Europe's largest company and AI play delivers on earnings but warns of China slowdown

By Jules Rimmer

ASML CEO Christophe Fouquet provides upbeat guidance on the company's long-term growth outlook.

ASML with a market cap of EUR323 billion is the biggest stock in Europe, after a 50% rally in its share price since August.

Shares in ASML, Europe's largest company by market capitalization and its most significant tech play, rose more than 3% after reporting third quarter earnings Wednesday.

Fueled by the AI boom, and with its stock having rallied by almost 50% since August, Netherlands-headquartered ASML (NL:ASML) (ASML) , which makes equipment used in the manufacture of AI chips, was always going to find it difficult to match expectations going into quarterly earnings.

They managed it, however, with a beat on its order book, and positive guidance from chief executive officer Christophe Fouquet.

In the results presentation, Fouquet reassured investors that 2026 revenue should be no less than in 2025 while his ambitious targets for growth out to 2030 will possibly persuade researchers to revisit their forecasts. Fouquet suggested revenues by 2030 could have doubled from last year's EUR28.5 billion to the EUR44 billion to EUR60 billion range on a gross margin he thinks could be between 56% and 60%. Net income of EUR2.12 billion was fractionally above consensus of EUR2.07 billion.

ASML is benefiting from the explosion in AI infrastructure capital expenditure. Its industry-leading extreme ultraviolet lithography machines that are required to produce the most sophisticated AI chips are in high demand as AI-related spending is estimated to reach $2.8 trillion by 2029, according to Citigroup.

Fouquet provided bullish commentary on ASML's operations, telling investors "we have positive momentum on AI.... (and)... AI is going to benefit a larger part of our customer base". Fouquet outlined plans to initiate a new share buyback program in January and he was also confident about the prospects for their recent EUR1.3 billion investment in an 11% stake in French AI start-up company Mistral but he did acknowledge that the Chinese division, currently accounting 42% of sales, will be dented by a slowdown next year.

JPMorgan analyst, Sandeep Deshpande, maintained his overweight and "top pick" recommendation on the shares and his first take on the numbers were "very strong memory orders" and "a strong order intake." Analysts' consensus expected an order book of around EUR5 billion but ASML managed EUR5.4 billion, while an upbeat view on the fourth quarter from management on the analyst call will probably generate 10-12% upgrades in consensus from the street, according to JPMorgan.

Enthusiasm for the results, though, will be tempered by the dimming outlook for China where a growth slowdown is forecast.

While tariff uncertainty is largely eliminated after the 15% agreement between the U.S and Europe this summer, the threat of the U.S. imposing tighter controls on technology exports to China, and possible disruptions to rare earth supplies from China, are major concerns for ASML investors.

JPMorgan's view on the stock is far from unique. Of the forty or so analysts providing recommendations to FactSet, only one broker has a sell recommendation while the mean target price, before any upgrades stemming from this results update are factored in, is EUR893, just a couple of percent above market levels.

-Jules Rimmer

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10-15-25 0847ET