ASML's EUV Dominance Positions It for Major Growth in 2026 and Beyond

ASML’s remarkable rally over the past 12 months reflects growing investor recognition of its irreplaceable role in the semiconductor supply chain. As the world’s only manufacturer of high-end extreme ultraviolet lithography systems, the Dutch equipment maker sits at a critical chokepoint in global chip production. With accelerating orders throughout 2025 and a significantly raised guidance for 2026, the company appears well-positioned to extend its gains as both artificial intelligence and memory chip markets drive unprecedented demand for advanced manufacturing capacity.

Financial Momentum Accelerates Despite Headwinds

ASML’s 2025 performance dramatically outpaced expectations, revealing the depth of demand for its core products. Revenue surged 16% to 327 billion euros, while earnings per share jumped 28% — a marked reversal from 2024, when net sales inched up just 3% and EPS actually declined 3%. That sharp turnaround tells an important story about shifting market dynamics.

The company initially faced headwinds from export restrictions affecting its china business and temporary capital expenditure pullbacks from major customers. However, as these constraints eased and demand normalized, ASML’s order backlog exploded to 388 billion euros by year-end 2025. This surge in orders — which typically precede revenue by several months — prompted the company to boost its 2026 revenue guidance significantly, now targeting 340-390 billion euros (representing approximately 12% growth at the midpoint). That projection substantially exceeds prior analyst expectations of just 7% expansion, signaling powerful underlying momentum.

Looking further ahead, ASML projects revenues reaching 440-600 billion euros by 2030, implying a steady 10% annual growth rate over the five-year period. Management’s confidence in these projections reflects visibility into years of future customer demand.

EUV Technology: An Unassailable Competitive Moat

The reason behind ASML’s seemingly recession-proof positioning lies in its unmatched technological capabilities. The company operates as a critical bottleneck in chip manufacturing: fabless chipmakers like Nvidia, AMD, Broadcom, and Qualcomm rely entirely on foundry partners to produce their processors, and those foundries — including TSMC, Samsung, and Intel — cannot manufacture cutting-edge chips without access to ASML’s euv systems.

This creates a powerful dynamic often described as a “picks and shovels” relationship with the broader technology ecosystem. As AI infrastructure spending accelerates, every advancement in AI chip performance requires increasingly sophisticated manufacturing processes that only euv lithography can deliver. The addressable market for such equipment is projected to expand at a 29.1% compound annual growth rate through 2032, according to industry forecasts. For ASML investors, this means steady, predictable demand driven by forces largely beyond any single chipmaker’s control.

Memory Chip Recovery Broadens Demand Sources

While artificial intelligence dominates headlines, a quieter recovery in the memory chip sector adds substantial tailwinds to ASML’s business. The memory market endured significant weakness from 2022 through 2023, as PC and smartphone shipments declined and rising interest rates forced technology companies to constrain data center capital expenditures.

Since 2024, conditions have normalized significantly. Consumer electronics markets stabilized, interest rate environments improved, and critically, AI infrastructure buildouts drove intense demand for high-bandwidth memory and advanced storage solutions. Memory chipmakers like Micron now upgrade their manufacturing processes to produce cutting-edge DRAM and NAND products, consuming both the company’s high-end euv systems and its older deep ultraviolet equipment. Analysts anticipate this recovery will persist for at least another two years, providing a steady revenue stream separate from pure AI acceleration.

China Factors: Short-Term Constraint, Long-Term Opportunity

ASML’s 2025 results demonstrate how export control policies influence its geography. Restrictions on certain advanced systems sold to china customers created a temporary drag on 2024 results. However, as the company successfully transitioned its customer base toward less-restricted product variants and as normalized business resumed, china-related constraints eased considerably during 2025.

Looking forward, the management commentary suggests that while regulatory headwinds will likely persist as geopolitical tensions remain, the overall impact has stabilized. The backlog accumulation indicates that customer demand for semiconductors from all regions continues expanding faster than supply, creating strong pricing power and offset capacity pressures. For investors, this suggests the company has already absorbed the worst disruption from trade restrictions, with a normalized regulatory environment pricing into forward expectations.

Valuation Justified by Growth Prospects and Market Position

ASML’s stock currently trades at approximately 42 times forward earnings — a premium multiple that might seem steep to bargain hunters. Yet several factors justify this valuation premium. First, the company projects earnings growth of 22% annually through 2027, significantly outpacing broader market growth rates. Second, its monopolistic control over euv manufacturing ensures sustainable competitive advantages and pricing power. Third, its exposure to the fastest-growing market segments — AI infrastructure and memory chips — provides multi-year revenue visibility.

These characteristics collectively warrant a higher valuation multiple than typical semiconductor equipment suppliers face. The combination of monopoly position, strong earnings growth, and exposure to structural technology trends creates a defensible investment case, even at premium prices.

Looking Ahead

ASML enters 2026 with powerful momentum: accelerating orders, raised guidance, and expanding gross margins collectively point toward continued strong execution. The euv business remains the foundation of chip industry growth, positioning the company to benefit from AI and memory market expansions for years to come. While no stock moves in a straight line upward, ASML’s structural advantages and current market positioning suggest the potential for meaningful further appreciation through 2026 and beyond.