ASML

IThe business

ASML makes the machines that print a chip’s patterns onto a silicon wafer. A chip is built in layers, each layer needs a pattern, and a lithography machine projects light through a mask that holds the pattern. The finer the light, the smaller the features. ASML sells those machines, the metrology and inspection systems that check the layers, and a service and upgrade business for the machines already in its customers’ factories.⁶

It reports one segment. In 2025 it sold 327 lithography systems, 300 new and 27 used, and 208 metrology and inspection systems, for €32.7B of net sales. Installed Base Management, its name for service and field upgrades, was €8.2B of that, 25%.⁶

In the twelve months to September 2026 cost of sales was 45.7% of revenue, R&D alone 12.4%, selling and administrative costs 3.4% and capital spending 4.4%; operating margin was 38.6% C (calculated).⁸⁶ Revenue grew from €6.9B in 2016 to €32.7B in 2025, 18.9% a year, and was €39.5B in the TTM.²³⁶⁸

What it sells

• EUV, the newest and highest-priced machines: 48 sold in 2025 for €11.6B, up 39%. The low NA version (NXE) averaged €237M a system and the High NA version (EXE) €289M C (calculated).⁶
• DUV immersion and dry, the older light and still the workhorse: ArF immersion was 131 units and €10.3B in 2025, €79M each C (calculated); ArF dry, KrF and i-line together were €1.7B.⁶
• Metrology and inspection: 208 systems and €824.6M, up 28%.⁶
• Installed Base Management: €8.2B, up 26%. Upgrades raise the output of machines already installed, and the Q3 2026 release credits “productivity upgrades” for sales above guidance.⁶⁷

Who pays

ASML’s 20-F names no customer. Four customers each took more than 10% of 2025 net sales and together €20.0B, 61.2%; the largest took €7.8B, 23.9%, up from 16.6% in 2024.⁶¹⁷ The filing does not say who they are.

By use, Logic systems were €16.1B of 2025 net sales and Memory systems €8.4B. In the first nine months of 2026 Memory systems were €10.3B, more than all of 2025, and Logic €11.0B.⁹ Customers say AI is the reason: the Q3 release says they keep raising short- and medium-term demand forecasts, driven by their views on the size and duration of AI investment.⁷

Where

By location of the factory, the systems went to Taiwan, South Korea and China. Of 2025 net sales including service, China was 29.1%, Taiwan 25.5% and South Korea 25.0%.⁶ China’s share of net system sales fell from 42% in Q3 2025 to 14% in Q2 2026 and was 23% in Q3 2026; over the nine months it was 19.0%, €4.0B of €21.2B C (calculated).^1312109

The step in 2026

Sales rose in each of the last two quarters, to €11.7B in Q3, and ASML guides €14.2B to 15.2B for Q4, 51% above Q4 2025 at the midpoint C (calculated).⁸⁷

ASML has raised its 2026 outlook three times, from €34B to 39B in January to €44B to 45B in October.¹³⁷ The midpoint of the last range is already at the bottom of the €44B to 60B that ASML gave for 2030 in November 2024 and repeated in January 2026.¹³

ASML said in January 2025 that from 2026 it would stop reporting quarterly order intake and give only backlog; its CFO called bookings lumpy by nature.⁴⁰ The 2026 releases print neither figure. The last are net bookings of €28.0B in 2025 and a backlog of €38.8B at the end of 2025, 65% EUV.¹³

Cycle or structure

Two things decide the next five years: how much of the AI build-out is lasting demand, and how fast ASML and its suppliers can add machines. ASML says more critical lithography exposures will be needed in advanced logic and memory.⁹ It plans 30% more low NA EUV and DUV immersion capacity in 2027. For 2028 it named a further 30% under study in July, and in October it said it is looking beyond that.⁷

…will not fully meet the demand of our customers.

Customers back that with cash. Non-current contract liabilities, mostly down payments for deliveries more than twelve months away, rose from €3.6B at 28 June to €9.3B at 27 September 2026.¹¹⁸ TSMC reiterated a 2026 capital budget of US$60B to 64B on 15 October and said its 2026 to 2028 spending would be even more significantly higher than in the past three years. Micron spent $30.7B on plant and equipment in its fiscal year to 3 September and expects about $25B, net of government incentives, in the first half of fiscal 2027.⁴¹³³

These four spend about $152B a year, and ASML’s 2026 sales of $50B are 33% of that E (estimate).^33414243477 ASML also sells to customers outside these four, so the ratio overstates its share. If it holds, my base year-four revenue of €64.0B, $71.6B, needs their combined spending to grow about 9.5% a year E (estimate).

