ASML Holding (ASML)
TL;DR
ASML is the global monopoly supplier of EUV lithography systems — the only machines that can pattern the world’s most advanced semiconductor chips. Just reported Q2 FY2026: revenue €9.3B (+21% YoY), gross margin 54.0% and net income €2.9B (EPS €7.59), both sales and margin above guidance on stronger Installed Base Management sales. Q3 FY2026 is guided to €11.0-12.0B revenue (55-57% GM) and full-year 2026 was raised to €43-45B, a strong acceleration driven by AI-fueled Logic and Memory demand. Stock sits at €1,792 on 48x P/E(ttm), off the €1,989 quarter-end high, elevated but backed by extremely strong H1 order intake and 30% capacity expansions planned for 2027.
Summary
| Finding | Assessment |
|---|---|
| 5-Year Stock Return | +159% (€691→€1,792). TTM OP +128% (€5.5B→€12,513M) outpaced stock. P/E(ttm) compressed 59x→48x as earnings caught up. |
| Business Model | Sole global EUV lithography supplier. EUV 36%, DUV 37%, IBM 25% of €33B FY2025 revenue. Logic 66%, Memory 34%. |
| Competitive Moat | WIDE Absolute EUV monopoly, exclusive Zeiss/Trumpf partnerships, €38.8B backlog (€25.5B EUV). No competitor despite decades of effort. |
| Past 5-YR Drivers | EUV intensity increase (20+ layers/wafer at 2nm), High NA ramp (5→20 units/year by 2028), AI-driven semiconductor capex. |
| Recent Stock Move | €1,792 vs. €801 (Jun 2025); hit €1,989 at quarter-end. Driven by Q2 2026 beat (€9.3B rev, 54% GM), FY2026 outlook raised to €43-45B, “extremely strong” H1 order intake. |
| Revenue Trend | ACCELERATING Rev YoY: 21% (Q2 2026) → 56% (Q3 2026E). |
| Margin Trend | EXPANDING OM%: 37.1% (Q2 2026) → 40.1% (Q3 2026E). |
| TTM OP Trajectory | ACCELERATING TTM OP QoQ: 6.8% (Q2 2026) → 17.9% (Q3 2026E). TTM OP €12,513M. |
| Key Opportunities | AI-driven Logic + Memory demand; customers accelerating capacity. ASML adding 30% EUV + 30% DUV immersion capacity for 2027. FY2026 outlook raised to €43-45B, 54-56% GM. |
| Key Risks | Export controls could curb China revenue. Valuation at cyclical high (hit ~63x P/E at €1,989). Cyclicality: single EUV €150M+, lumpy quarters. Customer concentration. |
| Catalysts | Q3 2026 earnings (€11.0-12.0B guide). Raised FY2026 outlook execution. 2027-2028 capacity ramp. NXE:3800F shipping 2027. Capital Markets Day June 10, 2027. |
| P/E(ttm) Valuation | 48x, mid 5-year range (30x-63x). Monopoly + raised outlook + €38.8B backlog. Upside ~60x on sustained AI demand; downside ~35x on export escalation. |
Q2 FY2026 Key Data (Apr-Jun 2026), reported 2026.07.15
- Revenue €9.3B (+21% YoY, +6% QoQ), above guidance. Gross margin 54.0% (above guide), net income €2.9B, EPS €7.59 (vs €7.15 Q1).
- Beat driven by Installed Base Management sales €2,762M (up from €2,488M). 86 new litho systems sold (vs 67), 5 used. End-quarter cash €7,582M.
- Q3 2026 guided €11.0-12.0B revenue, 55-57% GM. FY2026 outlook raised to €43-45B net sales, 54-56% GM.
Key Takeaways from Earnings Call
- Q2 sales €9.3B and 54.0% gross margin both beat guidance, the beat driven by Installed Base Management sales of €2,762M—nearly €300M above guide on upgrade business carrying very high component margins (CFO Dassen). Net system sales split almost evenly, logic 51% / memory 49%; EUV contributed €3.8B (including one High-NA system) and non-EUV €2.8B. Net income €2.9B, EPS €7.59; 86 new systems sold vs 67 in Q1.
- AI demand has customers aggressively adding leading-edge capacity in both logic and DRAM, many revising 2026 capex upward as they sign multi-year deals with their own customers. ASML now expects advanced-logic net system sales up >25% and memory up >75% this year; Fouquet framed DRAM as a “perfect storm” of HBM/DDR volume plus rising EUV/immersion layers at ramping 1c/1b nodes. H1 order intake stayed “extremely strong,” lifting backlog.
