Why ASML can't build enough machines until 2028

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TECH BRIEF

Happy Thursday, and thanks for reading the Daily Tech Brief from Front Research. Here are today's five stories:

• ASML posts a record €11.7 billion quarter and warns its supply will fall short of demand in both 2027 and 2028

• Netflix cuts about 1,000 jobs, roughly 6% of staff, in its biggest layoffs since 2022

• Federal prosecutors charge an OpenAI engineer with hiding a recording device in an executive conference room

• Japan will fund up to $21 billion for two GlobalFoundries-run chip fabs in New York, and Washington takes a 4% stake in the company

• Ukraine says SpaceX capped Starlink terminal speeds overnight, disrupting military drone missions

Here's what you need to know.

ASML Posts a Record Quarter and Says It Cannot Build Enough Machines Through 2028

• ASML reported record Q3 2026 net sales of €11.7 billion, a 57.5% gross margin and net income of €5.0 billion

• Q4 guidance is €14.2 billion to €15.2 billion, and full-year 2026 sales guidance is €44 billion to €45 billion

• ASML says planned supply for 2027 and 2028 "will not fully meet the demand of our customers," and some customers want to order for 2029 and 2030

• China fell to 23% of system sales from 42% a year earlier

• Why it matters: the one company that makes EUV tools is now the bottleneck on AI chip capacity, which gives it pricing power and caps how fast the industry can grow

ASML's third quarter set a record on every headline line. According to the company's results release, net sales were €11.66 billion, gross margin was 57.5%, net income was €4.96 billion and earnings per share were €12.95. ASML guided Q4 sales to €14.2 billion to €15.2 billion at a gross margin of about 57%, putting full-year 2026 sales at €44 billion to €45 billion. It also bought back about €4.1 billion of shares in the quarter and will pay an interim dividend of €1.88 per share on November 4.

The bigger message was about capacity. CEO Christophe Fouquet said "we now expect that our supply as currently planned for both 2027 and 2028 will not fully meet the demand of our customers," and that "some customers are expressing an interest in placing orders with us for 2029 and even 2030." ASML plans a 30% increase in low-NA EUV and DUV immersion capacity in 2027 and is studying a further increase for 2028. Stock Titan estimated that the 2027 step implies roughly 85 EUV machines against about 65 this year, and reported that ASML sold 17 EUV systems in the quarter, up from 9 a year earlier. Fouquet said pricing effects will show up partly in 2027 and fully from 2028.

There are caveats. Stock Titan noted that sales came in just below the Visible Alpha consensus of €11.71 billion and that EPS included a €509.7 million gain on ASML's Mistral AI stake. ASML no longer reports quarterly bookings, so interest in 2029 and 2030 orders is not backlog. China's share of system sales fell to 23% from 42% a year earlier, and ASML expects China to be about 20% of 2026 business. 24/7 Wall St. noted that the stock was still up about 61% year to date going into the report, but down about 6% over the prior week amid the chip selloff.

Why it matters: ASML is the only supplier of EUV lithography, so its capacity limit is the industry's limit. A supplier that is sold out for two years can push prices, which supports margins into 2028, and it tells investors that TSMC, Samsung, SK Hynix and Intel all plan to spend more than ASML can deliver. That is a strong signal against the "AI capex peak" worry that hit chip stocks this week. The risk sits on the other side of the trade: if AI demand cools, a 30% capacity expansion and customers asking for 2030 slots would leave the whole equipment chain exposed. Watch the June 10, 2027 Capital Markets Day for new long-term targets.

Netflix Cuts About 1,000 Jobs in Its Biggest Layoffs Since 2022

• Netflix is cutting about 6% of its workforce, close to 1,000 jobs, mostly in product, technology, legal and HR

• Co-CEOs Ted Sarandos and Greg Peters told staff the company must be disciplined about where it puts people and resources

• Netflix says it remains on track for its full-year forecast; Q3 results are due October 20

• The stock is down about 22% this year, and Huber Research downgraded it to Underweight on Tuesday

• Why it matters: the leader in paid streaming is now cutting costs to defend margins as YouTube and TikTok take a growing share of viewing time

Netflix confirmed on Wednesday that it is eliminating about 6% of its staff, a move first reported by The Wall Street Journal from an internal memo. TechCrunch reported that the cuts total close to 1,000 jobs, mostly in product, tech, legal and human resources, against about 16,000 full-time employees at the end of 2025. In the memo, Sarandos and Peters wrote that the company's mission "is ambitious" and that it has to be disciplined about where it puts its people, while Netflix said it would "continue to invest aggressively in high impact areas."