The cycle is the other half. ASML’s sales fell 22% in 2008, 46% in 2009 and 16% in 2012, and rose 182% in 2010.²⁷ In the ten years since 2016 sales never fell, and the weakest year was 2024 at +2.6% C (calculated).⁶ I read long-run demand as structural, because each new node needs more critical layers, and the timing as cyclical, because customers order ahead of their own demand. Service held up in both of the last deep falls: Installed Base Management sales went from €437M in 2008 to €421M in 2009 while systems fell 53%, and rose 21% in 2012 while systems fell 22% C (calculated).²⁷

Customers also fund the cycle. Contract liabilities, mostly down payments, rose from €1.8B in 2016 to €19.4B at the end of 2025. At 27 September 2026 the non-current part was €9.3B; the release does not give the current part, which was €13.9B at 28 June under IFRS.²⁷⁶⁸¹¹ That helps ASML while orders grow. In a downturn it reverses: my base case returns €2B of it in year three and my bear case €7B.

IIThe moat

I think ASML’s moat is a technology monopoly: the 20-F calls ASML the world’s only manufacturer of EUV systems, its machines depend on an exclusive optics supplier and a base of 5,100 suppliers, and €4.7B of R&D a year renews them.⁶ It is wide. It is widening at the leading edge, where High NA is just starting, and it is narrowing in one place that matters: China, where the law and local competition both press on it.

The best single measure is the return on the capital that runs the machines. Operating income after a flat 17.5% tax earned 22.5% a year on average plant, intangibles and goodwill in 2016, 74.4% in 2025 and 96% in the TTM. On ASML’s own invested-capital definition, which nets out current liabilities and non-current customer prepayments, it was 22.0% in 2018, 94% in 2025 and 88% in the TTM C (calculated).⁶⁸²⁷ That definition counts customer prepayments as funding, which lowers the capital base and raises the return; the plant measure ignores them and gives a similar answer. The ten-year average of the plant measure is 50%, so today’s figures are well above the long run.

Evidence it is widening

EUV mix. EUV was 38% of net system sales in 2024 and 47% in 2025 C (calculated), and about 57% in the first nine months of 2026, with the quarterly share between 66% and 49% as shipments time C (calculated).⁶⁹¹²¹⁰ An EUV system sells for about three times an ArF immersion system C (calculated), so the mix lifts revenue per machine.

Pricing and upgrades. Gross margin went from 45.7% in 2016 to 52.8% in 2025 and 57.5% in Q3 2026, helped by a rich mix of upgrades. The company’s range for 2030 is 56% to 60%.⁶⁸⁷¹³

Demand ahead of supply. ASML says its planned supply for 2027 and 2028 will not fully meet demand, and that some customers are expressing an interest in placing orders for 2029 and even 2030.⁷ That is the seller’s claim, and the customers’ spending plans above point the same way.

Evidence it is narrowing

Concentration. The largest customer rose from 16.6% to 23.9% of net sales in a year, and four are 61.2%.⁶¹⁷ Buyers that large can negotiate.

China. The 20-F lists new competitors driven by self-sufficiency as a risk.⁶ The US House committee advanced the MATCH Act on 22 April 2026, and Reuters reported that the substitute text kept a countrywide restriction on ASML’s DUV immersion machines and required licences for servicing equipment in covered facilities.³⁵³⁶

One optics supplier. Carl Zeiss SMT is the sole supplier of lenses, mirrors and other optics, and the 20-F says that if it stopped, ASML would effectively cease to be able to conduct its business.⁶ It protects ASML from rivals and ties its output to one partner’s capacity.

Rivals at the older end. Nikon forecasts ¥12.0B of profit on more ArF dry and immersion units in the year to March 2027, and Canon says its capacity will rise by more than 20% from next year.³⁹³⁷ They are small, and the unit figures are in the next section.

EUV was 57% of ASML’s net system sales in the first nine months of 2026 and no one else makes it; the test is China, which took 19.0%.⁶⁹¹²¹⁰

IIIThe competitive advantage

ASML’s advantage is the product and the return it earns on it. The 20-F calls ASML the world’s only manufacturer of EUV systems, and names Canon and Nikon as its main competitors in DUV.⁶ In 2025 ASML earned 88% on invested capital (94% on its own definition), against 73% at Lam, 70% at KLA and 40% at Applied in their latest fiscal years C (calculated).^6444546 Its operating margin is high but not the group’s highest: 34.6% in 2025 and 38.6% in the TTM, against 41.7% at KLA, 35.3% at Lam and 29.2% at Applied. Q3 2026 was 44.4% and Q4 is guided to about 46% C (calculated).^87444546

ASML spent €4.7B on R&D in 2025, $5.3B at the ECB rate, and €26.9B over ten years C (calculated). Applied spent $3.6B, Lam $2.4B and KLA $1.5B in their latest fiscal years. R&D was 14.4% of sales at ASML in 2025 against 10% to 13% at the others.^64444546

