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Accelerated commercialization and volume adoption of 0.55 NA High-NA EXE systems across leading-edge logic and DRAM nodes, driving system revenue beyond 2.5B EUR annually and expanding gross margins.
China net sales declining below 4.5B EUR over a trailing 12-month period due to expanded multilateral export bans.
We issue a Sell rating on ASML. While the company commands an exceptional lithography monopoly, the report-date price of 1679.92 USD sits far above its fundamental Fair value of 888.96 USD.4
A Sell rating indicates that investors should avoid initiating new positions and consider liquidating existing holdings. Capital preservation is paramount when market expectations outpace underlying cash generation.
As of 2026-09-18, ASML traded at 1679.92 USD. This price stands 89.0% above our Fair value of 888.96 USD and 35.2% above our Potential value of 1243.01 USD, offering negative 47.08% upside to intrinsic value.4
The primary risk centers on geopolitical export controls restricting deep ultraviolet tool sales to China. China contributed 9.52B EUR in FY2025 revenue; if shipments fall below 4.5B EUR, fixed factory costs would fail to adjust, compressing operating margins below 28.50%.46
The strongest bull case rests on ASML's complete monopoly in commercial extreme ultraviolet lithography. Expanding commercial shipments of High-NA tools, which reached 1.16B EUR in FY2025, could accelerate top-line growth and support our Potential value of 1243.01 USD.6
ASML is the sole global manufacturer of EUV lithography systems, generating 10.45B EUR in NXE system revenue in FY2025.6
Next-generation 0.55 NA systems reached 1.16B EUR in FY2025 commercial revenue, securing long-term technological leadership in sub-2nm fabrication.6
Installed base management and field services expanded to 8.19B EUR in FY2025, providing stable high-margin cash flow.6
We rate ASML a Sell because the report-date price of 1679.92 USD trades at an 89.0% premium to our Fair value of 888.96 USD, leaving investors vulnerable to China export restrictions.46
ASML is a leading supplier to the semiconductor industry. ASML Holding N.V. provides chipmakers with hardware, software and
consist of systems, system-related options and upgrades, other holistic lithography solutions and customer services.
A synchronized shock where Chinese DUV shipments fall below 4.5B EUR while top-four customers curtail fab tool acceptances would contract operating margin from 34.60% toward 28.50%, cutting operating cash flows and triggering severe valuation re-rating.
ASML commands a Wide economic moat anchored by an absolute monopoly in commercial extreme ultraviolet lithography systems. Proprietary optical components from Carl Zeiss, exclusive Cymer light sources, and thousands of patents create insurmountable entry barriers. Semicap peers maintain 33.74% operating margins but operate as complementary tooling providers rather than lithography competitors.
Customer switching costs are prohibitive because advanced semiconductor fab architectures are hard-coded around ASML scanner recipes. With 1.16B EUR in FY2025 EXE High-NA shipments, ASML extends its technological lead into sub-2nm nodes, ensuring ROIC remains well above its 11.41% WACC.
ASML generates durable economic profit because commercial extreme ultraviolet lithography is a natural technological monopoly, converting 10.45B EUR in NXE system deliveries into returns far above capital costs.
The highlighted cell is Fair value when every assumption sits at its base level ($888.96). Each row and column shows what Fair value becomes when one assumption moves.
Free cash flow to the firm stays positive in the first projected year at $13.8B after modeled reinvestment of $491.5M, with terminal value at 33.4% of enterprise value. A sudden drop in free cash flow is not projected unless capital spending relative to , reinvestment, or resets materially.
Accelerating High-NA tool acceptances and sustained commercial shipments demonstrate pricing power that offsets geopolitical headwinds.
Execution tracks baseline expectations, but valuation remains elevated relative to $888.96.
The semicap industry capex-to-revenue ratio sits at 4.10% with capex-to-depreciation at 2.0x, while ASML capex moderated from 2.16B EUR in FY2024 to 1.51B EUR in FY2025 as EXE High-NA tools entered commercial production.46
Accelerating AI accelerator fabrication and sovereign fab subsidies drive synchronized leading-edge logic and memory fab buildouts across Taiwan and South Korea.
