidable roadmap” in both low- and high-NA EUV. The order book remains robust, with Q3 system bookings totaling €5.4B and a nearly even split between logic and memory, suggesting broadening demand drivers. Shareholder returns continued, but management flagged that the current €12B buyback program will not be completed in the original timeframe, with a new program set for January 2026.
- EUV System Momentum: EUV orders and shipments are now central to growth, as customers migrate more layers to advanced lithography for AI and next-gen DRAM.
- China Revenue to Normalize: Management expects a “significant” decline in China sales in 2026 after an abnormally strong period, with mix shifting toward non-China customers and advanced nodes.
- Install-Base Services Resilient: Service and upgrade revenues remain a steady contributor, with EUV installed base growth driving higher service intensity.
While the company’s backlog provides visibility into 2026 and beyond, the timing of high-NA tool adoption and customer qualification cycles could create lumpiness in revenue and margin realization, especially as the mix of advanced tools increases.
Executive Commentary
"There has been a positive news flow across the industry in recent months that has helped to reduce the level of uncertainty that we were reporting last quarter. First, there were a number of announcements around the continued investment in AI infrastructure that supports demand in both leading edge logic and advanced DRAM. Second, the positive momentum around AI seems to extend to more customers in both logic and DRAM."
Christophe Fouquet, Chief Executive Officer
"In September, we announced that we closed a strategic partnership with Mistral AI... Our partnership with Mistral AI allows us to embed AI across our entire holistic portfolio in order to increase the performance and productivity of our systems and the yield of our customers' processes."
Roger Dassa, Chief Financial Officer
Strategic Positioning
1. AI-Driven Demand Broadening
AI infrastructure buildouts are catalyzing a shift from concentrated to more distributed demand for advanced lithography. Management highlighted that multiple customers across both logic and DRAM are now investing in EUV capacity, reducing the risk of supply bottlenecks and single-customer dependency. This trend supports higher lithography intensity per chip and a longer-term tailwind for advanced tool adoption.
2. China Demand Normalization
After several years of outsized growth, China sales are expected to “decline significantly” in 2026 as backlog normalization and market-specific dynamics take hold. Management described recent China demand as “very high and in no way normal,” signaling a return to more typical sales levels and reducing exposure to regulatory and cyclical volatility.
3. Technology & Portfolio Expansion
The launch of the XT260, a 3D integration iLine scanner, marks ASML’s entry into advanced packaging lithography, a critical enabler for chip stacking and heterogeneous integration. The company also reported significant progress on high-NA EUV (INA), with over 300,000 wafers processed at customer sites and performance maturity ahead of prior low-NA generations. These moves position ASML to capture incremental value as customers seek higher productivity and yield in both front-end and packaging steps.
4. Capital Allocation and Ecosystem Investment
The €1.3B investment in Mistral AI signals a strategic pivot to software-enabled productivity and deeper integration with the AI ecosystem. By embedding AI into tool control and process optimization, ASML aims to accelerate innovation cycles and improve customer ROI, while also gaining a seat at the table in shaping the future of semiconductor manufacturing intelligence.
5. Supply Chain and Capacity Readiness
Management emphasized lessons learned from the 2022 supply crunch, with investments in long-lead items and greater operational flexibility. Dialogue with customers has improved, enabling more proactive planning and reducing the risk of supply-driven market constraints as demand visibility extends further into the AI cycle.
Key Considerations
ASML’s Q3 underscores a strategic inflection, with AI-linked demand and technology leadership reshaping the business mix and growth profile. Investors should weigh the following:
Key Considerations:
- Product Mix Volatility: The transition from immersion to EUV and high-NA tools introduces margin volatility, as early high-NA shipments are margin-dilutive until volume scales.
- Backlog Visibility vs. Lumpiness: While backlog covers much of 2026, the timing of customer qualification, especially for high-NA, can cause revenue and margin swings.
- Install-Base Leverage: Growth in EUV installed base drives higher service and upgrade revenues, supporting recurring margin streams even as system sales fluctuate.
- China Downshift: Normalizing China sales reduce tail risk but also shift the growth burden to advanced nodes and non-China customers.
- AI Ecosystem Integration: The Mistral AI partnership and software focus may unlock new productivity gains and strengthen customer stickiness, but integration and execution risks remain.
Risks
Key risks include margin dilution from early high-NA shipments, lumpiness in order timing, and ongoing geopolitical/regulatory uncertainties, particularly in China. The normalization of China demand could expose the business to greater cyclicality in non-China markets, while aggressive AI-driven investments may outpace actual end-market absorption, creating overcapacity risk. Supply chain agility remains critical, especially as customer qualification cycles and technology adoption rates diverge across markets.
Forward Outlook
For Q4 2025, ASML guided to:
- Total net sales between €9.2B and €9.8B
- Installed base management sales of approximately €2.1B
- Gross margin between 51% and 53%
- R&D expense around €1.2B
- SG&A around €320M
For full-year 2025, management maintained guidance:
- Total net sales of approximately €32.5B
- Gross margin of around 52%
Management highlighted:
- 2026 sales are expected to be at least flat versus 2025, with EUV up and deep UV down due to China normalization.
- Further details on 2026 outlook, including high-NA adoption rates and margin implications, will be provided in January.
Takeaways
ASML’s Q3 results and commentary reflect a company at the center of a structural shift in semiconductor manufacturing, with AI-driven demand, technology leadership, and a more diversified customer base reshaping its growth and risk profile.
- EUV and High-NA Traction: Strong EUV bookings and customer engagement in high-NA signal a multi-year technology upgrade cycle, but margin mix will remain volatile as advanced systems ramp.
- China Normalization in Focus: The expected reset in China sales will test ASML’s ability to drive growth from advanced nodes and new applications, with less reliance on a single geography.
- AI Ecosystem Leverage: Strategic moves into AI-enabled software and 3D packaging position ASML for incremental value capture, but execution and integration will be key to sustaining moat and returns.
Conclusion
ASML’s Q3 2025 results mark a pivotal moment as the company transitions to broader, AI-fueled demand and deeper technology integration. While the order book and technology roadmap support a constructive long-term view, investors should expect margin and revenue lumpiness as the product mix evolves and China demand normalizes. Strategic bets in AI and packaging, coupled with ongoing supply chain discipline, will be critical to sustaining leadership in an increasingly dynamic market.
Industry Read-Through
ASML’s results and commentary underscore a sector-wide inflection toward AI-centric semiconductor investment, with advanced lithography intensity rising across both logic and memory. The normalization of China demand signals a shift in global supply chain and capital allocation patterns, impacting toolmakers and materials suppliers exposed to legacy nodes. The emphasis on 3D packaging and software-enabled productivity points to a future where hardware and software co-innovation will be essential for sustaining Moore’s Law and cost-per-function improvements. Peers in semiconductor equipment, advanced packaging, and AI infrastructure should prepare for more distributed, less predictable demand cycles as the market transitions from single-customer concentration to ecosystem-driven growth.