The nearest lithography rival is Nikon. Its Precision Equipment business, which includes flat-panel lithography, lost ¥4.5B on ¥167.2B of revenue in the year to March 2026 after a ¥5.7B impairment, and lost ¥2.6B in the June 2026 quarter after ¥4.1B of inventory write-downs.³⁸³⁹

Where ASML wins

ASML wins where a chip maker needs the smallest features at volume: EUV and High NA, which no rival offers.⁶ It also wins on the installed base, where upgrades let ASML supply “significant wafer capacity” while new-machine supply is short, as the Q3 release puts it.⁷

Where it loses

At the older end ASML’s unit sales fell from 184 KrF systems in 2023 to 152 in 2024 and 78 in 2025, then recovered to 100 in nine months of 2026; i-line was 54 in 2025 and 39 in nine months C (calculated).^61891210 The 20-F does not say why they fell. These machines are low priced: KrF averaged €13M in 2025 and i-line €6M C (calculated).⁶ Canon says memory demand for KrF is rising.³⁷

ASML earned 88% on invested capital in 2025; Applied, Lam and KLA earned 40% to 73% in their latest fiscal years C (calculated).^6444546

IVManagement

Christophe Fouquet has been president and chief executive since 24 April 2024. He joined ASML in 2008, after KLA-Tencor and Applied Materials, ran applications, then EUV, then the customer business, and has sat on the Board of Management since 2018.⁶ His predecessors, Peter Wennink and Martin van den Brink, stepped down as presidents on the same day.⁶ Roger Dassen, the CFO, joined in 2018 from Deloitte, where he was global vice chair. Marco Pieters, who joined in 1999, became chief technology officer in October 2025 and joined the board at the April 2026 AGM.⁶¹⁵¹⁶

Four of the six executives have more than 15 years at ASML or an acquired unit C (calculated).⁶

Pay and ownership

Fouquet’s 2025 pay was €7.0M as an accounting expense, up from €5.4M in 2024; 80.4% of it was variable. The Board of Management as a whole cost €24.3M, and the CEO’s pay was 46 times the average pay per employee.⁶ Long-term pay is performance shares set at up to 350% of base salary at target, vesting from about 37.5% to 200% of target over three years, with a two-year holding period. Relative total shareholder return against the PHLX Semiconductor Index counts for 25% of the 2025 to 2027 plan, return on average invested capital for 35% and non-financial goals for 40%.⁶

Ownership is small. Fouquet held 7,040 shares at the end of 2025, about €9.9M at the Q4 2026 close, 8.8 times his base salary of €1.125M C (calculated). All eight members of the two boards held 51,095 shares, 0.01% of the company.⁶¹ The CEO must hold four times salary, and all complied. His pay is mostly the three-year plan, paid in stock and measured on returns. The largest holders are BlackRock at 6.83% and Capital Research at 5.09%.⁶

Follow the pay. About 80% of Fouquet's pay is variable and the long plan is paid in stock, so he gains from return on capital, 35% of the plan, and the share against chip stocks, 25%.⁶ His own money is small: 7,040 shares, about €9.9M. Over ten years ASML bought back shares at an average of €446. In Q3 2026 it paid about €1,464, 30% above my base value.⁶²⁷⁹ None of the pay measures looks at the price paid for a buyback.

Fouquet’s own record

Most of the decisions that built ASML’s record were made before Fouquet became chief executive. His own record is short: the guides for 2025 and 2026, one large investment, the 2027 capacity plan, the 2026 to 2028 buyback and the end of quarterly bookings.

For 2025 ASML guided €30B to 35B in October 2024 and again in January 2025, and delivered €32.7B at a 52.8% gross margin, inside its 51% to 53% guide.²⁶¹³ For 2026 it set €34B to 39B, a midpoint of €36.5B, and has raised the range three times to €44B to 45B, a midpoint of €44.5B.¹³⁷ Wennink’s years show both directions: 2022 came in below the guide because €3.1B of fast shipments moved into 2023, and 2023 beat it.⁴⁹⁵⁰

Capital allocation

ASML spends to extend the machine first and returns what is left: €26.9B on R&D and €39.5B on dividends and buybacks from 2016 to 2025 C (calculated).⁶ The table shows who was chief executive for each decision.

