ASML Forecasts Higher 2026 Sales as AI Demand Drives Capacity Expansion

Revised Financial Outlook and Capacity Expansion

In a move that signals sustained confidence in the semiconductor sector, ASML hiked its full-year sales guidance for the second time this year. The Dutch equipment manufacturer now projects annual net sales between 43 billion euros and 45 billion euros, a significant jump from its previous forecast of 36 billion to 40 billion euros. The company also anticipates a gross margin between 54% and 56%, up from the earlier range of 51% to 53%.

The upward revision follows a strong second quarter, where ASML reported net sales of 9.3 billion euros against an expected 8.8 billion euros, and a net profit of 2.9 billion euros. The momentum is largely attributed to chipmakers racing to build out infrastructure for artificial intelligence. To meet this surge, CEO Christophe Fouquet announced that ASML will increase its 2026 capacity for both low NA EUV and Deep Ultraviolet (DUV) immersion machines by 30%.

Terafab Integration and Customer Commitments

Beyond broad industry trends, ASML’s future production schedule is now tied to specific high-profile projects. Chief Financial Officer Roger Dassen confirmed on Wednesday that the company’s expansion plans for 2027 and 2028 account for tool demand from Elon Musk’s planned Terafab chip production facility in Texas.

Dassen further noted that ASML is nearing a fully booked status for its 2027 extreme ultraviolet (EUV) capacity and has already secured a substantial number of orders for 2028. This visibility into long-term demand remains a cornerstone of the company’s current growth strategy.

Navigating the Chinese Market and Export Controls

Despite the optimism surrounding AI demand, ASML continues to operate under the shadow of tightening geopolitical tensions. The company expects China to account for approximately 20% of its total net sales this year. While U.S. lawmakers have proposed legislation that could further restrict the sale of DUV machines to Chinese firms, management maintains that the market is currently behaving in line with global trends.

CFO Dassen suggested that even if Chinese firms face limitations in expanding their specific capacity, global demand for chips remains constant, meaning production would simply shift to other regions. This perspective highlights the company’s view that its tools are essential to the global supply chain, regardless of where the fabrication happens.

Market Valuation and Analyst Skepticism

While the company’s operational performance remains strong, some financial analysts are questioning whether the current stock price reflects a sustainable ceiling. Javier Correonero, a senior equity analyst at Morningstar, pointed out that ASML is currently trading at approximately a 50x forward price-to-earnings (PE) ratio, levels in line with the peaks seen during Covid times.

There’s a lot priced in, and we see it slightly overvalued. Just to give you an idea, ASML right now is trading roughly at a 50x forward PE, which is in line with the peaks that we saw during Covid times … Our valuation for ASML implies more like a 35-40x forward PE, which we consider more recent.

Correonero acknowledged that ASML is effectively managing its output by optimizing cleanroom space in Veldhoven and utilizing fast shipments to get machines to customers more quickly. However, he cautioned that investors should remain mindful of the high expectations baked into the share price.

Key Financial and Operational Metrics

As ASML looks toward the future, the company has scheduled a Capital Markets Day for June 10 next year, where it intends to provide a further update on its long-term goals. For now, the combination of aggressive capacity expansion and deep integration into the build-out plans of major technology players like those behind Terafab will define the company’s trajectory through the end of 2028.

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