Intel Peer ASML Raises 2026 Outlook on AI Demand

What happened

ASML reported second-quarter revenue of €9.33 billion, up 21% year-over-year, beating analyst expectations of €8.83 billion. The company sold 86 new systems, a 28% increase, and posted a 54% gross margin, up from 53% a year earlier. Net profit reached €2.92 billion, exceeding forecasts.

ASML raised its full-year 2026 sales guidance to €43-45 billion (previously €36-40 billion) and lifted its gross margin outlook to 54-56% (from 51-53%). The company is nearly fully booked for EUV systems through the end of 2027 and is considering a 30% capacity increase for 2027 and another 30% boost for 2028 to meet customer demand. CFO Roger Dassen indicated the company has 'better pricing power' and is in discussions with customers about potential price increases.

ASML's Installed Base business, which includes software and hardware upgrades for existing machines, grew 11% sequentially and accounted for 30% of net revenue. Memory-related revenue is expected to increase 75% this year, reflecting tight supply conditions in the memory chip market.

Why it matters

ASML holds a monopoly on EUV lithography systems, the only technology capable of printing the most intricate circuits on advanced AI chips. Intel relies on ASML's high-end systems to manufacture its most sophisticated products, making ASML's capacity constraints and order backlog a direct indicator of demand for Intel's chip-making capabilities.

The raised guidance and capacity expansion plans signal sustained, long-term demand for advanced semiconductor manufacturing equipment driven by AI infrastructure investments. This validates Intel's strategy to expand its foundry capacity and underscores the ongoing race among chip makers to secure production capability.

ASML's near-full order book through 2027 and potential pricing power also suggest that chip makers-including Intel-face intensifying competition for limited manufacturing resources. This could impact Intel's ability to scale production quickly and may increase capital expenditure requirements as equipment costs potentially rise.

Bigger picture

The semiconductor industry is experiencing a historic demand surge driven by AI, with companies investing hundreds of billions of dollars in data center infrastructure. Memory chip prices have climbed so high that Apple raised prices on some products, and executives at Micron Technology expect tight supply conditions to persist beyond 2027.

ASML remains Europe's most valuable listed company, with shares up nearly 70% year-to-date and more than doubling over the past 12 months. However, the stock faced pressure following the earnings release as analysts noted that 2027 capacity expansion plans didn't go as far as some had hoped.

Major customers include Taiwan Semiconductor Manufacturing Co., Samsung Electronics, and Intel. Reports suggest ASML is meeting resistance from TSMC on price increases, though some Chinese customers have reportedly accepted a 10% price increase on less advanced DUV systems. Geopolitical risks remain, particularly around U.S. restrictions on servicing equipment in China and potential Taiwan-related disruptions.

What to watch

• Intel's ability to secure sufficient ASML systems to support its foundry expansion plans

• Any announcements from ASML about further capacity increases beyond 2028

• Pricing negotiations between ASML and major customers, which could affect Intel's capital expenditure

• ASML's investor day event next year, where the company will reveal changes to its long-term outlook

• Development of Canon's alternative Nanoimprint lithography technology, though commercial viability isn't expected until 2028

• U.S. legislative actions that could restrict ASML from servicing equipment in China

• Continued strength in memory chip demand, which supports the broader semiconductor equipment market