Three decisions mattered, all under Wennink and van den Brink. The first was the optics partner: in 2016 ASML agreed to fund up to €760M of Carl Zeiss SMT’s research, capacity and supply chain for High NA, and added €325M in 2017, the year it paid €1,019.7M for 24.9% of Zeiss SMT Holding.²⁴ In 2025 Zeiss paid ASML a dividend of €320.5M, 31% of the purchase price in one year C (calculated), and High NA revenue reached €1.2B.⁶ The second was R&D: in 2023, when free cash flow fell to €3.2B, R&D rose 22% to €4.0B C (calculated).⁶¹⁹ The third was inspection: the €2.6B purchase of HMI in 2016 now supports €824.6M of metrology and inspection sales a year, and ASML does not report that business’s profit.²⁵⁶

Shareholder returns were €24.3B of buybacks and €15.2B of dividends from 2016 to 2025, 76% of free cash flow of €51.7B C (calculated). Diluted shares fell from 427.7M to 388.9M, 9.1%, and to 383.5M by Q3 2026; the dividend declared for the year went from €1.20 to €7.50, 22.6% a year.⁶⁸²⁵¹³ Buybacks over the ten years paid an average of €446 a share against €1,407.20 today. In Q3 2026 ASML bought about 2.8 million shares for about €4.1B, near €1,464 a share, below the quarter’s average close of €1,512 and 30% above my base value C (calculated).²⁷⁹¹

The one large bet outside the core is Mistral AI. ASML paid €1,302.2M in September 2025 as lead investor, for 11.1% fully diluted, and its CFO sits on Mistral’s strategic committee. Equity investments, which include the stake, were carried at €2,239.4M at 27 September 2026, 0.4% of market value C (calculated).⁶⁸¹

In 2023, when free cash flow fell to 41% of net income, ASML raised R&D by 22%.⁶¹⁹

VFinancials

Profit has grown faster than sales, and cash arrives in lumps. Gross margin went from 45.7% in 2016 to 52.8% in 2025 and 54.3% in the TTM; operating margin from 25.6% to 34.6% and 38.6%. In Q3 2026 they were 57.5% and 44.4%.²³⁶⁸

Earnings quality

Two items in the TTM need adjusting. First, TTM net income of €13.5B includes a €509.7M gain on equity investments in Q3, before any tax effect. Without it, earnings per share fall from €34.97 to €33.65 and the price-to-earnings ratio rises from 40.2 to 41.8 C (calculated).⁸¹

Second, free cash flow of €21.0B on ASML’s own definition includes a €7.9B inflow from changes in assets and liabilities, mostly customer down payments. Without that line it is €13.1B, and €12.9B after stock pay. My cases and my reverse DCF start from €11.9B: operating income taxed at 17.5%, plus depreciation and amortization, less capital spending, the same construction as the cases. The €1.05B gap to the €12.9B is interest, the Zeiss dividend and cash taxes against that rate, among other items C (calculated).⁸⁶

I use US GAAP, ASML’s primary standard, because the 20-F, every quarterly release and the TTM are on it. EU-IFRS gave 2025 net income of €10,213.0M against €9,609.4M, mostly because IFRS capitalizes development costs.⁶¹⁴¹¹⁸

The balance sheet

At 27 September 2026 ASML held €12.7B of cash and short-term investments against €2.7B of debt, including a €750M note due in May 2027 that I add at principal. Inventories were €11.9B, 218 days of Q3 cost of sales, and receivables €9.3B, 72 days of Q3 sales against 29 days at the end of 2025 C (calculated).⁸⁶ Equity was €22.1B, 37.4% of assets.⁸ Net cash is €10.0B. Customers also hold prepayments: €9.3B is non-current, and the current part is not broken out at that date.⁸¹¹

VIValuation

Before the numbers

I start with how an owner loses money here. Three ways. Chip makers digest the AI build-out, as in my bear case: revenue falls 18% in year two, gross margin drops to 49% and customers take back €7B of down payments, and four customers pay 61% of sales.⁸⁶ The MATCH Act restricts DUV sales to China, and a permanent loss of 19% of revenue costs 16% of my base value.³⁶¹² Or Zeiss and the other suppliers miss the 30% ramp, which my model assumes they make.¹⁰⁷

An owner takes out less than ASML reports. Net income is €13.5B and ASML's free cash flow €21.0B, but €7.9B of that is customer down payments that come back if orders slow.⁸⁶ My cases start from €11.9B: operating income taxed at 17.5%, plus depreciation, less capital spending. That is 12% below net income and 43% below the €21.0B C (calculated). Stock pay is small, €0.20B in 2025.⁶ On a market value of about €540B, €11.9B is 2.2% C (calculated).¹⁸

Some of this I cannot know: how much of the 2028 step customers will order, or how deep the next down year goes. So I show a range, €573 to €1,750 across the cases. The discount rate is a range too: my base value is €1,123 at 8.5% and €815 at 10.5%.

