ASML Backlog Hits 2027 as Bookings Double Estimates, Yet Shares Slump on Call

TradingKey - On January 28, ASML (ASML) announced its fourth-quarter and full-year 2025 financial results. Q4 revenue reached a single-quarter record of €9.7 billion, driven in part by revenue recognition from two High-NA systems. Full-year 2025 revenue totaled €32.7 billion, with a net profit of €9.6 billion, both reaching all-time highs.

The most notable highlight was that Q4 net bookings surged to a record €13.2 billion, nearly double the average analyst estimate of €6.85 billion compiled by Bloomberg. Currently, ASML's backlog has reached €38.8 billion, with orders scheduled through 2027.

Following the earnings release, ASML's US shares surged 7% and its European shares opened up 6%, but they ultimately closed down 2.18% and 1.9%, respectively, after the earnings call.

What Does €13.2B in New Orders Mean?

Q4 net bookings reached €13.2 billion, a significant increase from €5.4 billion in the previous quarter. Beyond the figure itself, the order mix underwent a landmark shift: EUV (Extreme Ultraviolet) bookings reached €7.4 billion, far exceeding the consensus estimate of €4.4 billion, indicating that customers are securing equipment capacity for 2nm and below advanced process nodes. Orders from memory chip customers accounted for 56% (€7.4 billion), surpassing logic chip customers (44%, approximately €5.8 billion) for the first time.

UBS noted that memory orders grew by a staggering 71% year-on-year, driven by both technological iteration and demand growth: DRAM technology nodes are undergoing a critical transition from 6F² to 4F², while AI applications continue to drive demand for HBM (High Bandwidth Memory) and DDR5.

Meanwhile, logic chip order momentum remains strong. Both Citi and Goldman Sachs stated that logic chip customers are reassessing their needs and accelerating capacity planning and equipment investment, as the logic chip segment continues to recover and expand.

The growth in Q4 net bookings pushed the backlog to a record high of €38.8 billion, equivalent to 1.2 times its total 2025 revenue. These orders not only cover the system sales forecast for the entirety of 2026 but also extend into 2027. Specifically, EUV equipment capacity is fully booked through 2027, providing high certainty for future performance.

More importantly, as ASML sits at the absolute top of the semiconductor supply chain, the explosion in bookings suggests that capital expenditures by downstream chipmakers will continue to expand in the coming years, signaling the onset of a super-cycle for ASML.

Cooling Expectations: Record Orders Won't Boost 2026 Results

Despite the impressive Q4 bookings, management stated during the earnings call that most of the large orders added this quarter are scheduled for 2027, meaning they will have limited impact on 2026 performance.

Furthermore, as demand has approached saturation over the past two years, constraints on revenue have shifted to the supply side. Management indicated that customer fab construction progress will directly affect shipping schedules. ASML also needs to increase its quarterly capacity, and revenue will primarily depend on factory completion progress as well as ASML’s capacity ramp-up and execution capabilities.

In response to market concerns that capacity constraints might limit growth, management acknowledged that capacity cannot be significantly increased in a single quarter, but emphasized that ASML improves production speed and capacity every quarter. Furthermore, management noted that capacity limits do not hinder order intake because "if customers perceive a potential supply crunch in a given year, they will place orders in advance rather than waiting for final capacity confirmation."

ASML CEO Christophe Fouquet stated that 2026 is expected to be another growth year for the company, driven primarily by EUV sales and growth in the installed base business. ASML expects 2026 revenue to be between €34 billion and €39 billion, with the midpoint exceeding the consensus estimate of €35.1 billion, and gross margins maintained between 51% and 53%. Q1 revenue guidance is set at a range of €8.2 billion to €8.9 billion.

China Headwinds and Workforce Consolidation

ASML stated that due to export controls, the revenue share from China is expected to drop to approximately 20% in 2026, compared to a high of 41% in 2024. However, strong demand from other regions is expected to compensate. For instance, TSMC has raised its 2026 capital expenditure, and Samsung and SK Hynix are expanding HBM capacity, all of which will translate into equipment orders for ASML. Fouquet noted that over the past few weeks, Micron has announced new groundbreakings almost every week, actions that will directly translate into shipping demand for ASML equipment.

Additionally, ASML announced it would cut about 1,700 jobs, primarily in the Netherlands with some positions in the US. This move focuses on cutting certain leadership roles and streamlining the IT and data organization. Fouquet explained that this is not due to operational issues, but rather to simplify a complex structure resulting from rapid expansion over recent years, allowing teams to focus on core engineering and R&D, such as High-NA. Nevertheless, some interpreted this as a sign that even the semiconductor equipment leader cannot fully insulate itself from cyclical adjustments.

Analysts believe ASML's stock price spiked before falling sharply because the exceptionally strong Q4 results initially exhilarated investors, only for the subsequent earnings call to dampen expectations. Beyond factors such as a longer-than-expected monetization cycle for Q4 bookings, uncertainty over capacity meeting demand, the impact of export controls on China revenue, and concerns over layoffs, the Federal Reserve's decision on the same day to keep interest rates unchanged—citing ongoing inflation concerns—also led to a more conservative market sentiment.

However, in the medium to long term, the fundamentals of the lithography monopoly giant remain unchanged. The company reaffirmed its 2030 revenue opportunity of €44 billion to €60 billion, with gross margins expected to rise to 56%-60%. Citi (C) maintains a "Buy" rating and a price target of €1,400. J.P. Morgan (JPM) assigns an "Overweight" rating, seeing few negative factors. UBS (UBS) similarly gives a "Buy" rating and a €1,400 price target, believing that the current guidance remains conservative and there is room for further upward revisions.