ASML (ASML): UBS maintains Buy on ASML ahead of Q3, expecting AI demand, pricing power and High-NA momentum to lift medium-term earnings.

Overview

UBS reiterates Buy on ASML ahead of Q3 results on 14 October, arguing that AI-driven demand, pricing flexibility and faster High-NA adoption can support a stronger 2027-28 outlook and earnings above consensus.

Core views

UBS expects ASML to adopt a more constructive tone at Q3 results on 14 October, supported by strengthening AI-driven demand, improving visibility and greater confidence in the medium-term outlook. The firm sees potential for a modest lift to ASML’s 2027-28 capacity and revenue assumptions ahead of a more significant January backlog-disclosure catalyst. ASML currently guides for roughly 30% growth in both low-NA and immersion capacity in 2027E and 2028E; UBS believes targets could move above 30% to meet AI demand. It considers FY2027 group revenue guidance above 30% year-on-year plausible, compared with 28% consensus growth and UBS’s 33% forecast. Pricing is UBS’s central earnings-upside mechanism. Management has indicated greater pricing flexibility, and UBS expects customer negotiations to permit additional price increases across EUV and immersion systems. Since those platforms represent approximately 80-85% of revenue, the firm estimates that pricing could generate 15-20% EPS upside to consensus by 2028E and expects management again to stress pricing upside for 2027-28. UBS also sees accelerating High-NA adoption. Recent Samsung and TSMC announcements, together with progress on 12-inch photomasks, reinforce its view that adoption is gaining momentum. UBS expects clearer evidence of shipment acceleration into 2028E and sees upside to High-NA demand forecasts, particularly in DRAM. Its estimates show High-NA shipments rising from five in 2026E to six in 2027E and seven in 2028E, while the upside 2028 scenario assumes 10 shipments. For near-term Q3, UBS forecasts €12.1bn of revenue, 3% above consensus, a 55.8% gross margin versus 56.0% consensus, and a 42.6% EBIT margin versus 42.2%. For 2026, it estimates revenue broadly in line with guidance and consensus, but gross margin of 55.6% versus 55.1% consensus and EBIT margin of 41.2% versus 40.4%. The medium-term earnings gap is material: UBS forecasts diluted EPS of €58.41 in 2027E and €85.17 in 2028E, versus consensus of €53.76 and €69.05. It forecasts €85 EPS by 2030E, compared with €70 consensus, implying a 31% EPS CAGR from 2025-30E. UBS notes that ASML trades at 25x and 17x its 2027E and 2028E P/E estimates, below its historical average of about 30x, and at only a 2% premium to peers versus an 81% 10-year average. Its 2028 upside scenario indicates EPS could reach €103. Regionally, UBS expects China DUV revenue to decline about 11% in 2026E before growing 25% year-on-year in 2027E. It expects EUV revenue to drive non-China DUV revenue with similar growth rates and highlights strong memory-related EUV growth in 2026E and 2027E. UBS derives its €2,350 price target from a DCF using a 9% WACC and 3% terminal-growth assumption.

Analysis framework

UBS compares its quarterly and medium-term revenue, margin, shipment and EPS forecasts with consensus, then links AI demand to capacity expansion, pricing and High-NA adoption. It tests 2028 downside and upside operating scenarios and values ASML with a DCF, while also comparing forward P/E valuation with history and peers.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  DCF-based price target

  UBS values ASML by discounting expected future cash flows using a 9% WACC and 3% terminal growth rate to derive its €2,350 target price.

• Industry AnalysisSupply-demand framework

  Capacity, tool-shipment and AI-demand analysis

  UBS assesses how AI demand, customer adoption and lithography capacity requirements could affect ASML system volumes, pricing and revenue through 2028.

• Valuation methodsP/E and PEG Valuation

  Forward P/E comparison

  UBS compares ASML’s 2027E and 2028E P/E multiples with its historical average and a peer basket to support its valuation argument.

Asset mapping & comparison

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

• ASML (ASML.AS)

  Primary covered company; UBS expects AI demand, pricing and High-NA adoption to support earnings upside.

  Strengths

  Leading lithography-equipment supplier with critical products, limited leading-edge competition, and exposure to major semiconductor manufacturers.

  Comparison

  Trades at a 2% forward P/E premium to US large-cap peers versus an 81% 10-year average premium.

  Risks

  Semiconductor end-market cyclicality, potential capital-equipment spending cuts or order deferrals, and execution risk for next-generation EUV technology.

Key data

• Q3 2026E revenue€12.1bnUBS estimate, 3% above consensus.
• Q3 2026E gross margin55.8%Versus 56.0% consensus.
• Q3 2026E EBIT margin42.6%Versus 42.2% consensus.
• 2027E EPS€58.41UBS estimate versus €53.76 consensus; 7% above consensus.
• 2028E EPS€85.17UBS estimate versus €69.05 consensus; 20% above consensus.
• 2030E EPS€85Versus €70 consensus; UBS implies a 31% EPS CAGR from 2025-30E.
• 2028E upside-scenario EPS€103UBS scenario analysis.
• 2027E/2028E P/E25x/17xBelow ASML’s historical average of about 30x.
• Peer valuation premium2%Versus an 81% 10-year average premium.
• China DUV revenue growth-11% in 2026E; +25% in 2027EUBS estimates.

Impact & implications

UBS argues that stronger AI-related demand can translate into higher capacity targets, better pricing and faster High-NA shipments, widening the earnings gap versus consensus. It considers upcoming Q3 communication and January backlog disclosure key catalysts for this view.

Risks

• Macroeconomic weakness or slower semiconductor end markets could curb capital-equipment spending and defer ASML orders.
• ASML remains exposed to significant volatility because its customers’ businesses are cyclical.
• Execution risk around next-generation EUV technology could affect the investment case.

What to watch

• ASML’s Q3 results on 14 October, including its tone on AI demand, pricing flexibility, margins and 2027-28 capacity assumptions.
• January backlog disclosure, which UBS identifies as a more meaningful catalyst.
• Evidence of accelerating High-NA shipments, particularly DRAM demand, and updates from Samsung and TSMC.
• China DUV revenue trajectory and the expected 2027 recovery.