ASML's Asymmetric Upside

A Deep Dive into Management Guidance, Customer Capex, and Bull vs. Bear Valuation Paths

TL;DR

• ASML reaffirmed €44B–€60B 2030 revenue guidance; risks flagged for 2026.

• TSMC capex supports upside; Intel and Samsung more cautious.

• History of conservative guidance followed by consistent beats.

• 2030 price target ranges from €840 (7% CAGR) to €1,472 (19.3% CAGR).

Introduction: The Lithography Kingmaker

ASML Holding N.V. is the linchpin of the global semiconductor supply chain. As the exclusive provider of extreme ultraviolet (EUV) lithography systems and the upcoming High-NA EUV platform, ASML enables the world’s most advanced chipmakers to pack billions of transistors into ever-smaller spaces. Its customer list includes industry giants like TSMC, Intel, and Samsung, and its technology is essential to powering artificial intelligence, high-performance computing, and next-generation mobile devices. With a near-monopoly on cutting-edge lithography and strong pricing power, ASML commands premium margins and has delivered extraordinary long-term returns for shareholders. In this post, we explore ASML's updated guidance, valuation scenarios, and historical multiples to evaluate whether the stock offers an attractive opportunity for long-term investors today.

Updated Management Guidance (as of July 2025)

2025 Guidance

• Full-Year Revenue Growth: Management expects 2025 revenue to grow approximately 15% year-over-year, narrowing the previous range of €30 billion–€35 billion to around €32.5 billion.

• Gross Margin: Projected at 52%, tightening from the earlier 51–53% range.

• Q3 2025 Net Sales: Forecasted at €7.4–€7.9 billion, with a gross margin between 50% and 52%.

• Bookings: Q2 2025 net bookings reached €5.5 billion. While advanced lithography demand remains strong, order moderation is emerging.

• Order Volatility: Management warns of quarter-to-quarter volatility due to macroeconomic shifts, tariffs, and customer behavior.

2026 Guidance

• Growth Uncertainty: Management cannot confirm revenue growth for 2026, citing macroeconomic and geopolitical headwinds.

• CEO Commentary: Christophe Fouquet states:

  Looking at 2026, we see that our AI customers' fundamentals remain strong. At the same time, we continue to see increasing uncertainty driven by macro-economic and geopolitical developments. Therefore, while we still prepare for growth in 2026, we cannot confirm it at this stage.

• Key Risks: Tariffs, trade policy, and hesitant capex among customers. AI and advanced logic demand remains strong, but the memory market is weaker.

2030 Long-Term Outlook

• Revenue Target: ASML reaffirms a 2030 annual revenue target of €44 billion to €60 billion (approx. $46–63 billion)

• CAGR Outlook: Anticipated 8–14% compound annual growth through 2030.

• Gross Margin Target: Expected to rise to 56–60%.

• Growth Drivers:

  • AI and high-performance computing expansion

  • Sustained EUV and High-NA lithography investment

  • Ongoing R&D ramp-up and strong shareholder returns

Capex Trajectories for Leading Customers

TSMC

TSMC projects 2025 capital expenditures (capex) at $38 billion to $42 billion, a range it has reiterated throughout 2025 investor communications and earnings events, driven by heavy investments in advanced process nodes and AI-centric production capacity.

• Strong Upward Momentum: TSMC’s 2025 capital expenditure is projected at $38–42 billion, up from $29.2 billion in 2024 and representing the company’s largest expansion ever. Approximately 70–75% of this budget is devoted to advanced manufacturing—where ASML’s tools (especially EUV systems) are essential.

• 2026 Outlook: TSMC’s capex for 2026 is projected to be in the $40–45 billion range, signaling continued aggressive investment in leading-edge capacity.

This sustained high capex is a direct driver of ASML’s advanced lithography sales, supporting ASML’s mid- and long-term revenue growth. The single most important contributor to ASML’s revenue growth, thanks to record-breaking and still-expanding capex focused on advanced EUV and future High-NA tools.

