Key Updates
ASML shares have recovered +2.32% from the prior report's level of $1,765.65 to the current $1,806.65, reclaiming a significant portion of the -3.42% retracement observed in the July 17 report and returning the stock to within striking distance of the post-earnings highs near $1,828. The recovery is supported by continued media attention around ASML's potential to become Europe's first trillion-dollar company, with Reuters highlighting the stock's ~60% YTD gain and market cap approaching $700 billion. The investment thesis remains firmly intact: the fundamental re-rating driven by the Q2 earnings beat and second consecutive guidance raise continues to anchor the bull case, while near-term volatility reflects profit-taking and macro uncertainty rather than any deterioration in underlying demand.
Current Trend
ASML's YTD performance of +68.87% is exceptional by any benchmark, placing it among the strongest large-cap performers globally in 2026. The price action over the past month tells a more nuanced story: the -6.38% one-month decline reflects the post-earnings consolidation phase that followed the initial +6% surge on July 15, a pattern consistent with "buy the rumor, sell the news" dynamics after a significant guidance raise. However, the 5-day gain of +1.75% and the 1-day gain of +3.89% confirm that buying interest is returning at lower levels, suggesting the consolidation phase may be concluding. The 6-month gain of +32.83% underscores the structural uptrend that predates the latest earnings catalyst.
Investment Thesis
ASML occupies a monopolistic position in extreme ultraviolet (EUV) lithography, the critical bottleneck technology for advanced semiconductor manufacturing. The core thesis rests on three pillars: (1) structural demand from AI infrastructure buildout driving unprecedented capital expenditure by hyperscalers and chip manufacturers; (2) ASML's pricing power and capacity expansion roadmap — 30% EUV output growth planned for both 2027 and 2028 — translating directly into revenue and margin expansion; and (3) a material upward revision to long-term earnings power, with Morningstar now projecting ~€70 billion in revenue and ~€69 EPS by 2028, pulled forward from prior 2030 targets. The company's guidance raise to €43–45 billion in FY2026 sales (from €36–40 billion) and gross margin guidance of 54–56% (from 51–53%) represent a structural, not cyclical, improvement in the business model.
Thesis Status
The investment thesis is strongly confirmed and has been upgraded since the prior reports. The July 15 Q2 earnings release validated the AI-driven demand narrative with hard data: €9.33 billion in Q2 revenue, €2.92 billion net profit, and a 54% gross margin — all ahead of consensus. The second consecutive full-year guidance raise, combined with Morningstar's fair value upgrade to €1,800 per share (from €1,200), signals that the market re-rating is grounded in fundamentally improved earnings visibility. The current price of $1,806.65 is broadly consistent with Morningstar's revised fair value, suggesting the stock is approaching fair value rather than being deeply discounted — a shift from the undervaluation that characterized earlier entry points this year. The consolidation since the July 15 spike is healthy and does not alter the thesis; it reflects digestion of the re-rating rather than fundamental deterioration.
Key Drivers
The following key drivers are shaping ASML's near-term and medium-term outlook:
- Second consecutive guidance raise: FY2026 revenue guidance lifted to €43–45 billion (from €36–40 billion) and gross margin to 54–56% (from 51–53%), driven by unrelenting AI infrastructure demand. Q3 2026 guidance of €11–12 billion in sales with 55–57% gross margin implies sequential acceleration. (Morningstar, July 15)
- Capacity expansion roadmap: ASML is considering ~30% increases in EUV output for both 2027 and 2028, potentially lifting Low-NA EUV capacity to 85–110 systems and DUV immersion to 170–220 systems, compared to 65 and 130 units currently. This represents a significant supply response to customer demand. (Morningstar, July 15)
- Memory revenue surge: ASML projects a 75% increase in memory-related revenue in 2026, indicating that the AI demand wave has expanded beyond logic chips to encompass HBM and advanced DRAM, broadening the revenue base. (Morningstar, July 15)
- Trillion-dollar market cap speculation: Reuters coverage highlights ASML's market cap approaching $700 billion, with analyst commentary suggesting the trillion-dollar milestone is plausible, which is driving incremental institutional interest and portfolio reweighting. (Reuters, July 20)
- Morningstar fair value upgrade: Fair value raised to €1,800 per share from €1,200, with 2028 revenue now estimated at ~€70 billion and EPS at ~€69, and 2030 sales potentially exceeding €80 billion following a 28% sales CAGR from 2026–2028. (Morningstar, July 15)
Technical Analysis
ASML is trading at $1,806.65, up +3.89% on the day and recovering from the post-earnings consolidation trough. The stock appears to have found support in the $1,756–$1,765 range (the July 17 report level), which now represents near-term support. Resistance is clustered around the post-earnings high near $1,828 (the July 16 report level), with a break above that level opening the path toward the intraday spike highs likely seen on July 15 when the stock surged 6–7% intraday. The YTD gain of +68.87% reflects a sustained uptrend with higher lows, and the current consolidation pattern — characterized by the -6.38% one-month pullback followed by a resumption of buying — is consistent with a bull flag or consolidation within an uptrend rather than a trend reversal. The 6-month gain of +32.83% provides the medium-term trend context, confirming the structural uptrend that preceded the latest earnings catalyst. Near-term momentum indicators are constructive given the +3.89% single-day move.
