So, let's get straight to it, because the last two days have been packed with earnings reports. Three giants opened their books, and the market's reaction was, to put it politely, mixed.
On one hand, Netflix reported strong results. And the stock... fell. On the other hand, ASML and TSMC, the companies that build the "heart" of the AI industry, delivered record breaking numbers, sending a very clear message: demand for advanced chips is surging.
Let's start with the biggest headline. Netflix reported its second quarter results, and at first glance, everything looked solid.
Revenue climbed 13.4% compared to last year, driven by new subscribers, higher subscription prices, and growing advertising revenue. Operating income reached $4.19 billion, beating expectations and improving from last year's $3.78 billion. Performance was also strong across every region: Europe was up 14%, Latin America 21%, and Asia 16%.
"So why did the stock fall?" you're probably wondering.
There were two main reasons. First, revenue came in just slightly below what Wall Street was expecting. Second, and more importantly, free cash flow was only $1.53 billion, while analysts had been expecting nearly $2.93 billion, almost double.
And that's how the market works. When investors expect perfection, even "very good" can be seen as disappointing. That's why the stock dropped around 8% in after hours trading.
One thing that stood out was Netflix's growing use of artificial intelligence. The company said AI is increasingly being used to improve content recommendations, power voice search, and even assist with post production across roughly 300 productions this year. It's another sign that AI is rapidly reshaping the entertainment industry as well.
Speaking of AI, let's move to the second story, because this is where things get even more interesting.
ASML is a Dutch company that many people have never heard of. But without it, advanced chips simply wouldn't exist. It is the only company in the world that manufactures the extreme ultraviolet lithography machines used to produce the world's most advanced semiconductors.
And its results were impressive.
Revenue reached €9.33 billion, up 21.3% year over year. Earnings per share came in at €7.59, ahead of expectations, while net income reached €2.9 billion.
But the most impressive part wasn't the numbers. It was the guidance.
Just a few months ago, ASML expected 2026 revenue of between €36 billion and €40 billion. It has now raised that forecast to between €43 billion and €45 billion. That's a massive upgrade in just one quarter.
What's driving it?
One word: AI.
Management spoke about continued strong demand from customers who are aggressively expanding capacity for the most advanced chips, from today's 3 and 5 nanometer technologies to the rapidly growing 2 nanometer generation, with 1.4 nanometer designs already under development. Intel is already using ASML's most advanced technology to manufacture some of its next generation processors.
And the company isn't slowing down. ASML plans to expand its manufacturing capacity by roughly 30% in 2027 and is already evaluating another 30% increase for 2028. That tells you exactly where the industry is headed.
As if that wasn't enough, TSMC also reported results.
The world's largest chip manufacturer, producing semiconductors for Nvidia, Apple, AMD, and dozens of other companies, posted another outstanding quarter.
Revenue reached $40.2 billion, up 33.7% from a year ago.
But what really stands out are the margins. Gross margin came in at 67.7%, meaning the company keeps nearly 68 cents of every dollar in revenue before operating expenses.
Even more impressive, 77% of its revenue came from its most advanced chips, precisely the products powering the AI revolution.
TSMC also raised both its full year outlook and its investment plans. The company announced an additional $100 billion investment in U.S. manufacturing, bringing its total U.S. commitment to $265 billion across 12 fabrication plants.
Analysts were enthusiastic. Susquehanna raised its price target to $600, while Wedbush maintained its Outperform rating.
There is, however, one small caveat.
Some analysts noted signs of weakness in demand for older generation chips, possibly because of rising memory costs. So it's not a perfect picture.
Even so, the broader trend couldn't be clearer: global demand for advanced chips is accelerating at an extraordinary pace.