Intel

Intel is reducing its gross capital expenditure target for 2025 to $18 billion (from a previous $20 billion). While Intel continues to invest in AI and foundry operations, the pace of investment is more moderate than in prior cycles, reflecting both cost control and “a disciplined and prudent approach” to large outlays.

In a phase of capex restraint, Intel’s direct impact on ASML’s short-term growth will be modest compared to TSMC.

Samsung

Samsung’s foundry capex for 2025 is set at KRW 5 trillion (about $3.5 billion), down more than 50% from KRW 10 trillion in 2024. The cutbacks reflect lower client demand, advanced yield challenges, and a strategic focus on upgrading existing lines rather than expanding capacity.

Samsung’s sharp capex retrenchment means its contribution to ASML’s revenue growth will be reduced in the next few years.

Risks to ASML’s 2026 Revenue Growth

• Geopolitical & Trade Risks: Significant uncertainty about U.S. import tariffs and export controls; chipmakers are pausing or deferring orders pending tariff clarity.

• Customer Capex Volatility: TSMC’s ambitious expansion strongly supports ASML’s top-line growth, but Intel and Samsung’s slowdown highlight why ASML’s management is taking a more cautious stance on 2026 revenue prospects. This could create an uneven demand profile for ASML—strong in some areas, weak in others.

• Memory Market Softness: Weakness in DRAM and NAND capex (particularly for Samsung) may dampen demand for certain advanced tools.

A Track Record of Beating Expectations

ASML has earned a reputation for conservative guidance and consistent outperformance—a pattern recognized by investors, analysts, and market commentators alike. The company frequently issues cautious forecasts, citing near-term risks such as trade restrictions, macro volatility, and cyclicality in customer capex. Yet time and again, it surpasses both internal projections and Wall Street expectations.

In recent quarters, this trend has become even more pronounced. For example, in Q2 2025, ASML reported net sales of €7.7 billion, hitting the top end of its own €7.2–€7.7 billion guidance range. The company also achieved a gross margin of 53.7%, above its midpoint forecast and well ahead of consensus. Analysts expected EPS of $5.94, and ASML delivered at or slightly above that range (approx. €5.90–€6.00). Over the past four quarters, the company has beat revenue and EPS estimates by an average of 6–7%, underscoring its consistent outperformance.

This pattern extends beyond earnings. Net bookings routinely exceed both company targets and investor expectations, contributing to a resilient backlog and reinforcing confidence in long-term visibility. Despite strong operational metrics, ASML continues to guide cautiously—what some observers call a distinctly "Dutch tendency" toward conservatism. This approach not only reflects prudent risk management but also sets a baseline investors can trust, often leading to positive surprises.

Historical Growth and Valuation

ASML is one of the few companies globally that blends technical monopoly, mission-critical utility, and secular tailwinds. Over the past 10 years, it has delivered:

• 17% revenue CAGR

• 21.6% EPS CAGR

• Total return of 571%, a 20.9% IRR

• Net income margins rising from ~20% to 28.4%

Early 2024 brought temporary softness, with EPS declining and the stock retracing by over 27%. However, this was more about valuation compression than business erosion. The long-term story remains intact.

This 10-year chart tracks ASML Holding N.V.’s forward price-to-earnings (P/E) ratio based on normalized next-twelve-month earnings. It shows a clear narrative of rising investor conviction, cyclical exuberance, and recent multiple compression. From 2015 to 2019, ASML traded in a modest range of 20–30x earnings—consistent with a high-quality industrial tech name, but without the premium that would later define it. That changed in 2020–2021, when ASML’s valuation soared to a peak of 51.5x. This surge reflected the market’s recognition of ASML’s critical role in the semiconductor value chain, particularly through its monopoly in EUV lithography machines, which are indispensable for producing advanced chips at 5nm and below. As global demand for chips surged and the world became acutely aware of supply chain vulnerabilities, ASML’s strategic importance was priced in with enthusiasm. Since that peak, however, its valuation has contracted sharply. As of July 2025, ASML trades at 26.1x forward earnings—well below its 10-year average of 31.1x. This multiple compression has occurred despite the company’s continued operational excellence and deep backlog, reflecting broader macro concerns and a reset in tech valuations. For long-term investors, this below-average multiple could represent an opportunity to own a dominant, high-moat franchise at a reasonable price.

