ASML Stock Declines 9% After Q2 Earnings: Should You Hold or Fold?
Converted to the U.S. dollar, ASML Holding's second-quarter revenues and EPS were $8.7 billion and $6.70, respectively, both surpassing analysts' expectations. The top line beat the Zacks Consensus Estimate by 1.8%, while the bottom line surpassed it by 12.8%.
ASML Holding N.V. Price, Consensus and EPS Surprise
ASML Holding N.V. price-consensus-eps-surprise-chart | ASML Holding N.V. Quote
Despite strong quarterly results, the market reaction was negative, largely because of what the company said about 2026 uncertainty and weaker-than-expected third-quarter guidance.
ASML Turns Cautious About 2026 Outlook
Management backed away from earlier confidence about growth in 2026. Previously, ASML Holding had expected demand to keep rising, especially with AI fueling more chip production. However, on the second-quarter call, the company said that it 'cannot confirm growth in 2026,' pointing to customer hesitation and ongoing market uncertainty.
During the call, ASML Holding acknowledged that ongoing U.S.-China tariff discussions, including the Section 232 tariff review, are negatively impacting customer capital spending timelines. This hesitation may delay orders and revenue recognition in late 2025 and into 2026, casting doubt on near-term growth continuity.
Additionally, ASML Holding issued disappointing guidance for the third quarter. The company expects third-quarter revenues between €7.4 billion and €7.9 billion. As per the Euro/USD currency exchange rate as of July 16, the top-line guidance ranges from $8.6 billion to $9.2 billion, significantly lower than the Zacks Consensus Estimate of $9.81 billion.
ASML expects the third-quarter gross margin in the 50-52% range, depicting a significant decline from 53.7% in the second quarter. This sequential decline is expected mainly due to margin-dilutive High NA system revenues and fewer upgrade orders.
All these factors have caused near-term uncertainty about ASML Holding's prospects. However, considering the growing AI-driven demand for advanced chip-making tools, the company's long-term prospects seem bright, making the stock worth holding.
EUV Technology Keeps ASML in a Strong Position
ASML Holding's dominance in the semiconductor manufacturing sector is unchallenged. The company maintains a near-monopoly on extreme ultraviolet (EUV) lithography, which is essential for producing advanced chips at 3nm and below. Its EUV systems are crucial for leading chipmakers such as TSMC, Samsung and Intel, positioning ASML as a key enabler of cutting-edge semiconductor manufacturing.
ASML Holding's High-NA EUV technology represents the next frontier in chip manufacturing. Designed for sub-2nm nodes, these advanced systems will be critical for the industry's future. While the adoption of High-NA EUV has been slower than expected, the long-term potential remains enormous. As chipmakers ramp up production of smaller, more powerful chips, ASML's High-NA EUV tools will play a pivotal role, driving sustained demand.
Additionally, ASML Holding made substantial progress in High NA EUV during the second quarter with the shipment and installation of the first EXE:5200B system. This platform is critical for enabling the 1.4nm node and beyond. Customers are validating the performance, and ASML sees High NA insertion into high-volume manufacturing beginning in 2026-2027, offering a major long-term revenue and margin driver.
The company's technological superiority ensures high barriers to entry, giving it a competitive moat. With EUV technology being essential for advanced semiconductor fabrication, ASML Holding's dominance remains intact, supporting its long-term growth outlook.
ASML Holding projects 30% growth in EUV revenues this year. Customers are increasing EUV layers in DRAM nodes, using ASML's tools to reduce multi-patterning complexity.
AI Growth Continues to Support ASML's Future
ASML Holding is well-positioned to capitalize on the artificial intelligence (AI) revolution, which is driving massive demand for advanced semiconductors. With AI workloads requiring cutting-edge GPUs, high-bandwidth memory and AI accelerators, the demand for smaller and more powerful chips is rising. This trend plays directly into ASML's hands, as its EUV and High-NA EUV machines are vital for manufacturing these advanced chips.
As cloud providers, data centers and tech giants expand their AI infrastructure, ASML Holding's lithography tools will be in greater demand. This AI-driven semiconductor expansion ensures long-term growth tailwinds for ASML.
ASML Trades at a Reasonable Price Compared to Peers
ASML stock currently trades in line with the sector. Its forward 12-month price-to-earnings (P/E) ratio of 25.70 is slightly lower than the Zacks Computer and Technology sector's average of 27.67.
Image Source: Zacks Investment Research
ASML Holding also trades at lower P/E multiples compared with other semiconductor players, including Intel INTC, NVIDIA NVDA and Advanced Micro Devices AMD. Currently, Intel, NVIDIA and Advanced Micro Devices trade at P/E multiples of 43.82X, 35.60X and 33.68X, respectively.
Shares of ASML have risen 7.6% year to date (YTD), underperforming the sector's gain of 8.6%. Shares of semiconductor giants Intel, NVIDIA and Advanced Micro Devices have soared 13.7%, 28.9% and 32.5%, respectively, YTD.
YTD Price Return Performance
Image Source: Zacks Investment Research
Final Thoughts: Hold ASML for the Long Term
The recent dip in ASML Holding stock is more about short-term uncertainty than a breakdown in fundamentals. The company still leads in one of the most critical technologies for advanced semiconductor production. Its tools are essential for enabling AI, next-gen computing and high-performance memory.
Despite near-term caution around 2026 and geopolitical risks, ASML's market position, tech advantage and long-term demand drivers remain intact, making the stock worth retaining at the moment.
ASML Holding carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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