ASML stock drops on earnings: Guidance overshadows revenue beat

ASML Holding NV (ASML), the linchpin of the global semiconductor manufacturing equipment industry, delivered a mixed message to investors Wednesday. While the Dutch tech giant reported second-quarter earnings that handily beat expectations on both revenue and profit, a concerning outlook for 2026, citing macroeconomic and geopolitical uncertainties, sent ripples through the market. The company also tempered expectations for the current quarter and narrowed its full-year guidance, adding to investor unease.

Despite the beat on top and bottom lines, markets have reacted negatively to the outlook, with ASML's stock price trading down 6.7% in the pre-market at latest look. The market reaction reflects the conflicting signals emanating from the company's earnings report. While the Q2 beat and the continued demand from the AI sector provide some reassurance, the cautious outlook for 2026 and the lingering geopolitical uncertainties are weighing on investor sentiment.

ASML's Q2 2025 results showcased the company's continued strength in a market hungry for advanced chipmaking technology. Net sales reached €7.7 billion ($8.95 billion), exceeding the consensus estimate of €7.52 billion. Net profit soared to €2.29 billion, surpassing the projected €2.04 billion. CFO Roger Dassen attributed the strong performance to higher-than-anticipated revenue from upgrades to existing machines and a less severe impact from tariffs than previously feared.

A significant technological achievement this quarter was the shipment of ASML's first EXE:5200B system, marking a notable advancement in EUV lithography technology, promising enhanced productivity and overlay performance for its customers. Bookings also remained healthy, with net system bookings of €5.5 billion, of which €2.3 billion were EUV systems.

However, the celebratory tone was quickly dampened by ASML's forward-looking statements. The company's guidance for the third quarter of 2025 fell short of market expectations, with projected revenue between €7.4 billion and €7.9 billion, below the anticipated €8.3 billion. Furthermore, ASML narrowed its full-year 2025 net sales growth forecast to 15%, implying revenue of €32.5 billion, down from the previously guided range of €30 billion to €35 billion.

The most significant cause for concern was CEO Christophe Fouquet's cautious outlook for 2026. While acknowledging the robust fundamentals of ASML's customers in the artificial intelligence (AI) sector, Fouquet warned of increasing uncertainty stemming from macroeconomic conditions and geopolitical tensions.

“Looking at 2026, we see that our AI customers’ fundamentals remain strong,” Fouquet stated. “At the same time, we continue to see increasing uncertainty driven by macro-economic and geopolitical developments. Therefore, while we still prepare for growth in 2026, we cannot confirm it at this stage.” This statement raises the possibility of zero growth in 2026, a stark contrast to the company's historical growth trajectory and the optimistic projections of many industry analysts.

The uncertainty cited by ASML is multifaceted. The ongoing trade war between the United States and China continues to cast a long shadow over the semiconductor industry. U.S. export restrictions, aimed at limiting China's access to advanced chipmaking technology, pose a direct challenge to ASML's sales. While Chinese clients still accounted for a significant portion (27% in Q1 2025) of ASML's revenue, the long-term impact of these restrictions remains a major concern. Macroeconomic factors, such as inflation, rising interest rates, and potential recessionary pressures in key markets, further complicate the outlook.

Despite the near-term headwinds, ASML's long-term prospects remain compelling. The insatiable demand for semiconductors, driven by the proliferation of AI, 5G, cloud computing, and electric vehicles, ensures a strong underlying market for ASML's advanced lithography systems.

The company's dominance in EUV technology, which is essential for manufacturing the most advanced chips, provides a significant competitive advantage. ASML's continued investment in research and development positions it to maintain its technological leadership and capitalize on future growth opportunities.