Lubin Investment · Blog

ASML Holding (ASML): Q2 2026 results, my verdict

2026-07-18 ·

ASML.AS: see the full analysis on Lubin Investment

ASML just raised its full year guidance dramatically, driven by artificial intelligence demand and an unprecedented technology milestone at Intel. Quality remains nearly perfect in my filter. Price, however, has already priced in a good chunk of this good news. Here is how I read it.

The quarter that confirms the monopoly

ASML reported second quarter results on July 15, 2026 well above its own targets: 9.3 billion euros in net sales, 2.9 billion euros in net income, or 7.59 euros per share, and a 54.0% gross margin. Each of these three figures beats both the range the company itself had guided to and analyst consensus.

What really changes the picture is not this particular quarter, but what ASML says comes next. The company raised its full year 2026 sales guidance to a range of 43 to 45 billion euros, up from 36 to 40 billion announced just three months earlier after the first quarter. A revision of this size in a single quarter is rare for a company this size. For the third quarter, ASML is already targeting 11.0 to 12.0 billion euros in sales with a 55 to 57% gross margin, so accelerating further.

The milestone that changes things: Intel and High-NA EUV

The most significant announcement of the quarter is not in the numbers but in a technical release: Intel Foundry has qualified ASML's High-NA EUV technology for volume production of logic chips, a world first for this type of machine. Specifically, Intel is already using this equipment on its most advanced manufacturing node, 18A, to produce a subset of its Core Ultra Series 3 processors.

To understand why this matters, it helps to revisit what lithography actually is. It is the technique of projecting a circuit pattern onto a silicon wafer using light, much like a slide projector, but at a scale thousands of times smaller than a human hair. EUV (extreme ultraviolet) lithography is the only technology able to etch the finest transistors used in the most advanced chips, and ASML is the only company in the world that knows how to build these machines. High-NA EUV is the next generation of this technology, with an even more precise optical system that can etch even smaller patterns. The fact that Intel, historically more cautious than TSMC or Samsung about adopting new ASML machines, is already using it in real production validates that the technology works at industrial scale, not just in the lab.

Alongside these results, new CEO Christophe Fouquet also announced a 30% increase in production capacity for Low-NA EUV and immersion DUV machines, the older generation still widely used. His justification, in his own words, is customer demand he called extremely strong. Raising production capacity by 30% for a machine that costs, depending on the model, between 200 and 400 million dollars each and takes months to assemble is not a decision made on a whim: it signals order visibility that ASML now says extends into 2027 and 2028.

ASML's real moat: why no one can copy it

My quality filter validates ASML's moat (its competitive fortress, what stops a rival from taking its place) through two specific mechanisms: switching costs and scale economics. Switching costs first. A chipmaker does not pick a lithography machine the way it picks an office supplier: it designs its entire manufacturing process, often over several years, around the exact tolerances of the specific ASML machine it uses. Switching suppliers would mean requalifying entire production lines, with months or even years of lost yield during the transition. Nobody does this lightly.

Scale economics come next, and this may be the strongest lock of all. Building an EUV machine capable of etching at atomic scale requires decades of research in optics, plasma physics, and precision mechanics, originally funded by a consortium of the world's largest chipmakers themselves (Intel, Samsung, and TSMC were all part of it), before ASML became dominant enough to fund this development on its own. Nikon and Canon, the two other historic big names in lithography, both tried to follow into EUV and gave up, unable to catch up with ASML's technological and financial lead. This is not a monopoly of circumstance, it is an engineering monopoly built over more than fifteen years.

Quality: a near perfect score, with two honest caveats

On the extended model my filter applies to ASML (25 criteria, a more detailed grid I reserve for certain companies to capture more qualitative nuance), the stock validates 24 out of 25 criteria. The strengths leave little doubt: a 29.4% net margin, sales growing 15.6% a year on average over five years, a 116.7% cash return on invested capital (in other words, every dollar reinvested in the business generates more than one dollar back each year, a level very few industrial companies reach), a net cash position, and an end market, semiconductors, still growing structurally.

The two caveats my filter flags are instructive, and I would rather put them on the table than hide them. First, the CEO's personal stake: Christophe Fouquet, who has led ASML since April 2024 after eight years at the company, owns just 0.002% of the capital, a low level that does not align him strongly with minority shareholders compared with a founder who kept a meaningful stake. Second, the timing of buybacks: my filter notes that ASML's recent buybacks mostly happened at elevated price levels rather than at cycle lows, which is the opposite of what a truly value creating buyback should do (buy when the stock is cheap, not when it is expensive). Neither point challenges the quality of the business, but both are capital allocation signals worth watching.

