UBS raises ASML target price to €2,100, bullish on 2027-2028 growth momentum
AI summary card
UBS raises ASML target price to €2,100, bullish on 2027-2028 growth momentum
The report believes ASML's second-quarter results could serve as a mildly positive catalyst, with room for an upward revision to full-year guidance, while recoveries in advanced logic, memory, and China demand in 2027-2028 are expected to drive earnings above market expectations.
- UBS raised ASML's target price from €1,900 to €2,100 and maintained its 12-month Buy rating.
- 2027E and 2028E EPS forecasts were raised by 9% and 14%, respectively, with the new forecasts 22% and 33% above market consensus.
- UBS expects ASML may push its FY2026 revenue guidance toward the upper end of the range, or even slightly above the previous €36bn-€40bn range.
- China business is expected to improve in 2H26 and 2027, driven by strong memory, capacity expansion at CXMT and YMTC, and AI demand in advanced logic.
- Valuation uses the DCF method, with key assumptions including 9% WACC and a 3% terminal growth rate.
Report interpretation
Overview
This UBS company research report focuses on ASML's second-quarter earnings preview and its growth outlook for 2027-2028. Following recent updates from WFE and TSMC, the report raises ASML's long-term earnings forecasts and target price, arguing that trends in advanced logic and memory capex are stronger than expected and will improve visibility into the company's orders, revenue, and margins.
Core views
The core view is that ASML's second-quarter results and management commentary could be a mildly positive catalyst. UBS believes FY2026 revenue guidance has a chance to move toward the high end of the range or slightly above it, while gross margin may also approach the upper end of the 51%-53% guidance range. Over the medium term, growth in 2027-2028 is expected to come mainly from memory revenue, advanced logic demand, and recovery in China business. UBS forecasts 2027E EPS of €52.90 and 2028E EPS of €68.02, which are 22% and 33% above consensus, respectively.
Analysis framework
The report combines company guidance, WFE growth assumptions, segment revenue forecasts, shipment volume and ASP assumptions, and gross margin and EBIT margin forecasts, and compares them with Visible Alpha consensus. For valuation, it uses a DCF model and cross-checks it against historical P/E, EV/Sales, and valuation premiums/discounts versus large-cap U.S. peers.
Methodology notes
Discounted cash flow valuation
UBS uses DCF to estimate ASML's equity value, with key assumptions including 9% WACC, 3% terminal growth, normalized product sales and service sales growth rates of 3%, and a normalized EBIT margin of 40%.
Comparison of UBS forecasts versus consensus
The report compares UBS forecasts for Q2 2026, full-year 2026, and 2027-2028 revenue, gross margin, EBIT margin, and EPS against market consensus to identify earnings upgrades and expectation gaps.
Wafer fab equipment spending analysis
The report uses WFE growth, advanced logic investment, memory investment, and China fab readiness to assess demand and order drivers for ASML equipment.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- ASML.ASCore covered name; UBS maintains Buy and raises target price
- Strengths
- ASML is the world's leading supplier of lithography equipment, with a scarce competitive position in advanced process technology, especially EUV. Its customers include Samsung, TSMC, Intel, and Hynix. UBS believes stronger investment in advanced logic and memory will drive upside in revenue and EPS for 2027-2028.
- Weaknesses
- The company is highly sensitive to the semiconductor capex cycle, trades at a high valuation, and depends heavily on long-term growth and margin assumptions.
- Comparison
- ASML 2027E/2028E P/E is about 30x/24x; the report says this represents about an 8% discount to large-cap U.S. peers, versus a roughly 83% premium on the 10-year historical average.
- Risks
- Macro slowdown, weak semiconductor end demand, customer delays in equipment orders, EUV execution risk, and tighter China export restrictions.
- China semiconductor equipment demandAn important regional driver of ASML revenue and medium-term forecasts
- Strengths
- UBS expects China business to improve in 2H26 and 2027, supported by strong memory, capacity expansion at CXMT and YMTC, and AI demand in advanced logic.
- Weaknesses
- China revenue is affected by export restrictions and fab readiness, and lithography equipment shipments have still been under pressure since the start of the year.
- Comparison
- ASML's 2026E guidance assumes China contributes about 20% of revenue and declines about 23% YoY, while UBS estimates the decline at about 12% and expects China WFE growth of about 7%.
- Risks
- If further export restrictions are introduced or local fab expansion proceeds more slowly than expected, the recovery in China business may fall short of expectations.
Key data
- Target price€2,100Raised from €1,900, based on DCF valuation.
- Current price€1,612.00As of 29-Jun-2026.
- FY2026 revenue guidance€36bn-€40bnUBS believes it may move toward the upper end of the range or slightly above it.
- UBS 2026E revenue€39.392bnBroadly in line with consensus.
- UBS 2027E EPS€52.90Raised 9% from the previous forecast and about 22% above consensus.
- UBS 2028E EPS€68.02Raised 14% from the previous forecast and about 33% above consensus.
- 2026E gross margin53.7%Consensus is 52.4%.
- 2026E EBIT margin38.3%Consensus is 36.5%.
- 2027E/2028E P/E30x/24xThe report says around 30x for 2027E is close to the 10-year average and implies about an 8% discount to U.S. peers.
Impact & implications
If UBS's view plays out, ASML's investment narrative is likely to shift gradually from delivering 2026 results to earnings upgrades for 2027-2028. Guidance revisions, earlier orders, scalable capacity, and a recovery in China demand could all strengthen market confidence in the company's medium-term growth and support its high valuation. However, the earnings-upgrade thesis would be challenged if export restrictions intensify, semiconductor end demand slows, or customers defer capex.
Risks
- A slowdown in semiconductor end demand could lead customers to cut or delay capex spending on equipment.
- ASML's customers operate in cyclical businesses, and the company's revenue and orders may fluctuate significantly.
- There is execution risk associated with next-generation EUV technology.
- Further export restrictions could weaken the recovery in China demand and shipment momentum.
- The high valuation requires continued delivery of earnings upgrades in 2027-2028; otherwise, the stock price may come under pressure.
What to watch
- ASML's second-quarter results on July 15 and management commentary on the 2027-2028 outlook.
- Whether FY2026 revenue guidance is revised up to the high end of the €36bn-€40bn range or above.
- Whether full-year gross margin approaches the upper end of the 51%-53% range.
- Whether China shipments and orders improve in 2H26.
- Whether memory, advanced logic, and AI-related capex continue to strengthen.
- Management comments on 80+ system capacity for 2027 and further flexible expansion capability.