Valuation Scenarios: 2030 Bear vs. Bull

To estimate ASML’s potential valuation by 2030, we model two distinct scenarios using the company’s long-term guidance and apply conservative assumptions for net income margins and valuation multiples. This approach reflects a range of outcomes tied to both execution and market sentiment—one where ASML underwhelms slightly but still grows, and one where it fully capitalizes on the semiconductor megatrend.

Bear Case: Low-End Guidance, Moderate Margin Expansion

In the bear case, we anchor our expectations to the low end of ASML’s 2030 guidance. Management projects revenue of €44 billion and a gross margin of 56%, up from ~52% today. If that gross margin uplift flows through the income statement, we can reasonably estimate net income margin rising from 28.4% to 31% by 2030.

That translates to 2030 net income of €13.6 billion (€44B × 31%). To value this conservatively, we apply a P/E multiple of 25x, which aligns with ASML’s historical average between 2015 and 2019—before the EUV-fueled multiple expansion post-2020. This yields a market cap of €340 billion.

ASML has repurchased an average of 0.8% of its shares annually over the past three years. Applying the same rate of buybacks over the next five years implies a reduced share count of approximately 370 million shares in 2030 (from a current 388.2M). Dividing the €340B market cap by the forecasted share count gives a share price of ~€840, compared to ~€600 today.

That implies a compound annual growth rate (CAGR) of about 7%—a respectable outcome considering it represents the downside case, still beating inflation and long-term bond yields. It underscores the quality of ASML’s moat, where even tepid execution still creates value.

Bull Case: Full Guidance Realization, Stronger Multiple

In our upside scenario, ASML reaches the top end of its 2030 revenue guidance: €60 billion. With gross margin expanding to 60%, we estimate net income margins reach 32%, supported by operating leverage and a richer product mix led by High-NA EUV adoption.

This yields net income of €19.2 billion (€60B × 32%). For valuation, we apply a P/E multiple of 31x, consistent with ASML’s 10-year average and reflective of premium multiples applied to monopolistic tech enablers with secular growth drivers.

That results in a market cap of €595 billion. Assuming the same buyback cadence (0.8% annually), the 2030 share count would be ~370M, implying a share price of ~€1,472. From today’s price, that equates to a CAGR of approximately 19.3%, making ASML a potential high-return compounder over the next half decade.

In conclusion, ASML’s management has outlined a wide but credible long-term growth path. Whether it delivers on the low end or reaches full potential, investors at today’s levels are likely to realize positive returns. The bear case offers a 7% CAGR with margin of safety, while the bull case delivers nearly 20% CAGR. In both cases, ASML’s dominant market position and conservative capital allocation discipline provide strong downside protection with meaningful upside optionality.

Conclusion

ASML stands at the nexus of multiple long-term growth themes—AI, high-performance computing, and advanced semiconductors—while holding a monopoly position in one of the most critical tools in chipmaking: EUV lithography. Despite near-term macro and geopolitical uncertainty, its long-term trajectory remains firmly intact.

Management’s 2030 guidance of €44–€60 billion in revenue, paired with margin expansion, lays out a credible growth path. Our bear case suggests ~7% annualized returns even under conservative assumptions, while the bull case offers nearly 20% CAGR. Combined with a proven track record of underpromising and overdelivering, ASML offers investors a rare opportunity: a wide-moat, mission-critical business trading below its historical average valuation.

TSMC’s record-breaking capex provides tangible support to near-term demand, even as other customers like Intel and Samsung pull back. Meanwhile, historical data show ASML routinely beats guidance and analyst estimates, adding a layer of confidence to long-range forecasts.

In today’s environment of uncertainty and multiple compression, ASML offers both resilience and upside. For long-term investors, it is not just a bet on semiconductors—but on the foundational machinery of the digital age. At current levels, it’s a compelling mix of quality, visibility, and valuation.