The price in three steps

Step one: where does today's price sit in ASML's own history? The P/FCF (price-to-free-cash-flow, the share price divided by free cash flow, the cash that actually remains once every bill is paid) now stands at 61.6 times. This level sits at the 67th percentile of its own five year range, meaning ASML has traded more expensively than this about a third of the time over that period, yet still sits in the upper third of its own valuation range. So this is not the highest price ever paid for this stock, but it is clearly not a discount either.

Step two: why this level? The free cash flow trajectory tells the story. It fell from 7.2 billion dollars in 2022 to just 3.2 billion in 2023 (a dip tied to heavy inventory and capacity investment ahead of the High-NA ramp), then rebounded to 9.1 billion in 2024 and hit a record 11.0 billion in 2025. Revenue climbed without interruption from 21.2 to 32.7 billion dollars over the same period. The market is paying for this acceleration, reinforced this week by the guidance raise and the Intel milestone: it is betting that demand tied to artificial intelligence and next generation memory will extend this trajectory for several more years, with order visibility now stated through 2027-2028.

Step three: is it justified? My site's reasonable buy price model, which projects free cash flow per share five years out to derive a discounted value, puts this price at 1403 dollars for ASML, against a current share price of 1748 dollars: roughly a 20% premium under this strict calculation. I readily add nuance here: a monopoly with multi year order visibility normally deserves a premium over a generic valuation model, which tends to undervalue a durable dominant position. But 61.6 times free cash flow is still a multiple usually reserved for fast growing software, not an industrial equipment maker subject to a capex cycle. I am not saying ASML is overpriced outright, I am saying the margin of safety has shrunk and a good part of this quarter's good news is already in the share price.

The risk I am watching: China

China should account for roughly 20% of ASML's 2026 revenue, a share already reduced in recent years by US and Dutch restrictions on exporting advanced lithography equipment to China, designed to slow its ability to produce cutting edge chips usable for military or strategic purposes. ASML itself has warned that new restrictions could push its results toward the low end of guidance. This is a risk I watch without being able to quantify it precisely: it depends on political decisions, not the company's operating performance, and it can shift overnight depending on the geopolitical climate.

How I read it

ASML confirms this week everything that already made this stock exceptional: an engineering monopoly on a technology nobody else knows how to build, demand accelerating enough to justify the year's biggest guidance revision, and an industrial milestone at Intel that widens the base of customers validating this technology. On quality, it is hard to find better in my filter. On price, the market has already largely priced in this good news, and the current multiple leaves little room for disappointment. This is exactly the kind of stock where I always separate quality from price before deciding, which is what pushed me to build my analysis tool. You can find the full breakdown on the ASML analysis page, my full standalone thesis in my fundamental analysis of ASML, and my methodology.

FAQ

What is EUV lithography and why does ASML have a monopoly on it?

Lithography projects a circuit pattern onto a silicon wafer using light. EUV (extreme ultraviolet) is the only technology able to etch the finest transistors in advanced chips. ASML is the only company in the world that knows how to build these machines, after more than fifteen years of research no rival (Nikon, Canon) has managed to match.

What is High-NA EUV and why does the Intel milestone matter?

High-NA EUV is the next generation of EUV lithography, with a more precise optical system for etching even smaller patterns. Intel Foundry just qualified it for volume production on its 18A node, a world first proving the technology works at industrial scale, not just in testing.

Why is ASML's P/FCF so high, and is that abnormal?

The P/FCF (share price divided by free cash flow) sits at 61.6 times, the 67th percentile of ASML's 5 year history: elevated but not the highest ever paid. It reflects a real acceleration in demand (guidance raise, Intel milestone, order visibility through 2027-2028), but leaves little margin of safety if that demand disappoints.

What is the main risk for ASML today?

US and Dutch export restrictions to China, which should account for roughly 20% of expected 2026 revenue. ASML has warned that tighter restrictions could push results toward the low end of guidance. This is a political risk, hard to quantify in advance.

Should I buy ASML stock after these results?

Quality is near perfect in my filter, but price has already priced in a good chunk of this quarter's good news, with roughly a 20% premium under my strict model. This is not personalized investment advice, do your own research.

ASML.AS: see the full analysis on Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).