Tier-1 foundries digest prior capacity additions and tighten equipment budgets, pushing out lithography system installation dates and delaying High-NA tool commercial ramp schedules.
The stock trades at 1679.92 USD, an 89.0% premium over Fair value of 888.96 USD. With valuation heavily stretched, house allocation is 0%.4
Given severe valuation stretch where market price exceeds Fair value by 89.0%, risk management mandates exiting existing positions and avoiding new capital commitments until market multiples realign with fundamentals.
Shares trade at an 89.0% premium to fundamental Fair value of 888.96 USD, providing no margin of safety.
Even with consensus EPS expansion toward 51.72 EUR by FY2027, the report-date price of 1679.92 USD discounts growth far beyond realistic delivery rates.14
Capital allocation prioritizes High-NA R&D and repurchases over dividends, offering uncompelling yield alongside acute multiple downside risk.4
We recommend an immediate exit of existing equity positions and caution against initiating new capital commitments. ASML traded at 1679.92 USD on 2026-09-18, representing an 89.0% premium over our fundamental Fair value of 888.96 USD.4
While ASML maintains an undisputed monopoly in extreme ultraviolet lithography, the current valuation leaves zero margin of safety against potential China export bans or customer capex digestion.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
The records this analysis drew on, as they stood when it was run.
Escalating trade curbs sharply curtail deep ultraviolet shipments to Chinese customers, while primary foundry clients pause capital outlays. Fixed manufacturing overhead deleverage compresses operating margins and slows cash generation. Confirmation would appear through cancellations or pushouts in reported order intake.
China generated 9.52B EUR in FY2025 out of 32.67B EUR consolidated revenue; an embargo reducing China sales below 4.5B EUR creates an immediate ~15% top-line contraction and severe operating deleverage.46
Operating income was 11.30B EUR on 32.67B EUR revenue (34.60% margin) in FY2025; with four customers driving 61.2% of revenue, fab installation delays compress margins below 28.5%.46
Valuation models assume a 25.0x terminal P/E multiple, well above peer forward multiples such as AMAT at 24.09x and LRCX at 24.73x; multiple contraction toward 20.0x sharply reduces terminal equity value.3
WACC is currently computed at 11.41% with moderate Ke at 11.43%; escalating sovereign semiconductor conflict widening the equity risk premium lifts WACC above 13.4%.2
The five developments that would weaken our investment case.
Loss of Chinese mature and immersion lithography revenue removes high-margin equipment shipments without immediate replacement from Western fabs, causing fixed overhead underabsorption and curtailing consolidated gross cash generation across European manufacturing facilities.
Current:9.52B EUR in FY2025
Alert ifDecreases below 4.5B EUR over trailing 12 months
Sustained margin degradation demonstrates that fixed cleanroom depreciation and ongoing R&D expenditures are outstripping realized lithography system deliveries, proving that pricing power cannot offset customer tool deferrals and operational deleverage.
Current:34.60% in FY2025
Alert ifFalls below 28.50% over trailing 12 months
A sudden drop in core foundry revenue share driven by delayed tool deliveries signifies that leading logic and memory manufacturers are extending existing equipment lifecycles and slowing transition rates to next-generation wafer fabrication nodes.
Current:61.2% in FY2025
Alert ifFalls below 45.0% driven by order cancellations within 12 months
Persistent capital intensity overruns indicate protracted industrialization bottlenecks and higher facility tooling costs for High-NA systems, delaying the modeled transition to normalized free cash flow conversion and depressing economic returns on incremental invested capital.
Current:4.63% in FY2025
Alert ifExceeds 7.50% across trailing 12 months
Sub-scale High-NA adoption confirms that major chipmakers are choosing multi-patterning extensions with existing 0.33 NA tools instead of commercializing 0.55 NA systems, stalling average selling price growth and prolonging the development payback cycle.
Current:1.16B EUR in FY2025
Alert ifFails to exceed 2.0B EUR annually by FY2027
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Project SBC-adjusted EPS, discount each year's earnings at cost of equity, then add a Gordon-growth terminal value.