Forbes called it the largest single job reduction at Netflix since 2022. A month ago Sarandos said the company is "not growing as fast as I want us to." Shares were down about 22% year to date, and Huber Research's Craig Huber cut the stock to Underweight on Tuesday with a $70 price target, down from $85. Netflix reports third quarter results on Tuesday, October 20.

The cuts come after Netflix lost a long bidding war for Warner Bros. Discovery's studio and streaming businesses to Paramount Skydance earlier this year, TechCrunch noted. The company has raised prices, grown its ad tier to more than $1.5 billion in revenue, and pushed into live sports, games, video podcasts and short-form video, while YouTube has overtaken it in average daily viewing.

Why it matters: Netflix is the profitability benchmark for streaming, and layoffs aimed mainly at product and engineering, five days before earnings, suggest management is protecting operating margin while revenue growth slows. Investors will read the October 20 report for whether ad revenue and engagement can offset slower subscriber growth. For the wider media sector, the leader cutting costs after failing to buy scale through Warner Bros. Discovery is a sign that the fight for attention against YouTube and TikTok is getting more expensive, not less.

OpenAI Engineer Charged With Bugging an Executive Conference Room

• Abdulrahman Alfozan, 35, an OpenAI engineer since July 2025, was arrested October 9 and charged with intercepting oral communications

• Prosecutors say a recording device was found hidden in toilet paper behind a TV in an executive conference room on September 30, with a second device found in his bag on October 5

• The device was a thumb-sized Seeed XIAO ESP32-S3 Sense board with a microphone and encrypted storage

• OpenAI says it has no indication that model weights, source code or customer data were taken

• Why it matters: insider threats are now a national security issue for frontier AI labs, and the case will raise security costs and scrutiny across the industry

The U.S. Attorney's Office for the Northern District of California announced on Tuesday that Alfozan, a Saudi national, was charged with using or attempting to use a device to intercept oral communications, which carries a maximum sentence of five years. According to the complaint, OpenAI staff found the device on about September 30, plugged into a USB port behind a television in an executive conference room and concealed in toilet paper; it had been installed around September 28 and its contents were encrypted. On October 5, he allegedly looked behind the same TV, and security found a second, similar device in a bag he had left unattended. U.S. Attorney Craig Missakian said, "For us it is a matter of national security."

The San Francisco Standard reported that the room is used for meetings on proprietary research, product plans and government engagements. Prosecutors allege that before the device was installed, Alfozan used a productivity tool to ask about room capacities and the locations of leadership and partner meetings, and that a chatbot account linked to his spouse's identifiers received prompts on building and hiding a recorder. The Standard reported that he previously worked at Meta from 2017 to 2022 and lists himself as a venture partner at Riyadh-based RAED Ventures. Prosecutors have not alleged a motive or any foreign government role. A detention hearing is set for October 19.

OpenAI said its surveillance countermeasures team found the device during a sweep, that employees used its own models to analyze it, and that it restricted his access gradually from September 30 before firing him on the day of his arrest. Bloomberg also reported the arrest. The company said it has no indication he accessed or took model weights, source code or customer data.

Why it matters: frontier AI labs hold some of the most valuable intellectual property in the economy, and the FBI now treats protecting it as a counterintelligence priority. Expect more spending on physical security, tighter access controls and closer vetting of staff at OpenAI, Anthropic, Google DeepMind and others, along with pressure from Washington to formalize security standards for labs doing government work. For OpenAI's partners and investors, the key point is that nothing core appears to have left the building; the reputational and regulatory follow-through will matter more than the device itself.

