ASML’s Q2 Earnings Shine, but CEO Cools 2026 Growth Outlook Amid Trade Tensions

It was a tale of two narratives when ASML Holding N.V., the Dutch semiconductor equipment giant, unveiled its second-quarter earnings on July 16, 2025.

On one hand, the company delivered a financial performance that was nothing short of stellar, with sales, profits, and margins all exceeding expectations. On the other, a note of caution crept into the outlook for 2026, as geopolitical tensions and trade disputes threatened to cloud the horizon. Investors, initially buoyed by the strong results, were quick to react to the tempered guidance, sending ASML’s shares tumbling by as much as 11% in Amsterdam trading.

The Numbers: A Robust Quarter

ASML’s financial results for the second quarter were a testament to its dominance in the semiconductor equipment market. The company reported total net sales of €7.7 billion, hitting the upper end of its guidance and marking a significant year-over-year increase. Net income came in at €2.3 billion, representing a healthy 29.8% of total sales. This profitability was underpinned by a record gross margin of 53.7%, which surpassed the company’s own forecasts. The margin boost was attributed to a thriving upgrade business and a lower-than-anticipated impact from tariffs, showcasing ASML’s operational efficiency.

A key driver of this performance was the burgeoning demand for extreme ultraviolet (EUV) lithography systems, which are essential for manufacturing the most advanced chips used in everything from smartphones to artificial intelligence accelerators. ASML, the sole supplier of these cutting-edge machines, saw EUV revenue surge, with expectations of a 30% growth in 2025 compared to the previous year. This growth is fueled by both increased capacity and higher average selling prices, reflecting the insatiable appetite for advanced semiconductor technology.

Another bright spot was the Installed Base Management segment, which exceeded expectations with sales of €2.1 billion. This division, focused on servicing and upgrading existing equipment, is projected to grow by more than 20% year-over-year, highlighting ASML’s ability to extract value from its vast installed base.

The Caution: Trade Winds and Geopolitical Storms

However, the earnings call was not all sunshine and roses. CEO Christophe Fouquet struck a notably cautious tone regarding the outlook for 2026. Just months earlier, in October 2024, Fouquet had expressed optimism about 2026 being a growth year for both the semiconductor industry and ASML. But on this occasion, he walked back those expectations, citing “increasing uncertainty driven by macroeconomic and geopolitical developments.” He added, “While we still prepare for growth in 2026, we cannot confirm it at this stage.”

This shift in sentiment was echoed by CFO Roger Dassen, who noted that ASML’s customers are increasingly jittery about the global trade environment. “Our customers are more concerned about the tariffs discussion today than they were three months ago,” Dassen remarked during the analyst call. “Countries are in full battle mode again when it comes to tariffs.”

The semiconductor industry, already navigating a complex web of supply chains and technological advancements, now finds itself at the mercy of geopolitical chess games. ASML, in particular, has been caught in the crossfire of the US-China trade dispute. As the only company capable of producing the most advanced lithography machines, ASML’s technology is coveted by chipmakers worldwide, including those in China, which accounted for 27% of system sales in the last quarter. However, US-led restrictions have barred ASML from selling its top-tier EUV machines to Chinese customers, and last year, the Dutch government, under pressure from Washington, extended those restrictions to include immersion deep ultraviolet (DUV) systems, ASML’s second-most capable machines.

The specter of further trade barriers looms large. The US government is expected to conclude an investigation into semiconductor trade soon, which could lead to additional tariffs on chips and manufacturing equipment. While semiconductors are currently exempt from the reciprocal tariffs set to take effect on August 1, 2025, the possibility of sector-specific levies remains a concern. This uncertainty has made it challenging for ASML and its customers to plan major capital expenditures, casting a pall over the industry’s growth prospects.

Mixed Signals and Market Reactions

Despite the headwinds, there are glimmers of hope. Recent developments suggest a potential thawing in US-China relations, at least in the semiconductor domain. On July 15, 2025, Nvidia and Advanced Micro Devices announced they would resume sales of certain AI processors to China after receiving assurances from the Trump administration that the shipments would be approved. While this news is positive for the industry, CFO Dassen downplayed its immediate impact on ASML, stating, “Are we going to sell 20 more tools as a result of that? Probably not.”

Nonetheless, ASML remains well-positioned to capitalize on the AI boom. The company’s EUV machines are critical for producing the chips that power AI data centers, and with hundreds of billions of dollars earmarked for AI infrastructure investment, demand for ASML’s technology is expected to remain robust. In the second quarter, ASML reported bookings of €5.5 billion, surpassing analyst estimates and underscoring the strong appetite for its equipment.

Looking ahead, ASML provided a third-quarter sales forecast of €7.4 billion to €7.9 billion, which fell short of the €8.2 billion average.

A Pivot in Reporting

In a notable change, ASML announced that it would cease reporting bookings figures starting next year. The company argued that bookings do not always accurately reflect business momentum, given the long lead times and complexities of its order book. This decision, while aimed at providing a clearer picture of its financial health, may leave investors with less visibility into future demand trends.

The Road Ahead

As ASML navigates this complex landscape, the company finds itself at a crossroads. On one side, its technological prowess and market dominance position it to thrive in an era of unprecedented demand for advanced semiconductors. On the other, the geopolitical and trade uncertainties threaten to disrupt its growth trajectory.

For now, investors will be closely watching how ASML manages these challenges. The company’s ability to adapt to shifting trade policies, maintain its technological edge, and capitalize on the AI revolution will be critical to its success in the coming years. As ASML continues to power the semiconductor industry, its second-quarter earnings serve as a reminder that even in a world of technological marvels, the specter of global politics can cast a long shadow. For now, the company is basking in the glow of its financial achievements, but the cautious outlook for 2026 suggests that the road ahead may be bumpier than anticipated.