Considersing a 18% drop, Is it advisable to invest in ASML Holding's current dip?
ASML Holding, the Dutch company that dominates the global lithography equipment market with a 90% share, has reported strong financial results for the second quarter of 2025. The company's revenue increased by 24%, while earnings surged by 47%, both figures surpassing analysts' expectations.
The company's Q2 revenue stood at €7.4 billion to €7.9 billion, but this fell short of the analysts' expectations of €8.2 billion. Despite this slight miss, ASML's stock, which is currently trading at 26 times earnings, represents a discount compared to the average earnings multiple of 51 for the U.S. technology sector.
ASML's CEO, Christophe Fouquet, reiterated the company's 2030 revenue forecast of €44 billion to €60 billion, with the midpoint indicating a 60% increase from this year's projected revenue of €32.5 billion. This forecast is backed by the prospects of the semiconductor equipment market, which could help ASML sustain its momentum in the long run.
However, ASML's conservative guidance indicates that it is wary of the ongoing tariff-related turmoil and export controls that have the potential to hamper semiconductor sales. The company expects its gross margin to land between 56% and 60% by the end of the decade, which would be a nice bump over its 2025 gross margin forecast of 52% at the midpoint.
ASML's bookings increased by 40% on a quarter-over-quarter basis, and the company received new orders worth €5.5 billion during the second quarter of 2025, exceeding the Wall Street estimate of €4.8 billion. This strong demand is not limited to ASML; McKinsey forecasts that $6.7 trillion will be spent on data centers globally by 2030 to support both AI and non-AI workloads, with 60% of the spending going toward manufacturing chips and other computing hardware.
ASML is witnessing strong demand from artificial intelligence (AI) customers, a trend that is likely to continue as the AI industry grows. If ASML's stock continues to dip further, it may be a good idea to consider buying it from a long-term perspective, considering the potential margin gains that ASML is anticipating over the next five years. The company seems set to deliver robust bottom-line growth.
However, ASML's stock could continue to remain under pressure in the near term due to the negative sentiment created by its cautious outlook. The company cannot confirm growth in 2026 yet due to increasing uncertainty driven by macro-economic and geopolitical developments.
Despite these challenges, McKinsey expects a $1 trillion investment in new semiconductor plants through the end of the decade. This massive spending on semiconductor plants could provide a significant boost to ASML's business in the long run, helping the company to maintain its market dominance and deliver strong financial performance.
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