- ASML is lifting both low-NA EUV and DUV immersion capacity ~30% for 2027 and investigating a further +30% for 2028, the latter to ~110 EUV units on already-significant orders—all within existing clean-room footprint. Dassen stressed they are “preempting,” not waiting for POs. On EUV, the shift to a higher-productivity E/F tool mix means +30% units equals ~45% more wafer capacity; 2027 is “close to fully covered” with low-NA orders.
- FY2026 was raised to €43-45B net sales at 54-56% gross margin, with H2 GM near 56% on richer EUV ASPs (D models retiring), strong immersion, IBM upgrades and volume leverage; management added that value-based pricing leaves room for further gains “over time.” Top-line +35% on ~6% OpEx growth underscores operating leverage. Intel is now running High-NA on its 18A node (Core Ultra Series 3), a first production milestone; China holds ~20% of sales.
Key Segments and Revenue Mix (FY2025)
| Segment | FY2025 Revenue | % of Total | Key Details |
|---|---|---|---|
| EUV Systems | €11.6B | ~36% | 48 systems shipped (incl. High NA); +39% YoY. Q4: €3.6B incl. 2 High NA units |
| DUV Systems | €12.0B | ~37% | ArF immersion, dry; declined 6% YoY on China DUV export restrictions |
| Metrology & Inspection | €825M | ~3% | YieldStar, HMI multi e-beam; grew 28% YoY on 3D structure adoption |
| Installed Base Management | €8.2B | ~25% | Service, upgrades, field options; +26% YoY driven by growing EUV fleet |
End-market mix: Logic €16.1B (66%, +22% YoY), Memory €8.4B (34%, -2% YoY). Q4 system mix: Logic 70%, Memory 30%. China ~29% of FY2025 sales, expected to normalize to ~20% in FY2026 in line with backlog share. FY2025 net income €9.6B (€24.73 EPS); free cash flow €11.0B.
Business Model
SUPPLIERS
Carl Zeiss SMT (EUV optics, 24.9% owned)
Trumpf (EUV laser sources)
ASML Berlin (optical components)
VDL, Prodrive (mechatronics)
Optics /
Lasers
→
ASML
EUV lithography (sole global supplier)
DUV lithography (ArFi, ArF dry, KrF)
Installed Base Management (~25% rev)
Metrology & Inspection (YieldStar, HMI)
Litho /
Service
→
€ Revenue
CUSTOMERS
TSMC (~30% of revenue, leading-edge logic)
Samsung (logic foundry + advanced DRAM)
Intel (logic fabs, EUV adoption)
SK Hynix, Micron (DRAM, first High NA)
Moat Assessment: WIDE
- Absolute monopoly in EUV lithography: ASML is the sole global supplier of EUV systems, with no competitor despite decades of effort. Every advanced chip below 7nm needs ASML’s EUV tools, and High-NA (0.55 NA) extends the monopoly to sub-2nm nodes.
- Deep ecosystem lock-in: ASML’s 24.9% Carl Zeiss SMT stake and exclusive optics deals form a deep moat. Trumpf and a 5,000+ supplier network took decades to build, and customers construct fabs around ASML tools.
- Roadmap visibility through a €38.8B backlog: Year-end 2025 backlog (€25.5B of it EUV) exceeds a full year of revenue and underpins the €44-60B 2030 target. Long capacity lead times make it a structural demand buffer.
Stock vs. Earnings — 5-Year Performance
- Stock currently at €1,792, vs. €691 (5 years ago) — about +159%. ASML shares more than doubled riding the EUV adoption cycle and AI-driven semiconductor capex, with TTM operating profit growing even faster over the same period.
- TTM Operating Profit grew from €5.5B to €12,513M (+128%). Earnings outpaced the stock over five years, driven by EUV mix shift, installed-base expansion and operating leverage; P/E(ttm) compressed from ~59x to 48x as earnings caught up.
- P/E(ttm) has ranged 30x–63x across the cycle. Multiples peaked with the Q2 2026 rally (63x) and bottomed near 26x in the 2023 and early-2025 troughs. Current 48x sits mid-range, pricing in the raised 2026 outlook.
Past 5-Year Key Drivers
- EUV adoption and mix shift: EUV revenue grew 39% YoY to €11.6B across 48 systems in FY2025 (ASPs €150M+ Low-NA, €350M+ High-NA). Layer counts per wafer rose from ~14 to 20+ as chipmakers moved to 2nm nodes.
- Installed base expansion and pricing power: The 100+ EUV fleet generates €8.2B in recurring service revenue (FY2025, +26% YoY, up from €4.1B in FY2020) at 50%+ margins, and its monopoly enables steady ASP increases on upgrades.
- Operating leverage on higher volumes: ASML’s largely fixed R&D spend (€4.7B, ~14% of sales) drove operating margin expansion from ~26% to ~33% as revenue scaled from €14B to €33B.
