ASML posts record orders as AI chip demand stays strong

ASML Holding, the Dutch company that dominates the market for machines that manufacture advanced semiconductors, has reported record quarterly orders and given an upbeat forecast for 2026, signaling that spending on AI chip production remains strong despite concerns about market saturation.

The company booked orders worth €13.2 billion in the final quarter of 2025, more than double the previous three months and far exceeding analyst expectations of €6.95 billion. The surge was driven largely by orders for the company's most advanced and profitable equipment, extreme ultraviolet lithography machines, which pulled in €7.4 billion in orders alone.

For the full year 2025, ASML reported total sales of €32.7 billion and net income of €9.6 billion, both records. The company expects 2026 sales to fall between €34 billion and €39 billion, representing growth of up to 19 percent.

Background

ASML occupies a unique position in the global semiconductor industry. The company is the sole manufacturer of extreme ultraviolet lithography machines, the most advanced equipment available for printing the finest layers onto computer chips. These machines are essential for companies like Taiwan Semiconductor Manufacturing Company and Samsung Electronics to produce the advanced processors that power artificial intelligence applications.

The semiconductor equipment industry typically moves in cycles tied to broader trends in chip demand. Over the past two years, demand has been driven primarily by the rapid expansion of artificial intelligence, with major tech companies racing to build data centers capable of processing AI workloads. This has created unprecedented demand for advanced chips and, by extension, the equipment needed to manufacture them.

However, investors and analysts have worried that this AI boom might be a temporary bubble, with companies over-investing in capacity that will later sit idle. ASML's results and guidance offer a window into whether major chip manufacturers believe the AI demand is sustainable.

Key Details

ASML's backlog, the value of orders already received but not yet fulfilled, reached €38.8 billion at the end of 2025. This substantial backlog provides the company with visibility into revenue for well into 2026 and beyond, reducing uncertainty about future sales.

The company's chief executive, Christophe Fouquet, pointed to improved confidence among customers about the long-term health of the market.

"In the last months, many of our customers have shared a notably more positive assessment of the medium-term market situation, primarily based on more strong expectations of the sustainability of AI-related demand. This is reflected in a marked step-up in their medium-term capacity plans and in our record order intake."

ASML also announced plans to return cash to shareholders. The company will increase its dividend by 17 percent to €7.50 per share and launch a new share buyback program worth up to €12 billion to be completed by the end of 2028.

The role of major customers

The surge in orders appears to be driven by major chip manufacturers increasing their capital spending. Taiwan Semiconductor Manufacturing Company announced in mid-January that it would increase its 2026 capital expenditure to between $52 billion and $56 billion, up from previous levels. Samsung Electronics has also signaled plans to expand capacity. These commitments translate directly into equipment orders from ASML.

Analysts expect that ASML's extreme ultraviolet equipment will capture a disproportionate share of this spending. The company's gross margins, which measure profit relative to sales, are expected to remain around 51 to 53 percent in 2026, roughly in line with 2025.

For the first quarter of 2026, ASML expects sales between €8.2 billion and €8.9 billion.

What This Means

ASML's results and guidance suggest that major semiconductor manufacturers are confident enough in artificial intelligence demand to commit to significant capital spending. Unlike in previous cycles, when over-investment led to painful corrections, chip makers appear to be taking a more measured approach this time, though still investing heavily.

The record orders also reflect ASML's dominant market position. With no competitors capable of producing extreme ultraviolet lithography machines, the company effectively sets the pace for how quickly the semiconductor industry can scale production of advanced chips. This makes ASML a critical chokepoint in the global technology supply chain.

However, ASML faces headwinds. The company has noted that export controls imposed by Western governments on advanced chip technology sold to China represent a risk to future revenue. As geopolitical tensions persist, restrictions on selling to certain markets could limit growth opportunities.

The company also announced plans to streamline its technology and IT organizations to strengthen its focus on engineering and innovation. Details of these organizational changes were set to be released later on Wednesday.

ASML's strong results come at a time when the company's stock has already rallied significantly, raising questions about whether the positive news is already reflected in the share price. Analysts remain largely optimistic, with major investment banks recently raising their price targets for the stock.