Project EPS through the explicit advantage period, fade growth as competition catches up, and discount the full stream at cost of equity.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
Multiply the peer median PEG by this stock's forecast growth to derive an implied forward P/E, then apply it to forward EPS.
Solve for the growth rate that makes the model value equal the report-date share price.
Core extreme ultraviolet system demand compounds steadily across advanced logic and memory nodes. High-NA tools transition into commercial manufacturing while mature DUV tool shipments face moderate trade headwinds. Disconfirmation would emerge if top customer concentration translates into extended order digestion cycles by FY2027.
AI infrastructure expansion and global semiconductor fabrication incentives accelerate extreme ultraviolet tool adoption. High-NA lithography ramps smoothly into volume production across leading foundries, expanding operating margins as manufacturing scale efficiencies materialize. Disconfirmation would occur if tier-one customers delay next-generation node deployment by FY2027.
Shipment delays amplify fixed overhead deleverage and compress free cash flow generation.
Cash conversion remains robust as customer advance prepayments support operational liquidity. Operating cash generation tracks reported operating profit closely, confirming high accounting durability without abnormal working capital accruals.
Volume tool acceptance confirms sub-two-nanometer node adoption and expands average selling prices.
Tighter multilateral export licensing could restrict tool deliveries and cause immediate top-line contraction.
Customer fab buildout adjustments directly drive quarterly shipment volatility and factory absorption.
Pricing leverage in extreme ultraviolet lithography dictates enterprise operating cash conversion.
Lower facility investment unlocks free cash flow generation for shareholder distributions.
| $18.61B |
| $21.17B |
| $27.56B |
| $28.26B |
| $32.67B |
| +15.1% |
| Gross profit | $9.81B | $10.70B | $14.14B | $14.49B | $17.26B | +15.2% |
| Operating income | $6.76B | $6.52B | $9.24B | $9.21B | $11.41B | +14.0% |
| Net income | $5.88B | $5.62B | $7.84B | $7.57B | $9.61B | +13.1% |
| EPS (diluted) | $13.91 | $14.16 | $19.91 | $19.24 | $24.73 | +15.5% |
| EBITDA | $7.23B | $7.10B | $9.98B | $10.12B | $12.43B | +14.5% |
| R&D | $2.55B | $3.25B | $3.98B | $4.30B | $4.70B | +16.5% |
| SG&A | $725.6M | $945.9M | $1.11B | $1.17B | $1.26B | +14.7% |
Free cash flow expanded to 10.65B EUR in FY2025 from 9.50B EUR in FY2024, representing an exceptional 87.6% conversion of operating cash flow. Cash generation benefited from High-NA capex digestion, with capital spending falling from 2.16B EUR in FY2024 to 1.51B EUR in FY2025.45
Management prioritizes organic R&D and High-NA cleanroom capacity before returning surplus capital. In FY2025, operating cash flow of 12.16B EUR funded 1.51B EUR of capex, while 5.95B EUR was returned through share repurchases and 2.45B EUR via dividends, reducing diluted shares to 388.90M.
Returns on capital reflect durable monopoly rents in EUV lithography. While High-NA tool deployment requires working capital, pricing leverage preserves returns far above semicap peers.
ASML's ROIC of 39.46% delivers a 28.05 percentage point spread over its computed WACC of 11.41%.
EXE tool revenue reached 1.16B EUR while capex fell to 1.51B EUR in FY2025.
Initial manufacturing buildout is complete, shifting High-NA into a cash-generative phase.
Service and field option sales reached 8.19B EUR in FY2025.