Bull Case
- 1. Structural guidance re-rating with accelerating margins: ASML raised FY2026 revenue guidance to €43–45 billion (from €36–40 billion) and gross margin to 54–56% (from 51–53%), a simultaneous top-line and profitability upgrade that signals pricing power and operating leverage. Q3 guidance of €11–12 billion with 55–57% margins implies further sequential improvement. (Morningstar, July 15)
- 2. Long-term earnings power materially upgraded: Morningstar now projects ~€70 billion in revenue and ~€69 EPS by 2028, pulled forward from prior 2030 targets, with 2030 sales potentially exceeding €80 billion. This represents a fundamental re-rating of ASML's earnings trajectory, not a near-term cyclical uplift. (Morningstar, July 15)
- 3. Capacity expansion locked in through 2028: Planned 30% EUV output increases in both 2027 and 2028 are being driven by customer order commitments, providing multi-year revenue visibility and reducing execution risk. The expansion of Low-NA EUV to 85–110 systems and DUV immersion to 170–220 systems represents a step-change in addressable supply. (Morningstar, July 15)
- 4. Memory revenue diversification reduces customer concentration risk: A projected 75% surge in memory-related revenue in 2026 broadens ASML's revenue base beyond logic chip customers (TSMC, Intel), reducing dependence on any single end-market and capturing the HBM/advanced DRAM investment cycle. (Morningstar, July 15)
- 5. Trillion-dollar market cap trajectory supported by institutional flows: Reuters reports ASML now represents ~8% of at least one major Global Best Ideas fund strategy, and the stock's approach toward $700 billion market cap is generating incremental institutional coverage and index-driven buying pressure. (Reuters, July 20)
Bear Case
- 1. Hyperscaler capex sustainability is unproven: Reuters explicitly flags uncertainty over whether sustained capital expenditure from hyperscalers such as Google and Amazon will continue at current levels. Any reduction in AI infrastructure spending would directly impair ASML's order book and guidance trajectory. (Reuters, July 20)
- 2. Bear scenario implies 39–50% downside from current levels: Morningstar's bear case — modeling stalled growth and capacity digestion in 2029–30 — yields 2029 EPS of €57 (vs. €77 base case) and a valuation reset to the €1,100–€1,400 range, representing material downside from current prices. This scenario is not implausible given semiconductor cycle dynamics. (Morningstar, July 15)
- 3. Execution risk across supply chain and key customers: Reuters identifies execution risks across ASML's supply chain and key customers including TSMC and Samsung. A 30% capacity expansion in two consecutive years (2027–2028) is operationally demanding and subject to component availability, yield ramp, and customer absorption constraints. (Reuters, July 20)
- 4. Stock approaching fair value after 68.87% YTD re-rating: With the current price of $1,806.65 broadly aligned with Morningstar's upgraded fair value of €1,800, the margin of safety for new entrants has narrowed significantly. Further upside requires either additional guidance raises or multiple expansion, both of which carry execution risk. (Morningstar, July 15)
- 5. Post-earnings volatility and profit-taking pressure: Despite the strong Q2 beat and guidance raise, ASML shares closed only 0.4% higher on the day of the announcement after initially surging 7% intraday, and subsequently retraced -6.38% over the following month. This pattern suggests significant profit-taking at elevated levels and potential resistance to sustained price appreciation near current valuations. (Morningstar, July 15)