What the price implies

The share fell 5.0% in the session before the Q4 2026 close and 0.9% on the close, 5.8% over two sessions. The fall was sector-wide: the Philadelphia Semiconductor Index fell 6.7% in the first session, Lam Research 11.8%, KLA 9.5% and Applied Materials 8.2%, and ASML filed no 6-K after its 14 October guide.⁴⁸²⁸ The close high was €1,721.40 in June 2026 and the low €834.00 in November 2025.¹

At €1,407.20 ASML trades at 40.2 times trailing earnings, 33.0 times my estimate of 2026 earnings (34.0 without the gain), 23.4 times the fourth quarter annualised and 25.9 times my estimate of the next twelve months E (estimate).¹⁸⁷ The fourth quarter matters most: it is guided at €14.7B with a 57% gross margin and €1.6B of R&D and SG&A, an operating margin of 46%, and the TTM contains only part of that step. My cash flows return 7.4% a year in the base case, 9.7% in the bull case and 5.0% in the bear case, and the base case falls 1.1 points short of the 8.5% I ask for E (estimate). The 10-year Bund yields 3.39%, and the ECB’s AAA euro-area 10-year spot rate was 3.38% in Q4 2026.²⁹³⁰

A constant growth rate is the wrong shape for a business that is mid-step, so the table reads the price three ways.¹⁸ From my starting free cash flow of €11.9B the price needs 11.0% a year for fifteen years, to about €56.6B in year 15 C (calculated). My base case reaches €37.5B, 8.0% a year, and my bull case €59.7B, 11.4% a year E (estimate). The base rate is front-loaded: its first year alone is 45% growth to €17.1B. The fairer test starts from that year one, because it holds the step. The price then needs 8.4% a year after it against 5.8% in my base case E (estimate). At my base free cash flow margin of 33.4%, the price’s year-15 cash flow is revenue of about €170B, against €112B in my base case and €166B in my bull case E (estimate). For scale, the four equipment makers in the peers table sold about $109B in their latest years, and my base year-ten revenue of €93B is $104B C (calculated).^84445464

At €1,407.20 ASML has to grow free cash flow 11.0% a year for fifteen years from today’s base, or 8.4% a year after my year one against my 5.8%, to earn the 8.5% I ask for.

The discount rate

I use 8.5%. The capital asset pricing model gives 8.4% for a beta of 1.2: the 10-year Bund yield of 3.39% plus 1.2 times Damodaran’s 4.20% equity risk premium, rounded up.²⁹³¹ That premium is his figure for the US market, applied here to a Bund. It is the rule I use for NVIDIA, where a beta of 1.2 on a 5.00% Treasury yield gives 10%. ASML’s measured betas give more: 8.6% on the ten-year beta of 1.24 against the Euro Stoxx 50, 10.4% on 1.68 over 60 months, 11.6% on 1.95 over 36 months, and 9.5% to 11.0% against the S&P 500 on its New York line.³² Those regressions fit loosely, with R-squared of 0.20 to 0.42. At 9.5% my base value is €945 and at 10.5% €815, 42% below the price. I keep 8.5% because the cycle is in the cash flows, where it is visible: the base case has a down year, and the bear case cuts revenue 18% and returns €7B of down payments.

Three cases

I build each case from the income statement down: revenue, gross margin, R&D and SG&A, a 17.5% tax rate between the 17% ASML guides for 2026 and the 17.7% of 2025, capital spending and working capital.⁷⁶ Capital spending is 5.5% of revenue falling to 5.0%, against 4.4% in the TTM and 6.1% on average from 2016 to 2025 C (calculated).⁶⁸ Working capital absorbs 8% of each year’s revenue increase, although from 2016 to 2025 it added €7.3B of cash while revenue rose €25.8B C (calculated).⁶ Stock pay is a cost inside the margins. Each case states what happens to total sales, not to China, Taiwan or Korea separately.

The cases are tied to ASML’s capacity plan, because capacity is the constraint it names. ASML plans 30% more low NA EUV and DUV immersion capacity in 2027, from about 65 and 130 systems in 2026. In July it put a further 30% for 2028 under study, and in October it said it is looking beyond that.¹⁰⁷ At the average prices of the first nine months of 2026, €245M for an EUV system and €83M for an immersion system, those two lines are €26.7B in 2026 and €34.6B in 2027 C (calculated).⁹¹²¹⁰ Add other systems and installed base sales, and the 7% by which guided 2026 system sales exceed this build, and 2027 comes to about €54.9B, which fits year one of my base case E (estimate). Year two then depends on 2028: €56.8B with no further step, 3% above year one; €61.0B with half of the further 30%, 11% above; €65.2B with all of it, 18% above E (estimate). My base case takes the half step, my bull case the full step and my bear case none. Zeiss and the other suppliers have to ramp by the same amount.

The base case takes the 2027 plan and half of the further step, then has a down year.

