Buy, Sell Or Hold ASML Stock?

Forbes

17-07-2025

ASML (NASDAQ:ASML), the Dutch semiconductor equipment giant, saw its stock fall about 11% following its Q2 2025 earnings report, as the company warned that it could no longer guarantee that its topline would grow in 2026, overshadowing what was otherwise a strong quarter. Revenue came in at 7.7 billion euros ($8.9 billion), at the upper end of guidance, while net income stood at 2.3 billion euros ($2.67 billion). However, investor focus quickly shifted to the company's cautious outlook, that appears to be driven by rising geopolitical uncertainty. Revenue for Q3 is projected at 7.4 to 7.9 billion euros, slightly below expectations. Gross margin is seen around 52%, narrowed from a prior range of 51% to 53%. This mixed outlook is at odds with the broader semiconductor market, which is seeing continued strength. For example, TSMC, the world's largest semiconductor fabrication company, widely seen as a bellwether for the chip industry, posted strong quarterly results and raised its 2025 sales growth forecast to 30% in dollar terms. So what's hurting ASML in particular?
Logo of ASML - Advanced Semiconductor Materials Lithography as seen at the wall of the building at ... More the headquarters of the company. ASML is a Dutch multinational corporation, developing and manufacturing photolithography machines which are used to produce computer chips, it is the largest supplier for the semiconductor industry and the unique supplier in the world of extreme ultraviolet lithography EUV photolithography machines. The company is a highly valued European tech company with a market capitalization about US$280 billion. ASML Holding NV Headquarters in Veldhoven, the Netherlands on January 23, 2024 (Photo by Nicolas Economou/NurPhoto via Getty Images)
President Donald Trump has threatened 30% tariffs on EU imports, which could directly impact semiconductor equipment manufacturers such as ASML. Based in the Netherlands, ASML exports globally, with major customers including Intel in the U.S. and Asia's TSMC and Samsung Electronics - both of which also operate fabs on American soil. The potential tariffs could drive up landed costs for customers importing ASML's high-value tools into the U.S. For perspective, ASML's latest-gen High-NA EUV machines can cost up to $400 million per unit. Meanwhile, ASML also has U.S. manufacturing operations in San Diego and these could also be exposed to retaliatory EU tariffs on goods exported back to Europe. More importantly, ASML's customers pulling back on capital spending as the ongoing trade disputes and export controls relating to the U.S and China could make it more difficult to forecast demand. Separately, Can QBTS Stock Deliver Another 1,000% Gain?
Is ASML Stock A Buy?
ASML's key product is its extreme ultraviolet lithography (EUV) machines, which are critical tools used to produce the most advanced chips at process nodes of 5 nanometers and below. These systems use ultra-short wavelengths of light to etch circuit patterns, enabling chips that are smaller, faster, and more efficient. EUV is an important technology for extending Moore's Law, which is the long-standing industry trend of doubling transistor density approximately every two years, allowing chipmakers to continue pushing the limits of computing power and cost-effectiveness.
Demand for ASML's products has expanded as semiconductor chips are incorporated into everything ranging from computing to cars. AI in particular has become a major tailwind for ASML of late, as the boom in training and running complex models demands the high-performance semiconductors its equipment enables. Over the last quarter, ASML reported net bookings of 5.5 billion euros ($6.4 billion), about 25% ahead of forecasts, and a record 33 billion euro ($38 billion) order backlog. With 12 to 18 month lead times, today's orders should actually reflect customer confidence well into 2026. The stock trades at 27x estimated FY2025 earnings, which is a reasonable multiple considering ASML's revenues are on track to grow by about 14% this year, per consensus estimates. Moreover, the company's dominant position, cutting edge and highly proprietary technology, and exposure to the generative AI trend could also make the stock attractive.
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