Last Update 03 May 26

Fair value Increased 9.96%

ASML: AI Tool Demand And Tight Supply Will Test EPS Assumptions

ASML Holding's updated analyst price target has risen by about €104 to €1,150.93, with analysts citing refined assumptions around slightly lower discount rates, modestly adjusted revenue growth, a small uplift in profit margin expectations, and a higher future P/E multiple.

Analyst Commentary

Recent Street research on ASML Holding has clustered around higher price targets and updated forecasts, with several firms adjusting their models for discount rates, revenue trajectories, margin assumptions, and future P/E multiples. While the headline numbers point to lifted targets, the underlying research still flags areas where execution, valuation, and growth expectations may face pressure.

Across the latest notes, analysts are revisiting their frameworks for ASML's longer term earnings power, including scenarios linked to foundry and memory supply conditions, capital spending cycles, and the timing of new tool demand from chipmakers. These adjustments feed directly into their discounted cash flow and earnings based valuation work, which then flows through into revised price targets.

The spread of target increases in both euro and US dollar terms, from around €25 to €100 and from about $60 to $100, shows that views on upside are not uniform. Some analysts are only making modest revisions, which can suggest that they see more limited room for further multiple expansion or that they are building in execution risks on deliveries, pricing, or cost control. Others are tying their numbers to updated earnings per share estimates in the mid to long term, including explicit changes to 2026 to 2028 assumptions.

For you as an investor, this mix of target changes means it is important to look beyond the headline figures and focus on what is driving each revision. Factors such as assumed tool shipment volumes, the mix between leading edge and trailing edge customers, and expectations around supply tightness in foundry and DRAM markets all feed into these models. Differences here can translate into very different views on what constitutes a reasonable P/E multiple or cash flow yield for the stock.

Some of the most detailed work in the recent batch of research comes from larger global houses, which are updating multi year earnings forecasts alongside small price target increases. For example, one major bank lifted its ASML target from $1,868 to $1,886 and explicitly raised its calendar year 2026 to 2028 EPS estimates by about 4% to 6% on the view that foundry and DRAM supply could remain tight. Moves of this size are incremental rather than transformational, and they highlight how much of the valuation debate is now about fine tuning assumptions rather than wholesale changes in conviction.

Overall, the tone of recent research is constructive on ASML's role in the chip equipment chain, but the variation in target sizes and the relatively modest nature of some increases suggest that analysts are also trying to balance enthusiasm with discipline on price, execution, and cycle risk.

Bearish Takeaways

Bearish analysts are keeping target hikes relatively modest in some cases, such as increases of €25 or €50, which can signal concern that the current share price already reflects optimistic assumptions on future tool demand and margins.
Several research notes frame higher targets as primarily model driven, based on tweaks to discount rates or long term EPS inputs rather than new fundamental developments, which may indicate reluctance to assign a meaningfully higher P/E multiple at current levels.
The focus on tight foundry and DRAM supply in some EPS upgrades underscores a key risk. If supply conditions or customer capex plans turn out less supportive than modeled, earnings and valuation targets could be vulnerable to downward revision.
Incremental target moves, such as the change from $1,868 to $1,886, show that even bullish houses are only edging numbers higher. This may reflect ongoing caution around execution on high value tool shipments, pricing discipline, and the durability of longer term growth assumptions.

What's in the News

Big tech companies are reported to be increasing AI related spending, and ASML is described as facing higher demand for its chipmaking tools as a result (WSJ).
TSMC is reported as not planning to use ASML's newest chipmaking machine, according to comments from the company's deputy co-COO (Bloomberg).
SK Hynix is reported to be planning purchases of €8b equivalent in chipmaking tools from ASML, signaling sizable planned equipment orders from a key memory customer (Bloomberg).

Valuation Changes

Fair Value: updated from €1,046.72 to €1,150.93, a rise of about €104. This indicates a slightly higher central value in the refreshed model.
Discount Rate: moved from 8.75% to 8.64%, a small reduction that gives slightly more weight to future cash flows.
Revenue Growth: revised from 8.98% to 8.30%, a moderate trimming of long term top line growth assumptions in the model.
Net Profit Margin: adjusted from 33.78% to 34.30%, a modest uplift in expected profitability on each € of revenue.
Future P/E: increased from 34.4x to 36.7x. This reflects a slightly higher valuation multiple being applied to projected earnings.