Quarterly Key Metrics
| Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | Q4 2025 | Q1 2026 | Q2 2026 | Q3 2026E | |
|---|---|---|---|---|---|---|---|---|---|---|
| Quarter End | Jun 2024 | Sep 2024 | Dec 2024 | Mar 2025 | Jun 2025 | Sep 2025 | Dec 2025 | Mar 2026 | Jun 2026 | Sep 2026 |
| Stock Price | €1,033 | €833 | €693 | €663 | €801 | €968 | €1,070 | €1,321 | €1,989 | €1,792 |
| Stock QoQ | +4% | -19% | -17% | -4% | +21% | +21% | +11% | +23% | +51% | -10% |
| Rev YoY | -10% | 12% | 28% | 46% | 23% | 1% | 5% | 13% | 21% | 56% |
| OM% | 29% | 33% | 36% | 35% | 35% | 33% | 35% | 36% | 37% | 40% |
| R40 (Rev YoY + OM%) | 20% | 45% | 64% | 82% | 58% | 33% | 40% | 49% | 58% | 96% |
| TTM OP (€M) | €7,800 | €8,059 | €9,022 | €10,369 | €11,198 | €11,225 | €11,301 | €11,721 | €12,513 | €14,749 |
| TTM OP QoQ | -5% | +3% | +12% | +15% | +8% | +0% | +1% | +4% | +7% | +18% |
| FCF/OP ttm | 38% | 36% | 101% | 90% | 82% | 80% | 98% | 77% | 80% | 94% |
| Debt/EBITDA | 0.5x | 0.5x | 0.5x | 0.3x | 0.3x | 0.2x | 0.2x | 0.2x | 0.3x | 0.3x |
| P/E(ttm) | 52x | 41x | 31x | 26x | 29x | 34x | 37x | 44x | 63x | 48x |
Recent Stock Performance & Drivers
- Stock currently at €1,792, vs. €1,033 (Jun 2024). Shares hit €1,989 at quarter-end before easing. The Q2 2026 print delivered €9.3B revenue (+21% YoY, above guidance), 54.0% gross margin, €2.9B net income and €7.59 EPS.
- P/E(ttm) sits at 48x after touching ~63x at the €1,989 quarter-end peak. The market is pricing the raised FY2026 outlook (€43-45B) and “extremely strong” H1 order intake from Memory and Logic customers accelerating capacity.
- TTM OP grew to €12,513M (+7% QoQ), supported by EUV mix and installed-base growth. Q2 Installed Base Management sales reached €2,762M (above plan) and 86 new litho systems shipped, underscoring the recurring-revenue engine.
Opportunities
- AI-driven Logic and Memory demand: Ongoing AI investment is driving advanced Logic and Memory chip demand, and customers are accelerating capacity expansion, translating into commitments across ASML’s portfolio.
- Capacity expansion for 2027-2028: ASML is adding 30% to both its ~65 low-NA EUV and ~130 DUV immersion capacity for 2027, with another +30% for 2028 under study, to meet H1 order intake that management called “extremely strong.”
- FY2026 outlook raised: Full-year 2026 net sales guidance was lifted to €43-45B at 54-56% gross margin, alongside a Q2 that beat on both sales (€9.3B) and margin (54.0%), signaling execution confidence into an AI-led upcycle.
Challenges
- China and export-control uncertainty: ASML’s outlook still hinges on evolving US and Dutch export rules. Further restrictions on advanced DUV, EUV or servicing could reduce China revenue and compress the addressable market.
- Valuation at a cyclical high: The stock traded to €1,989 (~63x P/E(ttm)) at quarter-end before easing to €1,792. At 48x it prices in continued acceleration, leaving little cushion if order momentum or margins disappoint.
- Cyclicality and revenue lumpiness: Revenue is inherently lumpy—a single EUV system is €150M+, High-NA €350M+—and quarterly growth swings widely (Q3 2025 was +1% YoY). Customer concentration adds order-timing risk.
Next 12 Months
- Q3 2026 guidance: €11.0-12.0B revenue, 55-57% gross margin. After a Q2 beat, the market will watch whether ASML sustains above-guidance execution. Continued EUV strength and bookings would support the stock at 48x P/E.
- Raised FY2026 outlook (€43-45B, 54-56% GM): The lifted full-year guide reflects confidence in AI-driven demand. Order intake that was “extremely strong” in H1, with customers accelerating capacity, suggests upside as the year progresses.
- Capacity and upgrade execution: ASML’s plan to add 30% EUV and DUV immersion capacity for 2027 and expand its upgrade portfolio will be watched as a demand-visibility signal, with the next Capital Markets Day set for June 10, 2027.
