Key Takeaways for ASML Stock
- ASML Holding’s revenue grew 21% year over year to €9.33 billion in the quarter ended June.
- Operating margin expanded to 37% as operating income rose 30% year over year to €3.46 billion.
- TIKR’s model values ASML stock at €3,052, implying roughly 99% total return from the current price.
ASML Stock Jumps as Record Quarter Forces a Guidance Raise
ASML Holding N.V. (ASML) is the Dutch company that makes the extreme ultraviolet lithography machines chipmakers depend on to print the world’s most advanced semiconductors.
The company reported second quarter net sales of €9.33 billion, clearing the high end of its own guidance range.
That beat was driven largely by Installed Base Management sales, the recurring revenue ASML earns servicing and upgrading machines already running in customer fabs, which landed nearly €300 million above guidance. Net income for the quarter reached €2.9 billion.
Management responded to the demand strength by raising full year sales guidance to a range of €43 billion to €45 billion. CEO Christophe Fouquet named the driver directly on Q2 earnings call: “Strong end market demand this year has motivated our customers to aggressively add capacity on their leading-edge nodes.”
Fouquet said advanced logic and foundry related system sales should grow more than 25% this year.
He added that memory related system sales are on pace to grow over 75%, powered by DRAM, the memory chips used in most computing devices, and HBM, the higher performance memory used in AI accelerators.
ASML now expects to ship around 65 Low-NA EUV systems this year. Immersion deep UV shipments are expected to reach about 130 systems this year, roughly matching last year’s output level.
ASML also plans similarly sized capacity increases for its immersion lithography business next year to keep pace with a backlog that already extends into 2028.
Executives said order visibility now extends multiple years beyond the current guidance period, a rare position for a capital equipment supplier.
ASML’s Operating Margin Widens to 37% as Revenue Outruns Cost Growth
Revenue grew 21% year over year to €9.33 billion, its fastest pace this year, as demand across advanced logic and memory customers continued to outstrip ASML’s own supply expectations.
Total operating expenses rose only 8% year over year to €1.58 billion, with R&D spending making up the largest share of that cost base as SG&A stayed comparatively flat.
Operating income climbed 30% year over year to €3.46 billion, a direct result of revenue outpacing expense growth by a wide margin during the quarter.
Operating margin expanded to 37% from 35% in the same quarter last year, the clearest sign yet that the leverage embedded in ASML’s cost structure is starting to show up in reported profitability.
Gross margin held at 54% for the quarter, essentially flat with the prior quarter’s 53% reading, even as the mix shifted further toward higher value EUV and installed base upgrade revenue.
KLA’s Operating Margin Lead Over ASML and Lam Research Remains Structural
KLA Corporation (KLAC) posted an operating margin of 41% in the quarter ended March, the widest margin of the three companies across the past two years of data.
ASML’s operating margin climbed to 37% in its most recent quarter, its best reading in the group’s shared history, yet it still sits roughly 4 percentage points below KLA’s last reported level.
Lam Research (LAM) posted an operating margin of 35% in the same March quarter, tracking closely with ASML after the two names swapped positions earlier in the cycle.
KLA’s operating margin has held above 41% in every quarter shown, evidence that the gap with ASML and Lam is structural rather than cyclical, tied to KLA’s process control business carrying a fundamentally lighter cost base than ASML’s capital-intensive lithography manufacturing.
TIKR’s €3,052 Target on ASML Stock Holds if Operating Leverage Keeps Compounding
TIKR’s model values ASML at approximately €3,052 by 2030, implying around 99% total return from the current price of €1,537, or roughly 17% per year.
For that target to hold, the operating margin expansion just shown in the income statement has to keep compounding as expense growth continues trailing revenue growth into next year.
ASML’s own capacity expansion plans, already outlined in the earnings call, support the demand side of that assumption.
Should the Street’s operating expense estimates continue trailing ASML’s own guidance, the mid case scenario embedded in TIKR’s model becomes easier to justify over its multi-year horizon.
Should You Invest in ASML Holding N.V.?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
