ASML stock drops 8% as outlook is clouded by tariff uncertainty

The semiconductor company can’t confirm 2026 growth as tariff threats still loom.

ASML (NASDAQ:ASML) stock was dropping on Wednesday, down about 8%, despite having a pretty solid quarter.

It wasn’t so much the past results that were of concern, rather it was the clouded 2026 outlook.

ASML is a Netherlands-based semiconductor stock that builds the equipment and machines that are used to produce AI semiconductor chips. As such, it is a key player in the AI chip supply chain for companies like NVIDIA (NASDAQ:NVDA).

As mentioned, it was a solid second quarter for ASML as it beat revenue and earnings estimates. The firm generated €7.7 billion in net sales, which is about USD $8.95 billion. That was down about 24% year over year and down roughly 0.6% from Q1. It also beat estimates of €7.5 billion in sales.

Net income was also strong, as the firm earned €2.3 billion, or €5.90 per share, which was up about 45% from the same quarter a year ago and essentially flat compared to Q1. It also topped estimates of €2.0 billion.

The gross margin improved to 53.7%, up from 51.1% a year ago, but down a tad from 54% in Q1. The gross margin is revenue made after subtracting the cost of sales.

Also impressive was its net bookings of €5.5 billion, up from €3.9 billion in Q1. Net bookings include all sales orders that have already been contracted.

“Our second quarter total net sales came in at €7.7 billion, at the top end of our guidance. The gross margin was 53.7%, above guidance, primarily driven by higher upgrade business and one-offs resulting in lower costs,” ASML President and CEO Christophe Fouquet said. 

Outlook clouded by tariffs

The selloff on Wednesday was likely entirely due to the outlook.

It is not so much the outlook for the rest of 2025 that is worrisome. In the third quarter, ASML expects net sales between €7.4 billion and €7.9 billion, which would be roughly in line with Q2 sales. The gross margin is targeted to fall between 50% and 52% — which would be slightly down from Q2.

For the full fiscal year, net sales are projected to increase by about 15% with the gross margin anticipated to be around 52%. That would be a faster sales growth rate than the previous year.

The bigger concern is its 2026 outlook, which is clouded by tariffs and other macroeconomic and geopolitical issues – which could have both direct and indirect impacts.

“With regard to tariffs, the direct impact results from tariffs related to system sales to our customers in the United States, the import of materials for our U.S. manufacturing facilities, the import of parts and tools for our U.S. field operations and the export of parts from the U.S. into other countries to the extent tariffs were to apply to those parts,” CFO Roger Dassen said on the earnings call, per Seeking Alpha.

Can’t confirm growth rates in 2026 due to uncertainty

While the company is working with customers and suppliers to limit the direct impact of tariffs, the indirect impact is difficult to determine because it relates to their effect on GDP and market demand.

“No one knows even today, what’s the end state [with tariffs],” Fouquet said. “Some people are getting more optimistic. Some people are getting more pessimistic. And I think when we talk about uncertainties, we mean both basically. So, I think our visibility because of discussion has a bit reduced, and therefore, we are being more cautious.”

It is because of that uncertainty and lack of visibility that ASML cannot make any growth projections about 2026.

“Looking at 2026, we see that our AI customers’ fundamentals remain strong,” Fouquet said. “At the same time, we continue to see increasing uncertainty driven by macro-economic and geopolitical developments. Therefore, while we still prepare for growth in 2026, we cannot confirm it at this stage.”

ASML stock had been having a solid year until Wednesday’s selloff. Yet, it is still up 8% YTD.

The stock is still fairly expensive trading at 31 times earnings, so this may bring it down to a more reasonable valuation. If there is some resolution in the tariff wars, it would be a good idea to revisit ASML stock as it has been a strong growing in a booming industry.