Down 18%, Should You Buy the Dip on ASML Holding?

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I’m absolutely thrilled to be part of the circle that acknowledges ASML Holding (ASML) as a global titan in the semiconductor industry! Their innovative machinery plays a pivotal role in enabling chipmakers and foundries to craft chips that fuel a multitude of applications, from data centers and smartphones to computers and automobiles – and much more!

Nevertheless, the performance of ASML stock has been underwhelming over the past year, with a decrease of approximately 18% in its value during this timeframe. This trend was further exacerbated by the company’s second-quarter results for 2025, which brought additional sorrow to investors. As a result, ASML stock plummeted more than 8% after the release of the Q2 report on July 16.

Let’s investigate why it underperformed last year and determine if its struggling semiconductor stock could be a chance for intelligent investors to purchase a possible long-term success story.

ASML’s cloudy 2026 guidance is weighing on the stock

I’m absolutely thrilled about ASML’s latest financial report! This Dutch giant saw a remarkable 24% surge in revenue compared to last year, and earnings skyrocketed by an impressive 47%. To top it off, their results significantly surpassed the predictions of analysts. The cherry on top? New orders totaling a whopping 5.5 billion euros rolled in during the quarter – way beyond the anticipated 4.8 billion euros!

Despite ASML predicting Q3 revenues of between 7.4 billion and 7.9 billion euros, which was below analysts’ forecasts of 8.2 billion euros, investors were also concerned by the company’s long-term outlook for 2026. Although ASML anticipates a 15% rise in revenue this year, CEO Christophe Fouquet cautioned that while they are preparing for growth in 2026, they cannot guarantee it at this point in time.

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Despite a robust demand from AI clients, ASML’s 2026 perspective remains unclear due to escalating uncertainties stemming from economic and political events worldwide. Although their bookings surged by 40% compared to the previous quarter, ASML’s cautious forecast suggests they are concerned about the ongoing trade disputes and export restrictions that could negatively impact semiconductor sales.

It’s likely that ASML’s stocks will face ongoing pressure in the short term due to the pessimistic atmosphere surrounding their forecasts. Yet, if the stocks fall even more, buying them could prove beneficial for long-term investors.

The company is confident of achieving its long-term targets

Despite ASML expressing concerns about tariffs and geopolitical issues affecting its growth in the coming year, the company remains optimistic about the semiconductor market’s long-term expansion, driven by factors like AI. This confidence is behind ASML’s continued endorsement of its 2030 revenue projection, ranging from 44 to 60 billion euros. The midpoint of this range indicates a significant 60% increase in their revenue compared to the projected 32.5 billion euros for this year.

By the end of this decade, ASML anticipates that its gross margin will range from 56% to 60%. This figure represents a slight rise compared to its projected midpoint for 2025 gross margin of 52%. The long-term projection appears attainable given the substantial global investments being poured into AI infrastructure. These investments are prompting semiconductor manufacturers to boost their spending on equipment, which is a positive sign.

By 2030, it’s predicted that a staggering amount of $6.7 trillion will be allocated globally for data centers to accommodate both AI and non-AI tasks. Interestingly, about 60% of this spending is anticipated to be directed towards the production of chips and other computing hardware. It’s also worth noting that McKinsey forecasts a significant investment of $1 trillion in developing new semiconductor factories by the end of the decade.

With nearly 90% of the worldwide market for lithography equipment, ASML holds a strong position to benefit significantly from the anticipated high investments in semiconductor factories over the next five years. This advantage increases the likelihood that ASML will rebound and offer substantial returns to investors in the future. Given this scenario, investing in ASML stock during its current downturn could prove to be a shrewd decision.

Currently, the company is being traded at a multiple of 26 times earnings, which is lower than the average earnings multiple of 51 for the U.S. technology sector. This indicates a potential discount. The company’s recent growth has been robust, as evidenced by its most recent quarterly results. Furthermore, the positive outlook for the semiconductor equipment market could aid in maintaining this growth trajectory in the future as well.

Looking ahead, with ASML expecting significant profit increases over the next five years, the company appears poised for strong financial improvement. In summary, astute investors might find it advantageous to buy this semiconductor stock when its value is low, as it may become a profitable investment in the future.

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2025-07-24 18:20