ASML.US earnings report verifies EUV demand, UBS expects profit to improve in the next two years
The Zhitong Finance App learned that UBS released a research report indicating that the overall results of global lithography machine leader ASML.US (ASML.US) in the third quarter of 2026 met buyers' expectations. EBIT was about 5% higher than market consensus, and the median EBIT guidance for the fourth quarter exceeded the consensus by about 7%. Based on the company's renewed and updated 2026 guidance, UBS expects the 2027-2028 EPS market consensus to increase by 5%-10%. UBS maintains Asmack's “confident buy” rating. The 12-month target price is 2,350 euros, which has about 56% upside compared to the closing price on October 13.
Q3 results: gross margin exceeded expectations, EUV sales surged year-on-year but slightly below consensus
Asmack's net sales for the third quarter were 11.6 billion euros, which is basically in line with market consensus. Among them, sales of basic installed equipment management were 3.3 billion euros, exceeding market consensus by 13%; sales of EUV systems were 4.1 billion euros, up 94% year over year, but 7% lower than market consensus. Among them, China's system sales increased 110% month-on-month, but fell 17% year-on-year, accounting for 23% of Asmack's Q3 product sales. Asmat continues to expect the Chinese market to account for around 20% of the Group's sales this year.
Furthermore, Asmat's gross margin reached 57.5%, higher than the consensus of 56%, driving Q3 EBIT to exceed the consensus by about 5%.
Key highlights: Production capacity is in short supply, and order intentions extend to 2029-2030
The report emphasizes that Asmack indicated that the 2027 and 2028 low-NA EUV and immersion DUV production capacity increase plans by 30% is still insufficient to meet customer needs. The company is studying further expansion of production capacity, especially in 2028, and developing a plan to upgrade the installed infrastructure. Asmat has received “a large number of 2028 orders”, and customers are strongly interested in 2029 or even 2030 orders. UBS believes this means that the backlog of orders disclosed in the next quarter will far exceed market consensus.
Furthermore, pricing negotiations have been completed, and the impact will be partially evident in 2027 and fully reflected in 2028. This provides additional support for future gross margin and profit growth.
Q4 profit guidance exceeded expectations, and EPS is expected to rise in 2027-28
For the fourth quarter of 2026, Asmack expects net sales of 142-15.2 billion euros (consensus of 14.3 billion euros), and gross margin of about 57% (consensus 56.7%), which means that Q4 EBIT is expected to exceed the consensus by about 7%.
Management comments on production capacity demand in 2028 and beyond suggest that there is room for improvement in EUV unit forecasts. Combined with a strong gross margin outlook, UBS believes the 2027-2028 gross margin market consensus may move upward, which in turn will push the 2027 and 2028 EPS forecasts to rise by 5%-10%.
How will investors react?
UBS believes that the results are broadly in line with buyers' expectations. The results may be slightly disappointing given the high market expectations prior to the earnings report. However, the financial report showed a strong backlog of orders for the next quarter and further strengthened confidence in the continued positive trend in gross margin. As a result, UBS viewed this update as a positive sign and reaffirmed Asmack's “Conviction Buy” (Conviction Buy) rating. The key focus of this call will be the scale of the planned capacity expansion in 2028, which is likely to determine how much upside the current forecast is.