ASML Rally Continues. Is It Too Late to Buy the Stock?

ASML Holding reported strong Q3 net bookings of 5.4 billion euros, significantly exceeding analyst expectations, which drove its stock higher despite revenue hitting the low end of guidance at 7.5 billion euros. As the sole provider of critical EUV lithography technology, ASML projects robust Q4 revenue and stable 2026 revenue, even with an anticipated decline in Chinese demand due to export controls. The company's long-term outlook remains strong, underpinned by its monopoly position and positive developments such as Samsung's recovery and adoption of advanced High NA EUV systems, which could stimulate further foundry competition.

Analysis

ASML Holding reported Q3 revenue at the low end of its guidance range, reaching 7.5 billion euros, a modest 1% year-over-year increase. Equipment sales declined 7% to 5.6 billion euros, while service revenue surged 27% to 2 billion euros. Despite this, net bookings for the quarter soared to 5.4 billion euros, significantly surpassing analyst expectations of 4.9 billion euros, indicating robust future demand. The company's stock has rallied 45% year-to-date, reflecting its critical and monopolistic position in EUV lithography technology, which is essential for advanced chip manufacturing.

The company projects Q4 revenue between 9.2 billion and 9.8 billion euros, aligning with analyst estimates, and expects 2026 revenue to at least match 2025 levels. This outlook persists despite anticipated lumpiness in demand and a significant drop in revenue from China due to export controls, which have also pulled forward demand for non-EUV machines. ASML's long-term prospects are bolstered by the global rise of AI and the increasing need for advanced semiconductors.

The introduction of the new High NA EUV systems, despite initial cost pushback, presents a key growth driver. Samsung's commitment to adopt these systems, with deliveries expected by year-end and early 2026, could intensify competition in the foundry space, potentially spurring TSMC to accelerate its own investments. Intel's U.S. government-backed foundry expansion further supports ASML's core business. The stock's forward P/E of 34x 2026 estimates falls within its historical range, suggesting a fair valuation given its strategic importance and strong long-term outlook.

Key Decisions for Investors

• Monitor ASML's execution on its Q4 revenue guidance and the stability of its 2026 revenue projections, particularly regarding the impact of China export controls and the transition period for demand, Evaluate the adoption rate and profitability of the new High NA EUV systems, as their success and competitive implications for the foundry market could significantly influence ASML's future growth trajectory, Consider ASML's long-term strategic value as a critical, monopolistic technology provider for the burgeoning AI and advanced semiconductor industries, balancing its robust market position against potential short-term cyclicality in equipment demand.