• Year one, to September 2027, is €55.0B: the fourth quarter at the guidance midpoint, €14.7B, plus three quarters of 2027 that average €13.4B, 9% below the fourth quarter E (estimate).⁷ That is 39% on the TTM.
• Year two is €61.0B, up 11%, from the half step in the table above E (estimate). ASML has committed to none of the further 30%. With no step, year two grows only 3% and my base value is €1,053, €70 lower.
• Year three is €56.1B, down 8%. Customers that bought ahead of their own demand pause, gross margin falls 3 points to 55.0%, R&D and SG&A hold in euros, and customers take back €2B of down payments E (estimate). Operating margin is 41.3%.
• Year four rebounds 14% to €64.0B. Growth is then 9% in year five, falling to 5% in year ten, when revenue is €93B, 9.0% a year from the TTM against 18.9% a year in the last decade E (estimate).⁶
• Gross margin is 57.0% in year one and 58.0% in years five and six, the middle of the company’s 56% to 60% range for 2030, and eases to 57.0% by year ten as rivals and customers push back E (estimate).¹³
• R&D and SG&A together rise from 12.4% of revenue to 14.5% in year ten, against 15.8% in the TTM and 18.2% in 2025 C (calculated), so operating margin is 45.0% in year five and ends at 42.5%.⁶⁸

Why my base case is above ASML’s own range

Year four is €64.0B, against the top of ASML’s November 2024 range for 2030 of €60B. Three facts explain it. 2026 sales have reached the bottom of that range four years early, customers want to order for 2029 and 2030, and the range is stale: ASML will update it at the Capital Markets Day on 10 June 2027.⁷⁹¹³ Staying inside the range would mean sales grow about 3% a year after 2027, while the capacity plan and customers’ requests point the other way. The down year is why year four is not higher.

The bear case has the AI build-out pause. Revenue is €50.0B in year one, below the fourth-quarter run rate, and falls 18% in year two, between the falls of 2008 (22%) and 2012 (16%).²⁷ Installed Base Management held in both of those downturns, so I read the fall as systems down about 24% with service flat at about €13B E (estimate). Gross margin drops to 49%, below every year from 2021 to 2025, R&D and SG&A hold near €7B in euros so they rise to 17.8% of revenue, and customers take back €7B of down payments, three-quarters of the non-current balance E (estimate).⁶⁸ Growth recovers to 6% and fades to 4%, and the margin never regains 2026’s level. Year-ten revenue is €56B, 43% above the TTM, and year-ten operating margin is 37.4%, close to the TTM’s 38.6%. The bear case is a downturn that settles at a lower level; the stress case is the collapse. Run one at a time from the base, the bear revenue path takes €403 off the value, the bear margins €173 and the returned down payments €11; they overlap, so they do not add E (estimate).

The stress case keeps the bear revenue path and resets margins to the 2016 to 2019 range: gross margin of 45% from year three, against 44.7% to 46.0% in those years, and R&D and SG&A at 16% of revenue. It values a share at €465 E (estimate).²³²²

The bull case has customers take both capacity increases. Revenue is €58B in year one, grows 18% and 14% in years two and three, and reaches €135B in year ten, 13.1% a year from the TTM E (estimate). Gross margin reaches 60%, the top of the company’s range, as upgrades and mix work.¹³ Weighted 25%, 50% and 25%, the cases give €1,142 a share E (estimate), against a price of €1,407.20.¹ The weights are a judgement: I give the bear a quarter because the share is near a cycle high and four customers pay 61% of sales, and weights of 33%, 34% and 33% give €1,148. Terminal growth is 2.5% in the bear case, 3.0% in the base and 3.25% in the bull, the pattern on my other pages; at 3.0% in all three the bear is €601 and the bull €1,701. At 3.0% growth after year 15 the base case needs new capital to earn about 63% a year, against 94% in 2025 on ASML’s definition.

I add €13.4B of cash, investments and stakes, €34.9 a share, at carrying value. The terminal value is 50% of the base value E (estimate).⁸¹ Zeiss paid ASML €320.5M in 2025, 28% of the stake’s carrying value of €1.13B, so carrying value probably understates it; capitalising that dividend at 6% would add about €11 a share E (estimate).⁶

What closes the gap

No single change takes my base value to the price. A discount rate of 7.5% gets within 2%, at €1,381. Revenue growth two points higher in each of years two to ten gives €1,307, and no down year gives €1,234 E (estimate). Two changes together do it: no down year and growth two points higher give €1,434. Margins alone do not get there: two more points of gross margin give €1,177, and 1.5 fewer points of R&D and SG&A give €1,163 E (estimate). Dating the cash flows from the price date instead of 27 September adds €6.¹

The downside changes are of the same size. Revenue growth two points lower gives €967. A repeat of 2009 in year five, revenue down 46% for one year with gross margin 14 points lower, costs €44 a share if sales return to the path the next year. A permanent loss of 19% of revenue in year four, about the share of nine-month net system sales that went to China, costs €179 E (estimate).^9121027

The model is generous in two places. It treats the €9.3B of non-current down payments as a float that rolls, and deducting it all would take €24 off; the current part, not broken out for 27 September, is working capital that turns into sales.⁸ And it assumes the optics suppliers deliver the 30% on schedule. It is conservative in two others: stock pay is fully charged, and working capital absorbs cash where ten years of history added it.

