ASML Earnings: Capacity Plan Falls Short of Demand; 2029-30 Order Visibility Is the Next Catalyst

Key Morningstar Metrics for ASML Holding

• Fair Value Estimate
  : $2,050.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : High

What We Thought of ASML Holding’s Earnings

Last quarter, ASML Holding ASML announced plans to expand low-NA EUV and immersion DUV capacity by 30% in 2027 and another 30% in 2028. These plans seem already outdated, as management has acknowledged this might not be enough to meet customer demand.

Why it matters: ASML’s backlog keeps growing, with 2027 fully booked and significant order intake already for 2028. In our view, the most important disclosure from these earnings was that ASML is having first conversations with customers for 2029 and 2030 orders. DRAM makers seem the most open to talking about 2029-30 already.

• While we still see some upside to our 2028 revenue and EPS forecast as ASML tries to expand capacity beyond 30% with its existing footprint, we believe most of it is already priced in. What could push the stock higher is order visibility that confirms 2029 and 2030 as “growth years.”

The bottom line: We maintain our wide Morningstar Economic Moat Rating and EUR 1,800 fair value estimate.

• After 28% sales growth in both 2027 and 2028, reaching EUR 56 and EUR 71.5 billion respectively, we model a return to low-double-digit growth in 2029 and 2030, with sales reaching EUR 88 billion in 2030. Should management confirm the first 2029 orders over the next six months, our 2029-30 forecast would gain credibility, and the stock price could converge toward our fair value estimate.
• Our bull case would require 2029 to book as quickly and as fully as 2028 has. If customers place orders at a fast pace in the coming months, sales growth in 2029-30 could exceed our low-double-digit forecast.

Key stats: Beyond expanding capacity, ASML continues to aggressively develop upgrades to low-NA EUV and immersion DUV output. Installed base management revenue reached EUR 3.3 billion, EUR 400 million higher than expected, thanks to the upgrade business, as customers look to extract more productivity from their machines. Upgrades were the main driver of the 57.5% gross margin this quarter, above guidance of 55.0%-57.0%.