Wall Street comments on ASML’s earnings report: Explosive order volume and guidance exceeding expectations—the company is at the starting point of a new technological cycle!

Wall Street comments on ASML’s earnings report: Explosive order volume and guidance exceeding expectations—the company is at the starting point of a new technological cycle!

Mainstream Wall Street institutions have formed a clear consensus after ASML published a financial report far exceeding expectations: The company is at the beginning of a multi-year growth cycle jointly driven by AI computing power construction and storage technology upgrades. The explosive growth of its orders and strong performance guidance together confirm the inflection point in the semiconductor equipment industry.

The financial report released on January 28 shows that ASML’s new orders for the fourth quarter soared to 13.2 billion euros, a record high, nearly double the market’s consensus expectation (about 6.6 to 7 billion euros). This data marks the industry entering a strong upward channel.

The order structure has also undergone a significant transformation. Orders for extreme ultraviolet (EUV) lithography machines contributed 7.4 billion euros, far exceeding expectations; notably, orders from memory chip clients accounted for 56%, surpassing logic chips for the first time, highlighting the core driving force of high-performance memory demand, such as HBM and DDR5, in industry investment.

The company simultaneously provided strong guidance for 2026, with revenue expected to reach a median of 36.5 billion euros, representing growth of about 12% year-on-year. The current backlog of 38.8 billion euros provides high certainty for performance realization in the coming two years.

Faced with this series of better-than-expected data, major Wall Street institutions have generally raised their price targets. Notably, Citi and UBS raised their targets to 1,400 euros, J.P. Morgan to 1,300 euros, and Goldman Sachs to 1,270 euros.

Orders "Crush" Expectations: The Shock of 13.2 Billion Euros

The core highlight of this quarter’s report is the new orders. ASML announced Q4 orders totaling 13.2 billion euros, far exceeding general market expectations and 89% to 93.6% above the expected range of about 6.6 to 6.9 billion euros as compiled by Visible Alpha, as well as surpassing the most optimistic buy-side forecast of 8 billion euros.

Of this, EUV lithography systems contributed 7.4 billion euros, much higher than the generally expected 4.4 billion euros, showing that customers are actively securing critical equipment capacity ahead for future advanced processes (including 2-nanometer and below nodes).

By the end of 2025, ASML’s backlog had climbed to a historical high of 38.8 billion euros. This scale not only completely covers the company’s full-year system sales expectations for 2026, but its visibility also extends into 2027, providing strong certainty for future results.

Structural Changes: Explosive Memory Chip Demand

The order data reveals a structural rotation in the semiconductor industry cycle. In Q4, memory chip clients accounted for 56% of orders, amounting to about 7.4 billion euros, surpassing logic chip clients at 44% (about 5.8 billion euros), becoming the main driver of equipment investment.

UBS analysis points out that memory orders grew 71% year-on-year, driven mainly by two trends: the DRAM technology node is shifting from 6F² to 4F², and AI applications are continuously fueling demand for high-bandwidth memory (HBM) and DDR5. Clients are increasing the number of EUV process layers in DRAM production.

Despite being overtaken in share by memory chips, orders for logic chips remain strong. Reports from Citi and Goldman Sachs indicate that logic chip clients are actively reassessing mid-term demand driven by AI and, as a result, accelerating capacity planning and equipment investment, demonstrating that this segment is also on a clear path to recovery and expansion.

2026 Outlook: Extremely High Growth Certainty

Supported by its vast backlog, ASML’s management provided strong guidance for 2026. The company expects full-year net sales between 34 and 39 billion euros, with a midpoint of 36.5 billion euros, implying a year-on-year growth of about 12% — not only significantly higher than the earlier low single-digit expectations, but also 3.5% to 4% above the market consensus.

In terms of profitability, management expects gross margin to remain between 51% and 53% for 2026. Structurally, EUV business is expected to see significant growth, while deep ultraviolet (DUV) business is expected to remain stable.

Regionally, management guidance also reflects dynamic changes in global demand. The company expects the income contribution from certain regions to be adjusted in the coming year, and this structural shift has been incorporated into the latest financial forecasts. This signals clear confidence in demand growth in other global markets and that this is sufficient to support overall revenue goals.

Q4 Revenue and Profit Remain Solid, Q1 Guidance Upbeat

Beyond the focus on orders, ASML’s financial performance and short-term outlooks have remained robust. Q4 revenue reached 9.718 billion euros, slightly above Citi’s expectation of 9.643 billion euros and the market consensus of 9.586 billion euros, including income recognition for two High-NA EUV lithography systems.

Gross margin for the quarter was 52.2%, slightly above the market consensus of 52.0%. Earnings per share were 7.34 euros, somewhat below some investment bank expectations (e.g., Citi’s 7.61 euros) due to higher-than-expected investment in R&D and sales management, but still within the company's own guidance range.

For Q1 2026, the company has given an upbeat performance outlook: expected revenue between 8.2 and 8.9 billion euros, with a midpoint of 8.55 billion euros, significantly higher than the previous market estimate of 7.95 billion euros; meantime, gross margin is expected to remain in the stable 51% to 53% range.

Wall Street Consensus: Company at a New Starting Point for Growth, Huge Potential for 2027-2028

Major investment banks have reached a consensus after reviewing ASML’s latest results: The company is at the start of a new technical upgrade cycle, and current valuations do not yet fully reflect its growth potential in 2027-2028.

Citi maintains its “Buy” rating and a 1,400-euro target, believing the consensus for 2026 will be revised upward, while the upside for 2027-2028 is key. Citi predicts 2027 sales could hit 44 billion euros and earnings per share about 40 euros, noting the current ~30x expected P/E ratio is still below its five-year average.

J.P. Morgan gives an “Overweight” rating, target price of 1,300 euros, calling the order performance an "explosion," and sees almost no negative factors, expecting double-digit upward revisions to profit estimates for 2027 and 2028.

Goldman Sachs maintains a “Buy” rating, target price of 1,270 euros, noting the company’s 2026 sales guidance is about 5% above market consensus, and customer certification progress for High-NA lithography systems is smooth.

UBS also gives a “Buy” rating and a 1,400-euro target, emphasizing that High-NA technology adoption will become the next growth engine and considers the company's current guidance still conservative, with room for further upward revision.

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