Key Updates
ASML shares have recovered +2.01% since the prior report, climbing from $1,756.78 to $1,792.17, as the market digests a landmark Q2 earnings release that delivered a second consecutive full-year guidance upgrade driven by unrelenting AI-driven semiconductor demand. Today's earnings beat — revenue of €9.33 billion and net profit of €2.92 billion, both above consensus — combined with a dramatically widened full-year revenue guidance range of €43–45 billion (vs. prior €36–40 billion) and gross margin upgrade to 54–56% (vs. 51–53%), represent a material positive re-rating catalyst. Morningstar responded by raising its fair value estimate to EUR 1,800/share from EUR 1,200, reflecting a 50% upward revision to long-term earnings and capacity projections.
Current Trend
The YTD performance of +67.51% firmly establishes ASML as one of the strongest large-cap performers in the semiconductor equipment space in 2026. The near-term price action reflects a consolidation pattern: shares surged to a high of approximately $1,841 on July 9, pulled back ~4.8% into the $1,752–$1,757 range over July 13–15, and have now begun recovering toward that resistance level. The 6-month gain of +34.59% confirms the intermediate-term uptrend remains intact. The 1-month decline of -5.31% reflects post-run consolidation rather than a trend reversal, consistent with normal price behavior following a multi-week rally. Today's +0.93% daily gain and +2.01% recovery since the last report suggest buying interest is returning at current levels.
Investment Thesis
ASML's investment thesis rests on its monopoly position in extreme ultraviolet (EUV) lithography — the sole supplier of systems enabling advanced logic and memory chip manufacturing — combined with structurally accelerating demand from AI infrastructure buildout. The thesis has three pillars: (1) irreplaceable technology moat in both Low-NA EUV and DUV immersion systems; (2) a multi-year capacity expansion cycle with 30% output growth planned for 2027 and a potential further 30% in 2028, bringing Low-NA EUV capacity to 85–110 systems and DUV immersion to 170–220 systems; and (3) a revenue trajectory that has materially re-rated upward, with Morningstar now projecting ~€70 billion in revenue and €69 EPS by 2028 — a target previously set for 2030 — and 2030 revenues potentially exceeding €80 billion on a 28% CAGR from 2026–2028.
Thesis Status
The investment thesis is strongly confirmed and has materially strengthened with today's earnings release. The second consecutive full-year guidance upgrade — from €36–40 billion to €43–45 billion — signals that AI-driven demand is not a transient phenomenon but a structural acceleration. The 75% projected growth in memory revenue and Q3 guidance of €11–12 billion (implying sequential acceleration) further validate demand durability. Morningstar's 50% increase in fair value estimate to EUR 1,800 per share reflects a fundamental re-rating rather than sentiment-driven revaluation. The key risk to the thesis — capacity digestion or growth stalling in 2029–2030 — remains a bear scenario, with Morningstar's downside modeling placing 2029 EPS at EUR 57 vs. a EUR 77 base case, and valuation potentially resetting to EUR 1,100–1,400. At current prices near $1,792, the stock is trading approximately in line with the updated Morningstar fair value of EUR 1,800, suggesting limited near-term upside from a valuation standpoint but a well-supported fundamental floor.
