ASML Holding NV delivered a second-quarter report that far exceeded expectations, significantly raising its full-year guidance and, in a rare move, providing a capacity expansion roadmap for 2027-2028. This directly addresses the market's core doubts about the sustainability of AI-driven demand. Major Wall Street investment banks immediately voiced their collective support, with institutions like Goldman Sachs, J.P. Morgan, and Barclays all maintaining or reiterating buy ratings. They believe this performance definitively validates the AI supply bottleneck thesis and powerfully counters the bearish narrative of memory prices peaking by 2028.
ASML Holding NV reported Q2 revenue of €9.3 billion, surpassing the Bloomberg market consensus of €8.9 billion. Its gross margin of 54% significantly exceeded the guided range of 51%-52%. The company subsequently raised its full-year 2026 revenue guidance from €36-40 billion to €43-45 billion, with the midpoint being about 11% above market consensus. The full-year gross margin guidance was also raised to 54%-56%. More critically, management explicitly stated plans to expand capacity for low-NA EUV and immersion DUV systems by approximately 30% in 2027 and 2028, respectively. This statement directly triggered a significant upward revision of market profit expectations for 2028.
Following the announcement, ASML's Amsterdam-listed shares rose about 4%, while Nasdaq 100 index futures gained approximately 40 basis points. SK Hynix's Seoul-listed stock soared 8.8% in a single day, catching up to a prior 27% gain in its US depositary receipts. Goldman Sachs maintained its buy rating with a 12-month price target of €2,000, implying about 29% upside from current levels; J.P. Morgan similarly maintained an overweight rating with a €1,900 target.
Performance Across the Board Exceeds Expectations, Q3 Guidance Even More Surprising
All of ASML's core financial metrics for Q2 exceeded market expectations. According to a Goldman Sachs research note, Q2 revenue of €9.327 billion was 6% above consensus; EBIT of €3.456 billion was 13% above consensus; and earnings per share of €7.58 were about 11% above consensus. The gross margin of 54% not only far exceeded the upper end of the guidance but was also about 230 basis points higher than market consensus.
The Q3 guidance also substantially surpassed expectations. The company expects Q3 revenue of €11.0-12.0 billion, with the midpoint about 11% above consensus. The gross margin guidance of 55%-57% implies Q3 EBIT will be about 26% above market consensus. According to a J.P. Morgan report, the Q3 revenue midpoint of €11.5 billion is 12% above consensus, and the gross margin midpoint of 56% is 350 basis points above consensus.
J.P. Morgan analyst Sandeep Deshpande noted that the earnings beat was partly driven by the Installed Base Management business, which generated revenue about €300 million above expectations. Software-led productivity upgrades and the continued expansion of the EUV service installed base are expected to drive over 30% growth in this business this year, providing additional support for gross margins.
Capacity Roadmap Exceeds Buyer Expectations, 2028 Profit Potential Significantly Reassessed
The most market-notable aspect of the report was management's explicit commentary on capacity expansion for 2027-2028. ASML stated it will expand low-NA EUV capacity by approximately 30% from about 65 systems in 2026 to about 85 systems in 2027, and is studying a further 30% expansion to about 110 systems in 2028. Concurrently, immersion DUV capacity will expand from about 130 systems in 2026 to about 169 in 2027, and further to about 220 in 2028.
According to Goldman Sachs calculations, this capacity plan implies low-NA EUV shipments of 85/110 units in 2027/2028, significantly exceeding the market consensus of 85/89 units. Immersion DUV shipments of 169/220 units also substantially outpace the consensus of 137/146 units.
J.P. Morgan pointed out that the 2028 capacity guidance already exceeds its previous sell-side high forecast. Rough calculations suggest that if this capacity plan materializes, ASML's 2028 earnings per share could exceed €65. Combined with the strong momentum in the Installed Base Management business, actual profits could be even higher. Goldman Sachs' trading desk also commented that the 2028 target of about 110 EUV systems falls into the "super-optimistic range" (110-120 units), far exceeding the sell-side consensus of about 89 units.
Goldman Sachs added that ASML has largely secured most of the EUV orders needed for 2027 and has received a significant number of orders for 2028, with management describing the order intake as "extremely strong."
AI Demand Accelerates, Driving Expansion in Both Logic and Memory
Management clearly stated that AI-driven demand continues to strengthen in both logic and memory segments, supporting customers' further expansion in advanced process nodes. In advanced logic, ASML noted customers are simultaneously adding capacity at the 5/4/3nm nodes to meet AI demand, while aggressively pushing for 2nm mass production and beginning preparations for the transition to 1.4nm. The company expects advanced logic revenue to grow about 25% year-over-year in 2026.
In memory, ASML stated that tight DDR and HBM supply is prompting customers to accelerate investments, with increased EUV and advanced immersion lithography intensity further driving equipment demand. The company expects memory revenue to grow about 75% year-over-year in 2026.
Goldman Sachs' trading desk commented that as the memory market transitions to HBM4/HBM5 and advanced 1c/1d nm nodes required for traditional server DRAM, memory manufacturing is undergoing a fundamental paradigm shift. The number of EUV layers for 1c DRAM has increased to over five, with 1d and 0a generations planning full adoption of EUV across all layers. DUV multi-patterning is reaching its physical limits, making ASML a primary beneficiary of this structural shift.
Goldman Sachs further noted that HBM requires significantly higher wafer intensity than traditional DRAM. This dual expansion is severely straining global fab capacity, supporting memory prices at elevated levels for longer. Given the structural complexity of transitioning to advanced nodes, bearish arguments predicting memory prices will peak before 2028 or that supply gaps will ease significantly "sound premature."
Wall Street's Collective Endorsement, With Minor Disagreement on 2027 Guidance Aggressiveness
Several major investment banks quickly issued positive commentary following the earnings release, though with subtle differences in interpreting the 2027 EUV capacity guidance.
Barclays analyst Simon Coles stated that ASML delivered most of what investors were hoping for. The 2027 and 2028 low-NA EUV capacity guidance should reduce debate over whether the company is supply-constrained, noting that first-half low-NA EUV order value could be as high as €22 billion, reaching record levels.
J.P. Morgan's Sandeep Deshpande believed that while the company did not reach a target of 90 EUV systems for 2027, "we think this is irrelevant" because the 2028 EUV and DUV capacity guidance far exceeded expectations. Furthermore, the approximately 35% revenue growth expected in 2026 already exceeds current market expectations for overall wafer fab equipment industry growth, with the company effectively guiding to about 30% growth over the next two years.
Morgan Stanley analyst Lee Simpson noted that although the company no longer discloses order data, management indicated order intake remained "very strong" in the first half, with customers seeking to accelerate capacity expansion, pointing to robust sales momentum in 2027.
Jefferies analyst Janardan Menon held a relatively cautious stance, viewing the outlook commentary as mixed. The strong growth in Installed Base Management sales and gross margins was particularly positive, but the 2027 EUV guidance fell short of recently elevated market expectations.
Oddo BHF expects market consensus profit forecasts to be raised by about 20%, stating that "ASML remains an unrivaled technology dominance story, now benefiting from an AI-driven, fundamentally different cycle."
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