What Does ASML Do?
ASML Holding N.V. is a Dutch company and the world’s only supplier of extreme ultraviolet (EUV) lithography machines—a critical technology used to produce the world’s most advanced computer chips. These machines are essential for manufacturing cutting-edge semiconductors found in everything from AI chips and smartphones to data centers and advanced computing systems. ASML’s customers include industry giants like TSMC, Intel, and Samsung.
Q2 2025 Recap: Strong Results Despite a Cautious Outlook
ASML delivered a solid quarter, with:
- Net sales of €7.7 billion
- Gross margin of 53.7%
- Net income of €2.3 billion (29.8% margin)
- €5.5 billion in net bookings, including €2.3 billion in EUV orders
- €2.1 billion in Installed Base Management (IBM) sales
In addition, ASML successfully shipped its first TWINSCAN EXE:5200B, a next-generation EUV machine built for even smaller and more powerful chips.
Market Reaction: Short-Term Pessimism
Despite the earnings beat, the stock dropped roughly 8–9% following the report. The decline came after ASML’s management warned that sales growth could stall in 2026, largely due to:
- Macroeconomic uncertainty
- Geopolitical risks (including new export restrictions to China)
- Ongoing trade tension between the U.S. and China
This cautious tone caught investors off guard and overshadowed the company’s otherwise strong Q2 numbers.
Why ASML Remains a Long-Term Buy
1. Monopoly in Advanced Chipmaking
ASML is the only company in the world producing EUV lithography tools. These machines are essential for making the world’s most powerful semiconductors. This gives ASML a near-monopoly in a fast-growing market driven by AI, 5G, and high-performance computing.
2. Recurring Revenue and Profitability
With €2.1 billion in service revenue, ASML’s Installed Base Management business provides recurring, high-margin cash flow. This helps stabilize earnings even in periods of slower equipment sales.
3. Strong Backlog
€5.5 billion in net bookings during Q2—well above expectations—suggests customers are continuing to invest in future capacity, providing visibility into future revenue streams.
4. Cash Returns to Shareholders
ASML repurchased €1.4 billion worth of shares during the quarter and declared an interim dividend of €1.60 per share, reaffirming its commitment to shareholder returns.
5. Secular Growth Tailwinds
AI chip demand, advanced node development, and the global push for semiconductor independence all support ASML’s long-term relevance. Even with near-term uncertainty, the structural growth story remains intact.
Bottom Line: Buy the Dip
ASML’s Q2 results were objectively strong, but a cautious tone on the near-term outlook spooked investors. However, this creates an opportunity for long-term investors.
With its technological moat, strong balance sheet, and central role in enabling next-gen chips, ASML remains one of the most critical players in the semiconductor value chain. The current weakness may be a rare opportunity to accumulate shares of a company that’s essential to the future of computing.
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Disclaimer
The user Investingwilly holds no position in NasdaqGS:ASML. Simply Wall St has no position in any of the companies 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 author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does 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 the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.