Review|ASML 26Q3: Upgrades Lift Gross Margin; Capacity Expansion Awaits Further Clarity

Summary

ASML's Q3 gross margin and Q4 guidance both beat expectations. The company narrowed its 2026 revenue guidance to EUR 44–45b and raised its full-year gross margin guidance to around 56%, driven by continued strength in the upgrade business within Installed Base Management. The company stated that its plan to increase capacity by 30% in 2027, together with the further 30% increase in 2028 that had been under investigation, will still not fully meet customer demand, and it is now looking into expanding 2028 capacity beyond 30%. Customers have expressed interest in placing orders for 2029 and 2030, although ASML has not yet accepted those orders. We raise our 2026/27/28 EPS forecasts to EUR 42.5/61.4/76.9.

26Q3 Gross Margin Beat Driven by Upgrades

ASML's Q3 revenue was EUR 11.66b, in line with market expectations, while gross margin and earnings significantly beat expectations; Q4 and full-year guidance were also above consensus. The company guided Q4 revenue at EUR 14.2–15.2b and narrowed its full-year 2026 revenue guidance from EUR 43–45b to EUR 44–45b, driven mainly by strong EUV demand and growth in the Installed Base Management business. Q3 net income also included an approximately EUR 0.5b valuation gain on ASML’s investment in Mistral AI, which should be distinguished from underlying operating performance.