J.P. Morgan sees substantial upside to ASML's 2028 earnings from a stronger semiconductor cycle and potential tool price increases

Overview

J.P. Morgan examines ASML's 2028 earnings potential through a top-down semiconductor-cycle model and separate tool-price scenarios. It argues that consensus estimates may be too low, supported by strong industry demand, rising EUV exposure and potential pricing benefits.

Core views

J.P. Morgan's central argument is that ASML's 2028 earnings have considerable upgrade potential if the semiconductor up-cycle remains strong. Semiconductor sales in the first half of 2026 were $701.5bn, up 102.2% year on year according to WSTS/SIA data. J.P. Morgan estimates industry sales of roughly $1.7tn in 2026 and more than $2tn in 2027, then tests 2028 industry-revenue cases of $2.0tn, $2.25tn and $2.5tn. The report notes that ASML shares should begin discounting 2028 earnings in January 2027, making the 2027-28 industry path particularly important to valuation. The top-down model translates semiconductor sales into ASML equipment revenue through several historical ratios. It uses WFE intensity of 17%, the average since 2020, and a cautious 15% alternative; lithography spending equal to 21.4% of WFE; a 95% ASML share of lithography in 2028, versus 94% in 2025 and a 92% historical average; and Installed Base Management revenue equal to 24.7% of total revenue. The 95% share assumption reflects ASML's EUV monopoly and expected greater EUV usage, including High-NA adoption beginning in 2027 and greater EUV adoption in DRAM. The report also holds gross margin at 60%, despite modeled revenue above ASML's €44-60bn 2030 revenue guidance associated with that margin. Under the bull case of $2.5tn semiconductor revenue and 17% WFE intensity, the model produces €99.964bn of ASML revenue and €112.06 EPS for 2028, 67.5% above Bloomberg consensus. With the same industry revenue but 15% WFE intensity, EPS is €96.57. The mid case of $2.25tn produces EPS of €99.00 at 17% WFE intensity and €85.06 at 15%. Even the bear case of $2.0tn industry revenue and 15% WFE intensity produces €73.55 EPS, which the report says is about 10% above consensus. If gross margin instead rose to 62.5%, the bull-case EPS would reach €117.5, or 75.6% above consensus, while the bear case would be about 16% above consensus. The report separately identifies price increases as another source of earnings upside. ASML indicated at its July second-quarter results that it would raise prices on existing tools because very large order volumes require supply-chain expansion and additional hiring. Given order lead times, J.P. Morgan expects the full benefit to appear in 2028 shipments, with any 2027 impact more difficult to estimate. Its analysis applies 2.5%, 5%, 7.5% and 10% price increases only to EUV and immersion DUV tools, assuming 80% of the associated incremental revenue reaches gross profit after capacity-expansion costs. Starting from J.P. Morgan's current €70.73 2028 EPS model, a 2.5% increase lifts EPS to €73.88, a 5% increase to €77.04, and a 10% increase to €83.35. The report states that the 10% case is 17.8% above its model and almost 25% above consensus; even the 5% case is 15% above consensus. J.P. Morgan retains an Overweight rating and a €2,100 price target, equivalent to 29.6x its 2028 EPS estimate. It notes that ASML traded at 28-38x forward earnings over the prior five years, with a 33x average, so the target multiple sits at the lower end of that range and is intended to be earnings-driven rather than multiple-driven. In the bull case, the report calculates the stock would trade at 13.6x 2028 earnings at the then-current share price; applying roughly 25x would imply as much as €2,800. In the most bearish earnings case, it calculates 20.6x 2028 earnings at the current price; a 25x multiple would imply about €1,840, or 22.5% above the current share price.

Analysis framework

The report starts with semiconductor-sales scenarios for 2028, converts them into WFE spending, lithography spending and ASML revenue using historical industry ratios, then adds Installed Base Management revenue and applies margin, cost and tax assumptions to derive EPS. It separately stress-tests the earnings effect of EUV and immersion DUV price increases and contextualizes the resulting earnings scenarios with forward P/E multiples.

Methodology notes

• Industry AnalysisSupply-demand framework

  Top-down semiconductor industry revenue and WFE-intensity scenario analysis

  The report begins with alternative global semiconductor-sales outcomes, estimates the portion spent on wafer-fab equipment and lithography, and translates that spending into ASML revenue and earnings.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Semiconductor sales to WFE, lithography spending, ASML equipment revenue and Installed Base Management revenue

  This traces how stronger end-market semiconductor revenue is expected to flow through capital-equipment demand and ultimately to ASML's revenue and EPS.

• Valuation methodsP/E and PEG Valuation

  Forward P/E valuation

  J.P. Morgan values ASML using a 29.6x multiple on its 2028 EPS estimate and compares scenario earnings with approximately 25x P/E outcomes.

Asset mapping & comparison

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

• ASML (ASML.AS)

  Primary covered company and beneficiary of stronger semiconductor capital spending, EUV adoption and potential tool price increases.

  Strengths

  Sole supplier of EUV tools; expected 95% lithography-market share in 2028; exposure to major memory companies; Installed Base Management contribution.

  Weaknesses

  Ability to supply demand is identified as a key practical constraint.

  Comparison

  The target multiple of 29.6x 2028 EPS is below ASML's 28-38x forward-P/E interquartile range over the previous five years and below its 33x average.

  Risks

  Export restrictions, an economic downturn, lower-than-expected EUV adoption and rising interest rates could impair estimates or the valuation multiple.

Key data

• 1H26 semiconductor sales$701.5bnUp 102.2% year on year, according to WSTS/SIA data.
• J.P. Morgan 2028 EPS estimate€70.73Current model estimate before the separate price-increase scenarios.
• Bull-case 2028 EPS€112.06$2.5tn semiconductor revenue and 17% WFE intensity; 67.5% above Bloomberg consensus.
• Bear-case 2028 EPS€73.55$2.0tn semiconductor revenue and 15% WFE intensity; about 10% above Bloomberg consensus.
• 10% tool-price-increase EPS€83.35Almost 25% above consensus under the report's 80% gross-profit flow-through assumption.
• Price target€2,100.00Equivalent to 29.6x J.P. Morgan's 2028 EPS estimate.

Impact & implications

The report argues that ASML's earnings outlook is highly leveraged to sustained semiconductor and memory demand, higher EUV adoption and pricing flexibility. It frames the €2,100 target as driven primarily by earnings potential rather than an expansion in the valuation multiple.

Risks

• Export restrictions on tools to key geographies such as China could prevent the stock from reaching the price target.
• An economic downturn could jeopardize ASML earnings estimates and the price target.
• Lower-than-expected EUV adoption could create downside to estimates.
• Further increases in interest rates could reduce the valuation multiple and target price.

What to watch

• Whether semiconductor and memory-market strength persists through 2028.
• ASML's ability to expand supply capacity sufficiently to meet tool demand.
• The scale and timing of EUV and immersion DUV price increases, particularly their impact on 2028 shipments.
• High-NA and DRAM-related EUV adoption trends.
• Export-policy developments affecting tool sales to key geographies.