After Falling on Earnings, Should You Buy the Dip in ASML Stock?

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At first glance, it is evident that ASML Holding N.V.’s (ASML) competitive advantages stand out. The company is the globe’s sole manufacturer of extreme ultraviolet lithography (EUV) equipment, which key players such as Taiwan Semiconductor Manufacturing Company Limited (TSMC) heavily depend on to produce the world’s most sophisticated chips.

Generally, being the sole manufacturer of a cutting-edge machine gives a company a strong competitive edge, as is the case with ASML. However, this advantage hasn’t been sufficient to propel its stock to success recently. In contrast, other sectors such as artificial intelligence (AI) and semiconductors have experienced significant growth, while ASML has plummeted sharply since last year’s peak. Following a disappointing earnings report on Wednesday, the stock dropped an additional 8.3%, bringing its current decline to 32% from that record high last year.

Due to the fact that ASML specializes in selling highly-priced machinery (approximately $200 million each), the company’s financial outcomes may fluctuate from one quarter to another. In the second quarter, they announced a revenue increase of 23%, totaling 7.69 billion euros. This figure surpassed expectations of 7.52 billion euros, although it represented a marginal decrease of nearly 1% compared to the previous quarter.

1. The business saw a decrease in the number of new lithography machines sold, going from 73 in the initial quarter to 67. However, net bookings exceeded predictions, jumping from 3.9 billion euros in Q1 to 5.5 billion – a promising sign of growth. Approximately 2.3 billion euros of these orders were for EUV machines.

2. The company experienced a drop in the number of lithography machines sold this quarter, moving from 73 in the first quarter down to 67. Despite this, net bookings surpassed expectations, rising from 3.9 billion euros in Q1 to 5.5 billion – an indication of positive growth. A significant portion of these orders, around 2.3 billion euros, were for EUV machines.

Moving toward the bottom of the financial report, profits showed a small decrease quarter-over-quarter. The gross margin dipped slightly from 54% to 53.7%, and earnings per share dropped from 6.00 euros in Q1 to 5.90 euros.

What’s ailing ASML

During the second quarter, our performance matched expectations, but we faced certain hurdles beyond our control that persistently affect our operations.

Initially, the limitations on exporting semiconductor technology to China have caused difficulties for ASML. During their earnings discussion, management announced a decrease in their backlog from 4.4 billion euros to 33 billion euros, which was due to cancellations of orders linked to those restrictions. This reduction primarily concerned deep ultraviolet (DUV) lithography machines, which are less sophisticated than the EUV machines they’re famous for.

It was more discouraging to investors that the CEO’s comments about 2026 were cautious. Roger Dassen stated: “Regarding 2026, our AI customers’ foundations appear solid. However, we are still confronted with growing uncertainties due to economic and political factors worldwide. Consequently, although we are readying ourselves for growth in 2026, we cannot guarantee it yet.

In simple terms, there’s some uncertainty about whether the company’s revenue will increase next year. However, for the third quarter, they anticipate a revenue growth of between 7.4 billion and 7.9 billion euros, which represents a potential increase of 15%.

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What it means for ASML

I’ve found myself in the same boat as many other tech investors, watching ASML’s stock take a hit because of unclear guidance. It’s not just ASML; several companies have decided to withhold their forecasts due to the ambiguity surrounding tariffs, export controls, and the turbulent international economic landscape.

Arm Holdings chose not to provide full-year forecasts for their upcoming fiscal year in their May earnings report, leading to a drop in stock prices. This decision wasn’t a sign of weakness on their part, but rather an expression of uncertainty about the overall economy and their customer base, as they too had yet to issue guidance.

Despite temporary challenges in the semiconductor equipment cycle, the growing demand for AI-related products bodes well for ASML. Investors should keep their focus on the long-term benefits that artificial intelligence brings to the table. For now, ASML is navigating through the fluctuations of the semiconductor equipment industry, which moves independently from the broader chip sector. However, upgrades in equipment are inevitable in the future.

Following the stock’s decline on Wednesday, it currently sells at a price-to-earnings ratio of approximately 30. This appears to be a reasonable cost given that the company is an industry leader with a monopoly in cutting-edge technology and the possibility of rapid growth due to AI. The company still anticipates generating revenue between 44 billion and 60 billion euros by 2030, and expects its gross margin to increase to between 56% and 60%.

This suggests significant revenue increases beyond ten, and an improvement in profit margins. If the company manages to achieve this, the shares are likely to perform well for the subsequent five years.

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2025-07-22 14:21