ASML's earnings power is underestimated by the market, with Overweight maintained

Overview

This report is J.P. Morgan's update on ASML after first-quarter results and company guidance. The report says ASML's first-quarter order flow was very strong, the company has raised its FY26 revenue guidance midpoint to about €38bn, and customer demand has continued to strengthen over the past few months. The market is currently over-focusing on 2027 EUV capacity and shipments, while ignoring ASP upside from EUV tool mix upgrades, demand sensitivity in non-China customers' capacity expansion, and continued growth in Installed Base Management.

Core views

The core view is that ASML's 2027 earnings power is being underestimated by the market. On EUV, if low-NA tools in 2027 shift mostly to 3800E/3800F, ASP could rise 15%-20%, making revenue significantly above consensus even under a conservative 80-unit shipment assumption. On DUV, if non-China customers move into a capacity expansion cycle, DUV could be the main source of upside surprise. On Installed Base Management, 1Q25 revenue was about €2.5bn, and based on annualization and subsequent normal growth, FY27 revenue could also be above consensus. On valuation, U.S. semiconductor-equipment peer valuations have been repriced sharply, while ASML's relative premium has nearly disappeared; the report argues that its monopoly position and upward revisions to earnings should support stronger outcomes.

Analysis framework

The report uses a bottom-up revenue model, disaggregating EUV, Immersion, ArF dry, KrF, DUV, I-line, Metrology & Inspection, and service revenue, and combines company statements on FY26/FY27 EUV system delivery capability, tool ASP changes, non-China customer capex demand, Installed Base Management growth trend, and peer P/E valuation comparisons to re-evaluate FY26-FY28 revenue, gross margin, EBIT, net profit, and EPS.

Methodology notes

• equity_valuationforward_pe_multiple

  Target price is based on FY28 EPS and a forward P/E multiple

  The report sets ASML's target price at €1,515 (ADR at $1,813), implying around 29.4x FY28 EPS; this multiple is at the lower end of the 28x-39x forward P/E range over the past five years.

• bottom_up_modelsegment_revenue_build

  Build by segmenting revenue by equipment type and service

  The revenue forecast is composed of components such as EUV, DUV, Immersion, Dry, Metrology & Inspection, and service revenue, with total revenue derived from shipment, ASP, and service growth assumptions.

• peer_comparisonsemicap_peer_pe_comparison

  Compare valuation with Lam Research, KLA, and Applied Materials

  The report notes ASML's FY26/FY27 P/E is now about 41.7x/31.9x, close to U.S. semiconductor equipment peers, and it does not reflect the valuation premium that should come with ASML's EUV monopoly.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ASML HOLDING NV

  Core coverage name

  Strengths

  Sole EUV supplier with a high lithography market share, benefiting from AI infrastructure, DRAM upcycle, High-NA transition, and customer capacity expansion.

  Weaknesses

  Valuation remains at a relatively elevated historical level, and near-term FY26 Q2 revenue and gross margin forecasts were downgraded by company guidance.

  Comparison

  Compared with Lam Research, KLA, and Applied Materials, ASML's historical monopoly premium has largely disappeared, but the report argues its competitive moat should justify a premium.

  Risks

  Export controls in key regions such as China, economic slowdown, EUV adoption below expectations, and rising rates could pressure earnings and valuation.

• ASML ADR

  ADR investment vehicle for the same company

  Strengths

  Provides a U.S. market trading venue, with a target price of $1,813 based on the same fundamental logic as ASML ordinary shares.

  Weaknesses

  ADR pricing may still be affected by FX and ADR conversion impacts.

  Comparison

  Shares the same fundamental drivers as ASML.AS.

  Risks

  In addition to company-level risks, currency and cross-market valuation differences are also relevant.

• Lam Research / KLA / Applied Materials

  Valuation peer set

  Strengths

  U.S. semiconductor equipment peers have seen valuation repricing in the past year.

  Weaknesses

  They do not have ASML's EUV lithography monopoly.

  Comparison

  The report argues ASML is currently trading broadly in line with peers, even at a discount to some of them.

  Risks

  If the industry capex cycle weakens, peer valuations could also pull back.

Key data

• RatingOverweightThe report maintains an Overweight rating on ASML and ASML ADR.
• Target price€1,515 / $1,813Target price horizon is Dec-27.
• Current price€1,233.20 / $1,518.30These are ASML.AS on 15 Apr 2026 and ASML ADR on 14 Apr 2026.
• FY26 revenue guidance midpoint€38bnThe company raised FY26 revenue guidance to the €36bn-€40bn range.
• FY26/FY27/FY28 revenue estimate revisions+6% / +5% / +8%Driven mainly by low-NA EUV shipments, ASP expansion, and upward revision to DUV demand.
• FY26/FY27/FY28 EPS estimate revisions+9% / +7% / +11%The upward revisions to revenue and operating leverage supported the EPS hikes.
• Potential FY27 EUV revenue upsideAt least about 18.4%, above 30% in an upside scenarioBased on a minimum 80-unit shipment base and rising ASP; upside is larger if 85 units are shipped.
• Potential FY27 DUV revenue scenario€25.8bnIf 600 units are shipped and ASP is about €43m, this would be around 85% above the current DUV revenue consensus.
• FY26/FY27 P/E41.7x / 31.9xThe report says ASML's valuation premium versus U.S. peers has largely disappeared.

Impact & implications

If the report is correct, market expectations for ASML earnings still have room for upward revision, especially if 2027 EUV ASP improvements, expansion in non-China DUV demand, and Installed Base Management growth are delivered; the shares could benefit from both earnings upgrades and the valuation reclaiming a monopoly premium. For the semiconductor equipment chain, AI infrastructure, DRAM price recovery, and increasing High-NA/EUV adoption should continue to support lithography equipment strength.

Risks

• Equipment export restrictions in key regions including China may affect revenue and order flow.
• Economic slowdown could weaken customer capex, which in turn could affect earnings estimates and target price.
• EUV adoption below expectations would introduce downside risk to both revenue and profit.
• Higher rates persisting could compress valuation multiples, which would impact the target price.
• If DUV demand or Installed Base Management growth falls short of report assumptions, FY27 earnings upside may not materialize.

What to watch

• Whether ASML continues to raise FY26 revenue and shipment guidance.
• Whether 2027 EUV actual shipments reach or exceed 80 units, along with mix and ASP changes for 3800E/3800F.
• Whether non-China customer capacity expansion drives DUV shipments materially above consensus.
• Whether Installed Base Management revenue continues to post double-digit growth.
• Whether DRAM prices and the storage capex cycle continue to improve.
• Whether U.S. semiconductor equipment peers' valuation repricing continues and whether ASML's relative premium is restored.