What the cases leave out

The cases hold no change in the law beyond today’s. The MATCH Act would restrict DUV immersion sales to China and require licences for servicing equipment in covered facilities, and ASML said in April that the width of its 2026 range accommodated possible export-control outcomes.³⁶¹² I do not put a number on it. The bridge shows the arithmetic: a permanent loss of 19% of revenue costs 16% of the base value. The cases also hold no Taiwan or Korea shock, although together they were 50.5% of 2025 net sales.⁶

The New York line

One New York share is one ordinary share, and the Nasdaq line closed at $1,571.80 in Q4 2026, 0.2% below Amsterdam at the ECB rate of 1.1193.²³⁴

The margin of safety

• Price€1,407.20Close, Q4 2026 [1]
• Base value€1,123My estimate E (estimate)
• Margin of safety below€764set from my bear case, rounded down C (calculated)

I set the margin of safety from the bear case instead of as a discount to the base value, because the cycle drives this business. Below €764, 32% under my base value, my bear value of €573 is 75% of the price paid, and my base case would return about 11.0% a year and my bear case 7.0% E (estimate). That is 14 times my estimate of next-twelve-month earnings. At €1,407.20 my base cash flows return 7.4% against the 8.5% I ask for, and the margin-of-safety price is a level the share has not reached in a year: the 52-week low close was €834.00 in November 2025.¹ The cushion between the bear value and the margin-of-safety price is for what the model does not hold: Zeiss, China law, a customer that cuts, and my own error. It does not cover the stress case: at €764 the stress value of €465 is 61% of the price paid.

The next best use of the same dollar is my TSMC page, where the base case returns 7.8% a year at its price, against 5.2% here E (estimate). How good the business is and how good the price is are two questions. The business is strong: the only EUV supplier, with new capital earning 94% in 2025.⁶ The price is 25% above my base value. That is a very good business at a price with little room for error.

The base case also needs three things at once: the 2027 capacity on time, half the 2028 step built, and gross margin near 58%. At four chances in five each, all three come to 0.8 × 0.8 × 0.8 = 51% E (estimate).

Where this could be in 5 and 10 years

Years run October to September. A value in year 5 or 10 is what my model says the cash after that date is worth then, at 8.5%, per today’s 383.5M shares and in that year’s euros. It leaves out today’s €13.4B of net cash and stakes. Owner cash is free cash flow, counted as paid out. E (estimate)

For the base to hold at 5 years, the 2028 build has to happen and the dip in year 3 has to pass. Revenue is €56.1B in year 3 and €69.7B in year 5. By year 10 it needs €93B of revenue at a 42.5% operating margin and €30.7B of free cash flow. Growth, margin, capital spending near 5% of revenue and the 8.5% discount rate do the work.

The bear and the bull differ on growth and margin. In the bear, customers digest the AI build-out, revenue is €56B in year 10 at a 37.4% margin, and free cash flow is €16.4B. In the bull, customers take both capacity steps, gross margin holds at 60%, and year 10 is €135B at 45.8% and €48.0B.

The most likely way the base is wrong is growth in years 2 to 4. Year-4 revenue of €64.0B is 7% above the top of ASML’s 2030 range. If sales stall near that top, every base value here is too high.

These are estimates of value, not forecasts of the share price. The market price can sit above or below value for years.

VIIThe case for the price

What most people miss

ASML has already agreed a price rise. On the October call Roger Dassen, the CFO, said the customer talks are finished and the rise covers the “most critical products”. Some shows in 2027, all of it from 2028. Upgrade prices follow. ASML has not said how large it is, and Dassen said part of it pays for the ramp. Christophe Fouquet called it “something we never did”, and Dassen said the plan is not to repeat it every year.⁵⁴ My capacity table uses 2026 prices, so each 1% on low NA EUV and immersion in 2028 adds about €0.4B of sales to that table E (estimate).

