Did ASML Reveal That It Might Be Exiting China?

In the month leading up to its Q4 2025 earnings on the 28th of January 2026, Dutch semiconductor manufacturing equipment provider ASML Holding’s (ticker: ASML) stock rose nearly 30%. However, the trends exhibited in its earnings arguably have grounds for some caution.

Trend Analysis

ASML is the sole supplier in the world of extreme ultraviolet lithography (EUV) photolithography machines needed to manufacture advanced chips while companies such as Japan’s Nikon and Canon, supply lithography tools for less-advanced processes also employed in chips. In Q4 2025, sales of ASML’s products shot up precipitously relative to the previous Fiscal Year (FY).

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Source: Company Information; Leverage Shares analysis

Net sales closed FY 2025 with a 16% increase over the previous FY’s, with revenues from servicing existing deployed equipment again showing a massive contribution. Net income passthroughs from revenue remained efficient, recording a corresponding 27% growth over the previous FY’s net income.

Despite R&D cost growth inching slightly higher relative to that in FY 2024, it’s well within the high ramp-ups seen in years prior to FY 2024 while operating income growth rose from relative flatness in the previous year to post a 25% gain over the previous year.

Overall relationships between line items and net sales don’t indicate any substantive changes in costs and expenses. Essentially, the company functions as it had since FY 2020.

Source: Company Information; Leverage Shares analysis

In 2024, China alone accounted for nearly half of net sales. While the current report doesn’t have detailed summary of origins of revenue (a statistic which would be available in the finalized Annual Report set to be released shortly), the company’s management did highlight in their investors’ presentation during the earnings call that in 2024, China accounted for 41% of system sales while the U.S. represented 17%, Taiwan 11%, South Korea 21% and 5% of sales originated from Japan. In 2025, there has been a quiet shift: China now represents 33%, the U.S. 12%, South Korea 25% while Taiwan doubles its share to 22%. This strongly implies that Taiwan will continue to be the dominant source of origin of advanced chips to the world, despite efforts by Trump administration to house a greater share of manufacturing within the U.S. 2024 was the year when this trend had bucked: Taiwan otherwise had been the largest source of revenue for the company since 2020 – with FY 2021 being the high watermark at a solid 39% contribution.

Is China Out?

In Q3 2025, ASML’s CEO Christophe Fouquet had stated in that period’s earnings’ press release, “we expect China customer demand, and therefore our China total net sales in 2026 to decline significantly compared to our very strong business there in 2024 and 2025.” The trend portrayed here seems to be validating that assertion.

In the Q4 2025 earnings call, CFO Roger Dassen stated in response to expected business in 2026, “we expect the China business for us to come in at approximately the percentage that China also has in our backlog, which is around 20% of the backlog and therefore 20% of our revenue is what we expect the China business to come in at”. This statement constituted the entirety of the references made in the entire call.

While there are concerns that this would be detrimental for sales in 2026, ASML CEO Fouquet asserted that the company expects between €34 and €39 billion euros in net sales, which represents around an increase in the 4-20% range over 2025, primarily borne on strong demand from transitions from 4nm to 3nm technology and ramp-ups in 2nm technology adoption due to clients being more comfortable about the sustainability of long-term AI demand.

All in all, present language seems to suggest that – outside of servicing contracts – ASML might be mulling an exit from catering to the Chinese market.

In Conclusion

Whether China is in or not, the fact remains that specialist ASML occupies an important position within the semiconductor industry for the supply of advanced chipmaking equipment while the likes of Japanese conglomerates such as Nikon and Canon are quite far away from offering technology at this level of complexity.

However, the stock loaded up on value quite early on the year and the massive spike in valuation is likely to be tested in the quarter to come. There isn’t a strong case to be made for the bulk of investors to double down on the stock, which implies that the likelihood of turbulence remains at some strength.

Professional investors might consider the +3x Long ASML ETP (ASL3) and the -3x ASML ETP (ASMS) during bullish and bearish trends in the stock. For a broader yet leveraged exposure, the +4X Long Semiconductor ETP (SOXL) and the -4X Short Semiconductor ETP (SOXS) are at hand.

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