Recurring service contracts decouple cash flow from quarterly system delivery lumpiness.
| Revenue | €9,326,500,000 |
|---|---|
| Cost of revenue | €4,291,100,000 |
| Gross profit | €5,035,400,000 |
| Operating expenses | €1,579,300,000 |
| Operating income | €3,456,100,000 |
| Non-operating items and tax | -€538,500,000 |
| Net income | €2,917,600,000 |
| Total assets | €50,545,079,000 |
|---|---|
| Cash | €12,910,503,000 |
| Current assets | €30,603,070,000 |
| Total liabilities | €30,941,226,000 |
| Current liabilities | €24,253,573,000 |
| Shareholders’ equity | €19,612,200,000 |
| Net income | €9,609,400,000 |
|---|---|
| Operating inflow | €12,158,903,103 |
| Depreciation and amortization | €1,025,900,000 |
| Stock-based compensation | €202,300,000 |
| Other operating adjustments | €1,321,303,103 |
| Operating cash flow | €12,158,903,103 |
| Cash available | €24,894,803,103 |
| Beginning cash | €12,735,900,000 |
| Investing outflow | €3,628,700,409 |
| Capex | €1,511,494,250 |
| Other investing activities | €2,117,206,159 |
| Financing outflow | €8,328,298,720 |
| Exchange-rate effect | €30,100,000 |
| Ending cash | €12,910,503,000 |
| Investing cash flow | -€3,628,700,409 |
| Financing cash flow | -€8,328,298,720 |
Source: SEC EDGAR · Filed 2026-02-25 · SEC EDGAR
| Revenue by geography | Revenue | Share | YoY |
|---|---|---|---|
| China | €9.5B | 29.1% | -6.6% |
| Taiwan | €8.3B | 25.5% | 91.5% |
| South Korea | €8.2B | 25% | 27.3% |
| United States | €4.1B | 12.5% | -9.6% |
| Japan | €1.4B | 4.3% | 22.9% |
| Singapore | €608.4M | 1.9% | 113.5% |
| Rest Of Europe And Middle East | €524.3M | 1.6% | -60.3% |
| Netherlands | €4.7M | 0% | -71.7% |
| Rest Of Asia | €2.7M | 0% | -22.9% |
Point-in-time financial data used in the 2026-09-21 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016-12-31 | €6.9B | €2B | €1.6B | €1.8B | €1.4B | €333.5M | €373.5M | €47.7M | — | €470M | — | -€3.4B | €2.1B | — | €2.9B | €4.1B | €3.3B | 25.6% | — | 7.2% | — |
| 2017-12-31 | €9B | €2.8B | €2.1B | €1.8B | €1.4B | €326.6M | €398.7M | €53.1M | — | €497.9M | — | -€1.2B | -€1.2B | €2.9B | €2.3B | €3.3B | €3B | 27.2% | — | 7.1% | — |
| 2018-12-31 | €10.9B | €3.4B | €2.6B | €3.2B | €2.6B | €592.9M | €432.9M | €48.3M | — | €616.7M | — | -€507.7M | -€1.8B | €2.3B | €3.1B | €4B | €3.2B | 27.1% | — | 7.2% | — |
| 2019-12-31 | €11.8B | €3.3B | €2.6B | €3.3B | €2.5B | €766.6M | €521.2M | €74.6M | — | €1.3B | — | -€1.2B | -€1.8B | €3.1B | €3.5B | €4.7B | €4.2B | 23.6% | — | 6.9% | — |
| 2020-12-31 | €14B | €4.6B | €3.6B | €4.6B | €3.7B | €962M | €551.9M | €53.9M | — | €1.1B | — | -€1.4B | -€753M | €3.5B | €4.5B | €7.3B | €4.8B | 29.0% | — | 5.3% | — |
| 2021-12-31 | €18.6B | €7.2B | €5.9B | €10.8B | €9.9B | €900.7M | €432.8M | €117.5M | — | €1.4B | — | -€72M | -€9.9B | €4.5B | €4.8B | €7.6B | €4.8B | 36.3% | — | 6.1% | — |
| 2022-12-31 | €21.2B | €7.1B | €5.6B | €8.5B | €7.2B | €1.3B | €557.3M | €68.9M | €4.6B | €2.6B | -€20.6M | -€1B | -€7.2B | €7B | €7.2B | €7.3B | €4.4B | 30.7% | — | 9.4% | — |
| 2023-12-31 | €27.6B | €10B | €7.8B | €5.3B | €3.2B | €2.1B | €772.4M | €134.8M | €1B | €2.3B | €245M | -€2.6B | -€3B | €7.3B | €7B | €7B | €4.9B | 32.8% | — | 9.7% | — |
| 2024-12-31 | €28.3B | €10.1B | €7.6B | €11.7B | €9.5B | €2.2B | €1B | €172.6M | €500M | €2.6B | -€3.2M | -€2.7B | -€3B | €7B | €12.7B | €12.7B | €5B | 31.9% | — | 10.4% | — |
| 2025-12-31 | €32.7B | €12.4B | €9.6B | €12.2B | €10.6B | €1.5B | €1B | €202.3M | €6B | €2.4B | -€312.5M | -€3.6B | -€8.3B | €12.7B | €12.9B | €13.3B | €2.7B | 34.6% | — | 11.4% | — |
ASML Holding N.V. (ASML) trades at 27.9x forward earnings against a peer median of 25.6x. Its EV/EBITDA of 2,657.2x compares with a peer median of 40.0x. The comparison uses 4 peers: Applied Materials Inc., KLA Corporation, Lam Research Corporation and Fortinet Inc., as of 2026-09-20 to 2026-09-21.
