ASML Shares Retreat Despite Record Performance and Strong Fundamentals

ASML shares fell sharply as investors focused on 2026 guidance and China sales normalization, despite a record backlog and new €12B buyback.

ASML Holding NV, the semiconductor equipment giant, saw its shares decline sharply in Thursday's trading, a move that caught many investors off guard. This pullback occurred even as the company presented a robust annual report for 2025, featuring full order books and solid profit growth. The downward pressure appears rooted not in past performance but in forward-looking concerns regarding its business in China and broader sector weakness.

Investor Confidence Tempered by Future Guidance

The sell-off, which pushed the share price down by over 6 percent to close at €1,241.20, was not triggered by any company-specific negative news. Instead, the equity was caught in a broader sector downturn as sentiment shifted following recent results from industry peer Nvidia. More significant than the general market mood, however, is investor sensitivity surrounding the outlook for 2026.

Management anticipates that revenue from China will normalize to approximately 20 percent of sales in the current year. This follows an exceptionally strong 2025, with the decline attributed to export restrictions and the drawdown of a backlog of older orders. With the stock having performed well into early 2026, the absence of new, short-term catalysts prompted investors to lock in profits. The shares currently trade around €1,234.00, representing a decline of nearly 4.7 percent from their 52-week high.

A Formidable Backlog and Shareholder Returns

Fundamentally, the Dutch company's position remains strong. For the full year 2025, ASML reported annual revenue of €32.7 billion and a net profit of €9.6 billion. More critical for its future, however, is the massive order backlog valued at approximately €39 billion as of the end of 2025.

This cushion already covers the mid-point of the revenue forecast for 2026, which ASML has set between €34 billion and €39 billion. Company leadership expresses confidence that the decline in Chinese business will be offset by significantly rising demand for its extreme ultraviolet (EUV) lithography systems. These highly complex machines are essential for manufacturing the most advanced AI chips, for which global demand continues to grow unabated.

To underscore confidence in its long-term strategy, the corporation announced a new share buyback program of up to €12 billion, extending through the end of 2028. Shareholders are also set to benefit directly, with the dividend for 2025 proposed to rise to €7.50 per share—a 17 percent increase compared to the previous year.

Navigating a Transitional Year

The coming year presents ASML with a balancing act between declining sales in China and ramping demand for AI-driven EUV equipment. Bolstered by the introduction of its new High-NA EUV technology and a record order backlog, the company aims to further cement its monopoly in high-end lithography systems and secure its margins for the long term. The market's reaction highlights the tension between stellar historical results and the challenges of navigating geopolitical and cyclical headwinds ahead.