Key Drivers
The following catalysts are driving the current price action and forward outlook:
- Second consecutive full-year guidance upgrade: Revenue guidance raised to €43–45 billion from €36–40 billion, gross margin to 54–56% from 51–53%, directly reflecting AI-driven order strength. (Morningstar)
- Q2 earnings beat: Revenue of €9.33 billion and net profit of €2.92 billion exceeded analyst expectations, with a 54% gross margin achieved in the quarter. (Morningstar)
- Capacity expansion commitment: ASML is planning ~30% increases in EUV output for both 2027 and 2028, signaling management confidence in sustained demand and locking in multi-year revenue visibility. (Morningstar)
- Memory revenue surge: Memory revenue expected to increase 75% in 2026, broadening the demand base beyond logic chips and reducing customer concentration risk. (Morningstar)
- Analyst fair value re-rating: Morningstar raised its fair value estimate by 50% to EUR 1,800/share, revising 2028 revenue projections to ~€70 billion and EPS to €69, with 2030 revenues potentially exceeding €80 billion. (Morningstar)
Technical Analysis
ASML is trading at $1,792.17, recovering from the $1,752–$1,757 support zone established during the July 13–15 consolidation. Key levels to monitor: support at ~$1,752 (recent intraday low and consolidation floor); resistance at ~$1,841 (July 9 high) and then at the psychological $1,900 level. The +2.01% recovery since the last report, combined with today's +0.93% daily gain, suggests the post-earnings selloff has stabilized and buyers are re-engaging. The 1-month decline of -5.31% is consistent with a healthy consolidation after a 34.59% 6-month run. The broader YTD uptrend of +67.51% remains structurally intact. A sustained break above $1,841 would signal a resumption of the primary uptrend, while a close below $1,752 would open downside toward the $1,700 area. Today's earnings-driven re-rating provides a fundamental catalyst to retest the July 9 highs in the near term.
Bull Case
- 1. Structural AI demand driving unprecedented guidance upgrades: ASML raised full-year revenue guidance to €43–45 billion from €36–40 billion — a ~15% midpoint increase — for the second time in 2026, driven by chip manufacturers scrambling for advanced lithography capacity to power AI data centers. This is not cyclical demand recovery but structural acceleration. (Morningstar)
- 2. Long-term revenue trajectory materially re-rated upward: Morningstar now projects ~€70 billion in revenue and €69 EPS by 2028 — targets previously set for 2030 — with 2030 revenues potentially exceeding €80 billion on a 28% CAGR from 2026–2028. This represents a fundamental step-change in the company's earnings power. (Morningstar)
- 3. Committed capacity expansion locking in multi-year revenue visibility: Planned 30% increases in EUV output for both 2027 and 2028, targeting Low-NA EUV capacity of 85–110 systems and DUV immersion of 170–220 systems, provide concrete backlog-backed revenue visibility through 2028. (Morningstar)
- 4. Expanding gross margin profile: Full-year gross margin guidance raised to 54–56% from 51–53%, with Q3 guidance of 55–57%, demonstrating pricing power and improving operating leverage as capacity scales. Q2 already delivered 54% gross margin. (Morningstar)
- 5. Memory revenue surge broadening demand base: Memory revenue expected to grow 75% in 2026, diversifying demand beyond logic chips and reducing reliance on any single end-market, while adding a significant incremental revenue stream. (Morningstar)
Bear Case
- 1. Valuation at or near fair value with limited near-term upside: At $1,792.17, ASML is trading approximately in line with Morningstar's newly raised fair value of EUR 1,800/share. The stock has already priced in much of the fundamental upgrade, leaving limited margin of safety at current levels. (Morningstar)
- 2. Bear scenario implies 38–61% downside: Morningstar's bear case — modeling stalled growth and capacity digestion in 2029–2030 — places 2029 EPS at EUR 57 vs. EUR 77 base case, with valuation resetting to EUR 1,100–1,400, representing 22–39% downside from current levels. (Morningstar)
- 3. Near-term price consolidation despite earnings beat: Despite a landmark Q2 beat and second guidance upgrade, shares have spent July 13–15 consolidating and remain below the July 9 high of ~$1,841, suggesting the market may have partially pre-priced the positive earnings outcome. (Morningstar)
- 4. Execution risk on aggressive capacity expansion: The planned 30% output increases for both 2027 and 2028 represent significant operational scaling. Any supply chain disruptions, manufacturing ramp delays, or component shortages could impair delivery timelines and revenue recognition. (Morningstar)
- 5. Concentration of demand in AI infrastructure cycle: The guidance upgrade is explicitly tied to AI infrastructure investment by major chip manufacturers. A deceleration in AI capex spending — whether from regulatory action, model efficiency improvements reducing chip intensity, or macroeconomic slowdown — could rapidly erode the demand outlook underpinning current guidance. (Morningstar)