Japan Bankrolls Up to $21 Billion for Two GlobalFoundries Fabs in New York

• Japan will fund up to $21 billion for two new 300mm fabs in Malta, New York, with GlobalFoundries as technology provider and operator

• The U.S. Commerce Department will receive an equity stake of about 4% in GlobalFoundries

• The first fab is expected to come online in 2029; Apple, GM, Renesas and Cirrus Logic are named as planned users

• GlobalFoundries shares rose about 5% in premarket trading on Wednesday

• Why it matters: this is a new model for US chip policy: allied capital builds the fabs, a US company runs them and Washington takes equity

GlobalFoundries said on Wednesday it was selected to run two new semiconductor fabs at its Malta, New York site under a U.S. and Japan initiative with up to $21 billion of Japanese funding. Investing.com, via Yahoo Finance, reported that about $10 billion goes to each fab. Japan provides the capital, while GlobalFoundries earns construction and operating fees and licenses its process technology. Each fab is expected to add about 900,000 300mm wafers of annual capacity at full output, with the first coming online in 2029 and ground breaking planned for later in 2026.

The U.S. Commerce Department will take an equity stake of roughly 4% in GlobalFoundries, Quartz reported. The company also agreed to redirect $955 million of its existing CHIPS Act award toward silicon photonics, silicon-germanium and advanced packaging in Malta and Burlington, Vermont. Renesas, Apple, Cirrus Logic and GM were cited as planning to use the new capacity, and the project is expected to support about 27,000 construction and ecosystem jobs and more than 1,000 manufacturing jobs. Nikkei Asia also reported the deal.

Why it matters: the structure is the story. Japan supplies the capital, GlobalFoundries runs the fabs on a fee and licensing basis without carrying the full capex on its balance sheet, and Washington takes equity, following the stake it took in Intel. For GlobalFoundries, majority owned by Abu Dhabi's Mubadala, that is growth with less balance sheet risk, which explains the share move. For other chipmakers and their allies, it shows how US industrial policy is evolving: expect more trade commitments to be turned into specific fabs, with the US government taking stakes in the operators.

Ukraine Says SpaceX Throttled Starlink, Disrupting Drone Missions

• Ukrainian officials say SpaceX imposed a 100 mph (160 km/h) speed cap on moving Starlink terminals used by the military, without warning, overnight into October 14

• Drones lost connectivity for up to 20 seconds even at lower speeds, and at least one drone unit canceled missions

• Elon Musk said the military Starshield systems are controlled by the U.S. government and that limits are set by the U.S. military and the president

• Service stabilized later in the day, but the cap remained

• Why it matters: a private satellite network has become a lever of US foreign policy, which raises the political risk around SpaceX and speeds up Europe's push for alternatives

Presidential adviser Serhii Beskrestnov said the restriction applied to the Starshield military service package and capped terminal speeds at 100 mph, The Kyiv Independent reported. Mid-range strike drones, interceptor drones, frontline logistics and reconnaissance were affected, and the 7th Air Assault Corps said a drone unit in the Huliaipole sector canceled missions. Beskrestnov said the timing "cannot be a coincidence," but gave no evidence of a link to Washington. Ukraine's Defense Ministry is negotiating with partners and SpaceX to avoid sudden restrictions.

Forbes, citing Reuters, reported that drones sometimes lost connectivity for up to 20 seconds even at around 68 to 75 mph. Polish Foreign Minister Radosław Sikorski, whose government helps pay for Ukraine's Starlink service, asked Musk on X whether he was "playing politics with your products again." Musk said Starshield systems are owned and controlled by the U.S. government and that their limits are set by the U.S. military and ultimately the president. The White House had not commented.

The restriction came as President Trump pressed Kyiv to stop striking Russian oil refineries and declared an "energy ceasefire," and after Trump threatened to withhold intelligence and aid, The Kyiv Independent reported. Sources told the paper Washington had not decided to halt intelligence sharing. US News carried Reuters' report of the disruption.

Why it matters: Starlink is SpaceX's main revenue engine, and this episode shows that its military business carries political risk that can be switched on overnight. For European governments, it strengthens the case for funding sovereign alternatives such as Eutelsat's OneWeb and the EU's IRIS² constellation, which is a tailwind for those operators. For defense investors, it is a reminder that battlefield capability now depends on commercial networks controlled by one company and, through it, by the U.S. government.