The order book still has a public gauge. ASML stopped printing bookings, but Dassen called non-current contract liabilities “a nice proxy”, though a lagging one. He said a down payment is “enough to hurt”, and that walking away costs more than that.⁵⁴ That line went from €3.6B to €9.3B in one quarter.¹¹⁸

Customers have offered orders for 2029 and 2030, and ASML has not taken them yet. Fouquet said he does not see Zeiss as a bottleneck today, even above the 30% for 2028.⁵⁴

The bull case

AI needs more advanced logic and more DRAM, both need EUV, and one company makes it. Supply is the limit, so volume and price can rise together.

The fullest public version I found is Bernstein’s. I read press reports of the notes, not the notes. On 6 July David Dai raised his EUV forecast, High NA included, to 91 systems in 2027 and 113 in 2028.⁵⁵⁵⁶ That note put 2030 revenue at €80B against a consensus of €64B then, with a target at 40 times earnings.⁵⁶ After the Q2 results he went to €2,500, with revenue of €56B in 2027 and €72B in 2028, and the average EUV price up 10% in 2027.⁵⁷ Those are July numbers. I found none newer. The 41 analysts on MarketScreener have an average target of €2,097.⁵⁸

Baron Opportunity Fund started a position in the first quarter. Its letter, as Yahoo reproduces it, says EUV’s complexity makes it “virtually impossible for any competitor to replicate”.⁵⁹ ASML’s leading customers told it that demand for their chips will outrun supply through at least 2028.⁵⁴

Against reality

Bernstein’s 2027 is close to my work: €56B against €54.9B in my table. Its €72B for 2028 is above the €67.4B my table reaches with all of the further 30%, at 2026 prices. Its €80B for 2030 sits between my base of €64.0B for year four and my bull of €87.4B E (estimate).

If ASML builds about two-thirds or more of that further step, skips the pause I put in year three, and grows two points faster every year after that, the price is possible. That gives €1,434 E (estimate). In sales: €62.2B, €68.4B and €74.5B in years two to four, against my €61.0B, €56.1B and €64.0B E (estimate).

Today’s numbers are a long way from that. The 2026 guide is €44B to 45B, so €74.5B is about two-thirds more in four years. It is also 24% above the top of ASML’s own 2030 range of €60B. ASML has committed to no number for 2028, and nothing is published on capacity for 2029 or 2030.⁷¹³⁵⁴ The four customers in my spending table would have to grow about 14% a year, against 9.5% in my base E (estimate).

What they have to hit

ASML prints four of these each quarter. Capacity comes only in management’s remarks. Rows also in the next section’s table use its thresholds.

Where I come down

The finished price rise moved me most. My capacity build leaves it out of sales, so it is the piece most likely to prove my base too low. The offers for 2029 and 2030 moved me less. They are not firm orders. A decision to build all of the further 30% and a new 2030 range above €60B in June 2027 would raise my values, which stay at €573, €1,123 and €1,750 E (estimate).

VIIIRisks, and what would change my view

1. Customer concentration. Four customers took 61.2% of 2025 net sales and the largest 23.9%.⁶ One customer cutting moves the total.
2. China and export law. China was 29.1% of 2025 sales and 19.0% of nine-month 2026 net system sales. The MATCH Act would restrict DUV immersion sales and servicing.^69121036
3. One optics supplier. Zeiss SMT is the sole supplier, and ASML lends to it: its exposure was €3.9B at the end of 2025 C (calculated).⁶
4. The cycle. Chip makers’ spending drives ASML’s sales, and ASML’s sales fell 22%, 46% and 16% in three years of the last twenty.²⁷ A repeat of 2009 that recovers costs €44 a share in my model, and a level that resets costs far more: my bear case is €573 and my stress case €465.
5. Working capital and down payments. Inventories are €11.9B, receivables 72 days of sales, and non-current down payments €9.3B. If orders slip, deposits fall and the cash goes with them.⁸
6. Disclosure. ASML no longer prints quarterly orders, so the signals on demand are its own description of the order book and the down-payment line.⁷⁴⁰
7. Taiwan and South Korea. Together 50.5% of 2025 net sales; the 20-F names cross-strait relations as a risk.⁶
8. Tariffs and the yen. Tariffs raise ASML’s costs and customers’ import costs, and a weaker yen raises price competition from Japan.⁶
9. Management transition. A new CEO since April 2024 and a new CTO since October 2025 are carrying the roadmap.⁶
10. Equity stakes. They are carried at €2.2B, and a €509.7M gain on equity investments moved Q3 earnings.⁸

What would raise my base value: a backlog figure printed again and rising, a decision to build all of the further 30% for 2028, gross margin holding at 58% or more through the ramp, and a new 2030 range above €60B in June 2027. What would lower it: no 2028 step, down payments falling while sales rise, receivable days above 90, two large customers cutting capital spending, or the MATCH Act becoming law with its DUV immersion limits.^78133336