Next 12-24 Months
- Capacity build-out for 2027-2028: The planned +30% low-NA EUV and +30% DUV immersion capacity for 2027 (with a further +30% under study for 2028) positions ASML to supply the next leg of AI-driven fab expansion across Logic and Memory.
- 2nm ramp and EUV intensity: TSMC N2, Intel 18A and Samsung 2nm each need 20+ EUV layers per wafer. Rising layer counts and High-NA adoption underpin the path toward the €44-60B 2030 revenue target.
- Capital returns: ASML repurchased ~€1.1B of stock in Q2 under its 2026-2028 buyback program and declared a €1.88 interim 2026 dividend (payable Aug 5). A scaling installed base supports 56-60% gross-margin targets and growing shareholder returns.
Core Metrics Scorecard
| Q4'21 | Q1'22 | Q2'22 | Q3'22 | Q4'22 | Q1'23 | Q2'23 | Q3'23 | Q4'23 | Q1'24 | Q2'24 | Q3'24 | Q4'24 | Q1'25 | Q2'25 | Q3'25 | Q4'25 | Q1'26 | Q2'26 | Q3'26E | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter End | Dec21 | Mar22 | Jun22 | Sep22 | Dec22 | Mar23 | Jun23 | Sep23 | Dec23 | Mar24 | Jun24 | Sep24 | Dec24 | Mar25 | Jun25 | Sep25 | Dec25 | Mar26 | Jun26 | Sep26 |
| R40 > 40% | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ||||
| R40 accelerate | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | |||||||||
| TTM OP QoQ > 10% | ✅ | ✅ | ✅ | ✅ | ||||||||||||||||
| TTM OP QoQ accelerate | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ||||||||||
| TTM FCF/OP > 60% | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ||||
| Debt/EBITDA < 3.5 | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ | ✅ |
| Total passes | 3 | 2 | 5 | 3 | 5 | 6 | 3 | 3 | 2 | 1 | 3 | 4 | 6 | 6 | 3 | 2 | 4 | 5 | 5 | 6 |
| Stock QoQ | +7% | -16% | -29% | -13% | +32% | +24% | +6% | -20% | +23% | +39% | +4% | -19% | -17% | -4% | +21% | +21% | +11% | +23% | +51% | -10% |
| P/E(ttm) | 49x | 46x | 31x | 27x | 34x | 34x | 33x | 26x | 31x | 48x | 52x | 41x | 31x | 26x | 29x | 34x | 37x | 44x | 63x | 48x |
- Stock rallies align with 5-6 pass quarters, corrections with 2-3 passes. Q1 2023, Q4 2024-Q1 2025 and now Q3 2026E (6 passes) mark strength, while Q1 2024 (1 pass) and Q3 2025 (2 passes) preceded weakness. Q2 2026 held 5 passes; the current 6-pass reading supports momentum.
- R40 and TTM OP QoQ acceleration are the growth signals. TTM OP QoQ cleared the 10% bar only in Q4 2024-Q1 2025 and again in Q3 2026E during the sharpest recoveries. R40 acceleration has been more reliable—four straight passes (Q4 2025 through Q3 2026E) coincide with the rally to €1,989.
- FCF/OP and Debt/EBITDA are consistent strengths. Debt/EBITDA passed in all 20 quarters (below ~0.6x throughout) and FCF/OP has cleared 60% since Q4 2024, keeping scorecard floors high. The only gaps are the cyclical growth criteria in trough quarters.
Chart: R40 vs Stock Price (Since 2020)
Chart: Scorecard Total Passes vs Stock Price (Since 2020)
Q1 FY2026 Key Data, reported 2026.04.15
- Revenue €8.8B (within guidance), GM 53.0% (high end). Net income €2.8B, EPS €7.15.
- Memory reached 51% of system revenue (AI-driven). EUV €4.1B (2 High-NA). Installed Base Mgmt €2.5B (above guidance).
- FY2026 guidance raised to €36-40B (from €34-39B), 51-53% GM. Q2 guided €8.4-9.0B, 51-52% GM.
Key Takeaways from Earnings Call
- AI demand driving unprecedented capacity expansion across Memory and Logic. Memory sold out through 2026. Order intake “very strong” supporting raised guidance.
- High-NA exceeding expectations — 500K+ wafers, 80%+ availability. Single-expose patterning for 3+ nodes in Logic and DRAM, broadening economic case for adoption.
- Export control guidance bandwidth accommodates potential outcomes. China normalizing to ~20% of revenue. Management confident in offsetting ~€3B headwind through EUV intensity and installed base growth.
Source: SEC EDGAR annual and quarterly filings, company earnings conference calls and presentations.
Disclaimer: This report is for educational purposes only. NO investment advice.