Investment in artificial intelligence infrastructure continues to heat up, pushing the order demand for chip equipment giant ASML (ASML) towards an even more distant future.

ASML announced its third-quarter results on Wednesday, with net profits significantly exceeding market expectations, and once again raised its full-year performance forecast—this is the third consecutive quarter that the company has raised its outlook. What is more noteworthy is that some customers have begun to express their intention to place orders for equipment purchases in 2029 and even 2030, while the company's existing supply plans for 2027 and 2028 are no longer able to fully meet market demand.

Faced with an increasingly tight supply-demand gap, CEO Christophe Fouquet stated that the company is evaluating raising its production capacity in 2028 by more than the previously announced 30% expansion plan to meet the continuously rising demand.

ASML's European shares opened up 2.8% higher, after previously falling sharply by 3% before the market opened. The market's reaction to these earnings and outlooks will be an important reference for the sentiment in the semiconductor sector in the near term. Earlier this week, chip stocks faced a global sell-off due to Broadcom CEO Hock Tan comparing industry investors' sentiment to that of a casino, which sparked concerns about the sustainability of the AI craze.

Profits and gross margin both exceeded expectations.

ASML's total net sales in the third quarter reached 11.66 billion euros, slightly lower than the analysts' average forecast of 11.7 billion euros, but its net profit amounted to 4.96 billion euros, significantly higher than the market's expectation of 4.11 billion euros. The gross margin was 57.5%, also exceeding the expected 56.1%.

Christophe Fouquet characterized the total net sales for the third quarter as "record-breaking" in its statement, noting that the results were at the higher end of the forecast range. The sales volume of Basic Management Installation (Installed Base Management) reached 3.3 billion euros, exceeding expectations, mainly driven by the strong demand for improved production efficiency, which was also a key factor in driving the gross margin above forecasts.

In this quarter, ASML sold a total of 113 new lithography systems and 8 used systems, which is an increase from the previous quarter's 86 and 5, respectively. At the end of the quarter, cash and short-term investments totaled 12.7 billion euros. In addition, the company announced a mid-term dividend of 1.88 euros per share, to be paid on November 4th, and plans to repurchase its own shares for approximately 4.1 billion euros in the third quarter.

Guidance for the fourth quarter and the full year exceeded analysts' expectations.

Looking ahead, ASML expects its net sales in the fourth quarter to be between 14.2 billion and 15.2 billion euros, which is higher than the analysts' previous forecast of around 13.97 billion euros; the gross margin for the fourth quarter is expected to be around 57%, also higher than the market's expectation of 56.4%.

On an annual basis, the company has narrowed and raised the lower limit of its net sales forecast range, expecting annual net sales to be between 44 and 45 billion euros, compared to the previous range of 43 to 45 billion euros; the annual gross margin is expected to be raised to around 56%, up from the previous forecast of 54% to 56%, which is higher than the market's previous expectation of 54.9%.

In terms of specific business growth rates, ASML expects that its EUV (extreme ultraviolet lithography) business will grow by more than 45% this year, while its non-EUV business is expected to grow by about 20% year-on-year this year.

The supply-demand gap widens, and capacity expansion plans are upgraded again.

ASML is the only company in the world that produces EUV lithography machines. Its equipment is a key tool for manufacturing the most advanced chips, and the cycle from order to delivery exceeds one year. Therefore, its order data is regarded by the market as an important forward-looking indicator of the capital expenditure trends of major chip manufacturers such as TSMC, Samsung, and Intel.

According to Bloomberg, ASML stated in July this year that it planned to increase the production capacity of its second-generation high-end product—the lithography machine with a small numerical aperture EUV ( low NA EUV ) by 30% by 2027, with an annual shipment target of about 85 units, and was also evaluating further capacity expansion for 2028. The company now made it clear that even if this plan is pursued, the supply in 2027 and 2028 will still not be able to fully meet demand.

Christophe Fouquet stated in the declaration: "Our customers are continuously refining the short- and medium-term equipment demand forecasts we have jointly developed, which is mainly based on their assessments of the investment scale and duration related to AI. Given this strong demand visibility, some customers are expressing interest in placing orders for 2029 and even 2030." The company mentioned that it will further explore possible pathways for increasing production capacity in 2028, on top of the previous goal of expanding production by 30%.