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Key Takeaways

Geopolitical tensions and rising technology nationalism threaten market access, intensify competition, and could undermine ASML's dominant industry position.
Heightened R&D costs, overcapacity risks, and evolving chip architectures may pressure margins and weaken demand for ASML's core and service offerings.
Robust demand for advanced chips, leading technology, recurring service income, and global expansion position ASML for sustained growth and earnings stability.

Catalysts

About ASML Holding

Provides lithography solutions for the development, production, marketing, sales, upgrading, and servicing of advanced semiconductor equipment systems.What are the underlying business or industry changes driving this perspective?

The company faces growing risks from escalating geopolitical tensions and the proliferation of trade barriers, which are causing significant uncertainty for ASML's key customers. These factors threaten to restrict access to major global markets, disrupt supply chains, and potentially limit future revenue growth.
There is mounting evidence that rising technology nationalism may result in an acceleration of domestic semiconductor equipment development by major countries, creating competition and eroding ASML's dominant position and long-term revenue streams.
Persistently increasing R&D requirements and costs to maintain leadership in EUV and High NA lithography are likely to put sustained pressure on net margins, particularly if customer CapEx slows or innovation cycles lengthen.
The risk of overcapacity, as recent aggressive foundry expansions and wafer-fab buildouts may not be matched by demand, could lead to a drawn-out period of weaker bookings, heightened pricing pressure, and backlog declines, negatively impacting both top-line and earnings visibility over the next several years.
Structural advances in chiplet architectures, 3D stacking, and alternative packaging technologies threaten to slow lithography tool replacement cycles, dampen upgrade demand for ASML's systems, and impede recurring revenues from the company's installed base and services business.

ASML Holding Earnings and Revenue Growth

ASML Holding Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more pessimistic perspective on ASML Holding compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
The bearish analysts are assuming ASML Holding's revenue will grow by 8.3% annually over the next 3 years.
The bearish analysts assume that profit margins will increase from 29.7% today to 34.3% in 3 years time.
The bearish analysts expect earnings to reach €14.7 billion (and earnings per share of €39.34) by about May 2029, up from €10.0 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as €21.6 billion.
In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 36.7x on those 2029 earnings, down from 47.0x today. This future PE is lower than the current PE for the GB Semiconductor industry at 47.0x.
The bearish analysts expect the number of shares outstanding to decline by 1.76% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.64%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

Persistent and growing demand for advanced logic and memory chips driven by artificial intelligence, high-performance computing, and ongoing digitalization is expected to sustain high utilization and orders for ASML's EUV lithography tools, leading to potential revenue and earnings growth over the long term.
ASML's leadership position and technological moat in EUV and the introduction of High-NA EUV tools enable the company to command higher average selling prices and maintain or improve gross margins, positively impacting profitability and net income in coming years.
The installed base management segment continues to grow robustly alongside recurring, high-margin service and upgrade revenues, underpinning stable long-term cashflows and potentially increasing overall earnings stability regardless of near-term cycles.
The company's multi-year customer backlog, strong momentum in both logic and memory segments, and new fab investments globally (including in China) provide visibility into future revenue streams and mitigate risks associated with short-term order volatility.
ASML's own long-range outlook, supported by secular semiconductor trends and customer roadmaps, forecasts revenue between €44 billion and €60 billion and gross margins up to 60 percent by 2030, suggesting upside potential for long-term investors and the possibility of upward share price pressure.

Valuation

How have all the factors above been brought together to estimate a fair value?

The assumed bearish price target for ASML Holding is €1150.93, which represents up to two standard deviations below the consensus price target of €1468.71. This valuation is based on what can be assumed as the expectations of ASML Holding's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €1700.0, and the most bearish reporting a price target of just €980.0.
In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be €42.8 billion, earnings will come to €14.7 billion, and it would be trading on a PE ratio of 36.7x, assuming you use a discount rate of 8.6%.
Given the current share price of €1222.4, the analyst price target of €1150.93 is 6.2% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystLowTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystLowTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Geopolitical Risks Will Hamper EUV Markets While Backlogs Will Support