ASML warns China sales to decline significantly in 2026
5 min read
Dutch semiconductor equipment giant ASML delivered robust third-quarter results on Tuesday but cautioned that China sales will drop "significantly" in 2026, highlighting the deepening impact of geopolitical tensions on the chip industry.
Strong Quarter Overshadowed by China Warning
ASML reported €7.5 billion in net sales and €2.1 billion in net income for Q3 2025, with a gross margin of 51.6% that exceeded analyst expectations. The company secured net bookings of €5.4 billion, including €3.6 billion from extreme ultraviolet (EUV) lithography systems.[1][2][3]
Despite the solid performance, CEO Christophe Fouquet warned investors about the company's largest geopolitical challenge. "We expect China customer demand, and therefore our China total net sales in 2026, to decline significantly compared to our very strong business there in 2024 and 2025," he said in a statement.[4][5]
The warning reflects escalating trade tensions between the U.S. and China that have placed ASML at the center of a technological cold war. The Netherlands has imposed export restrictions on ASML's most advanced EUV machines to China, while the U.S. has pressured allies to further limit semiconductor equipment sales.[6][7]
Geopolitical Pressures Mount
ASML's China warning comes as trade tensions have intensified dramatically in recent days. China imposed new export restrictions on rare earth materials essential for semiconductor manufacturing, prompting delays for companies including ASML. The restrictions require foreign companies to obtain government approval even for small exports containing trace amounts of rare earths.[1][2]
The escalating conflict has also seen the Netherlands government take control of Chinese-owned chipmaker Nexperia, citing security concerns about technology transfer. China responded with export bans and threatened further retaliation against the semiconductor industry.[3][4][5]
Market Outlook Despite Challenges
ASML maintained its optimistic 2025 outlook, projecting full-year sales growth of around 15% with a gross margin of approximately 52%. The company expects Q4 2025 sales between €9.2 billion and €9.8 billion.[1][2][3]
Crucially, Fouquet assured investors that "we do not expect 2026 total net sales to be below 2025," providing some stability amid the China uncertainty. The company plans to provide detailed 2026 guidance in January.[3][4][1]
Wall Street analysts have recently upgraded their outlook for ASML, with Morgan Stanley raising its rating to "Overweight" and UBS increasing its price target to €940, citing AI-driven demand growth. ASML's stock closed at $983.18, up 33.84% over the past three months.[5][6][7][8]
Reference sources:
[1](https://www.globenewswire.com/news-release/2025/10/15/3166781/0/en/ASML-reports-7-5-billion-total-net-sales-and-2-1-billion-net-income-in-Q3-2025.html)[2](https://www.asml.com/en/news/press-releases/2025/q3-2025-financial-results)[3](https://www.stocktitan.net/news/ASML/asml-reports-7-5-billion-total-net-sales-and-2-1-billion-net-income-ph4yp54zqoce.html)[4](https://www.reuters.com/business/media-telecom/asmls-third-quarter-bookings-above-estimates-2025-10-15/)[5](https://www.investing.com/news/analyst-ratings/morgan-stanley-upgrades-asml-stock-rating-to-overweight-on-earnings-potential-93CH-4248200)[6](https://www.investing.com/news/analyst-ratings/asml-stock-price-target-raised-to-eur940-by-ubs-on-ailed-growth-93CH-4265128)[7](https://uk.investing.com/news/earnings/asml--adr-earnings-beat-by-006-revenue-fell-short-of-estimates-4306139)[8](https://ng.investing.com/news/earnings/asml--adr-earnings-beat-by-006-revenue-fell-short-of-estimates-2146174)[1](https://www.calcalistech.com/ctechnews/article/hjpfvpypel)[2](https://www.businessinsurance.com/chinas-new-export-rules-threaten-global-chip-supply-chain/)[3](https://timesofindia.indiatimes.com/technology/tech-news/netherlands-government-invokes-emergency-powers-to-take-control-of-chinese-chip-company-banned-by-america-for-helping-/articleshow/124534356.cms)[4](https://www.reuters.com/world/china/dutch-government-intervenes-chinese-owned-computer-chip-firm-nexperia-2025-10-12/)[5](https://nltimes.nl/2025/10/14/china-imposes-export-ban-dutch-intervention-chipmaker-nexperia)[1](https://www.globenewswire.com/news-release/2025/10/15/3166781/0/en/ASML-reports-7-5-billion-total-net-sales-and-2-1-billion-net-income-in-Q3-2025.html)[2](https://www.asml.com/en/news/press-releases/2025/q3-2025-financial-results)[3](https://www.stocktitan.net/news/ASML/asml-reports-7-5-billion-total-net-sales-and-2-1-billion-net-income-ph4yp54zqoce.html)[4](https://www.reuters.com/business/media-telecom/asmls-third-quarter-bookings-above-estimates-2025-10-15/)[5](https://finance.yahoo.com/news/dutch-tech-giant-asml-china-051821203.html)[6](https://www.bloomberg.com/news/articles/2025-10-10/asml-other-semiconductor-firms-brace-for-fallout-from-china-s-rare-earths-curbs)[7](https://time.com/7325306/us-china-trump-xi-trade-tensions-truce-export-controls-tariffs/)