| Impact |
|---|
| Note |
|---|
| Artificial Intelligence Hardware Demand | positive | Growing complexity of advanced AI accelerators requires sub-3nm nodes, mandating 0.33 NA and 0.55 NA EUV lithography systems. |
| Geopolitical Fab Decoupling and Onshoring | positive | Subsidized regional fab construction in the US and Europe duplicates cleanroom infrastructure and drives incremental tool demand. |
| Bilateral Trade and Export Control Escalation | negative | Expanding multilateral restrictions limit immersion DUV sales into China, capping ~29.1% of historical revenue. |
ASML sits at the apex of the semiconductor capital cycle as the sole supplier of EUV systems, capturing irreplaceable wallet share during advanced node expansions.6
| Avoid establishing positions |
| Shares trade at an 89.0% premium to intrinsic value, offering no margin of safety. |
| At or below Fair value of 888.96 USD | Re-evaluate long entry | A pullback to Fair value would eliminate the valuation premium and re-establish an appropriate risk-adjusted margin of safety. |
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
| 31.1% |
| 27.2% |
| 20.2% |
| 13.2% |
| 6.2% |
| 5.9% |
| 5.6% |
| 5.2% |
| 4.9% |
| 4.6% |
| Operating margin | 34.8% | 34.8% | 34.7% | 34.7% | 34.6% | 34.6% | 34.6% | 34.6% | 34.6% | 34.6% |
| Operating income | $17.32B | $21.99B | $26.38B | $29.81B | $31.60B | $33.46B | $35.32B | $37.17B | $39.00B | $40.79B |
| Tax rate | 17.4% | 17.4% | 17.4% | 17.4% | 17.4% | 17.4% | 17.4% | 17.4% | 17.4% | 17.4% |
| NOPAT | $14.31B | $18.17B | $21.80B | $24.63B | $26.11B | $27.65B | $29.18B | $30.71B | $32.22B | $33.71B |
| Reinvestment | $491.51M | $312.03M | $0.00 | $156.07M | $330.86M | $525.49M | $739.58M | $972.94M | $1.22B | $1.49B |
| Reinvestment rate (of NOPAT) | 3.4% | 1.7% | 0.0% | 0.6% | 1.3% | 1.9% | 2.5% | 3.2% | 3.8% | 4.4% |
| Depreciation and amortization | $1.56B | $1.98B | $2.39B | $2.70B | $2.87B | $3.04B | $3.21B | $3.37B | $3.54B | $3.70B |
| Free cash flow to firm | $13.82B | $17.86B | $21.80B | $24.48B | $25.78B | $27.12B | $28.44B | $29.74B | $31.00B | $32.21B |
| Terminal growth | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% |
| KLAC |
| KLA Corporation |
| $231.2B |
| 26.4x |
| 17.0x |
| 38.4x |
| 87.5% |
| 42.5% |
| LRCX | Lam Research Corporation | $360.5B | 24.7x | 15.5x | 41.6x | 65.1% | 37.4% |
| FTNT | Fortinet Inc. | $124.6B | 45.0x | 16.6x | 46.7x | 117.4% | 33.6% |
