European technology firms have resoundingly outperformed expectations this earnings season, as accelerating investment in AI lifts demand and offsets the impact of global trade tensions.

The MSCI Europe Technology Index has posted earnings-per-share growth of 16% for the third quarter so far, with more than 86% of its market capitalisation having reported. That figure stands well above the pre-season forecast of 4.2% growth, marking a sharp lead over every other sector in the region.

Among the first major companies to report was ASML Holding NV, the Dutch semiconductor equipment manufacturer whose advanced chipmaking machines are central to AI infrastructure.

Orders for its most sophisticated systems surged, easing fears of a potential slowdown next year. The results supported confidence among analysts that “the bearish view of a worse than expected 2026 will be put to rest,” according to JPMorgan’s Sandeep Deshpande.

Another Dutch firm, BE Semiconductor Industries NV, also posted results ahead of expectations, with both orders and profits buoyed by AI-driven demand from Asia.

Europe’s largest software maker, SAP SE, delivered a more mixed outlook for its key cloud business, noting that trade tensions and a weaker US dollar had affected client investment decisions. However, comments from the company’s leadership helped to reassure investors about the long-term AI opportunity. “I’m very excited about AI becoming the key enabler of our growth,” said Chief Executive Officer Christian Klein during the earnings call.

In the telecom sector, Ericsson AB’s profits were boosted by the sale of its call-routing business, while Finnish rival Nokia Oyj reported a third-quarter profit that exceeded analyst expectations, underpinned by growing demand from AI and cloud clients.

The strength of what some analysts are calling an AI “super-cycle” has provided fresh momentum for European tech. OpenAI multibillion-dollar investments in data centres and chip deals – now collectively worth more than $1 trillion – have further fuelled optimism, lifting forecasts for companies positioned to benefit from the technology’s rapid expansion. Analysts have been revising earnings estimates upward for the sector, following several months of decline.

Yet, despite the optimism, challenges remain. The semiconductor industry continues to face headwinds from global supply chain disruption, aggravated by rising US-China tensions and escalating tariff barriers. Washington is moving to restrict the delivery of advanced AI chips to China, while Beijing has tightened control over exports of rare earth materials essential to chip production.

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These geopolitical pressures have already begun to affect industry sentiment. STMicroelectronics NV, one of Europe’s leading semiconductor firms, joined US rival Texas Instruments Inc. in warning that customers – particularly in the automotive and industrial sectors – are holding back on new orders.

The automotive market, already subdued, may now face further turbulence after the Dutch government seized control of Nexperia, a Chinese-owned chip manufacturer.

While the near-term outlook for some segments remains uncertain, Europe’s technology sector is ending the quarter on a strong note, buoyed by AI-fuelled optimism that has helped it decisively outpace expectations.