Is ASML Stock a Buy as Rapid Growth Tests Its Premium Valuation?

ASML Holding ASML is making rapid strides, courtesy of its dominant position in extreme ultraviolet (“EUV”) lithography systems. An increase in AI-driven infrastructure spending is boosting demand for advanced logic and memory chips, thereby supporting the industry to which ASML belongs.

The sticking point is valuation. ASML already reflects substantial growth expectations, with it being well-positioned to address evolving customer requirements through the broad technology portfolio. However, the company’s sizeable debt and increasing competition across the semiconductor equipment industry leave little room for operational missteps.

ASML’s Growth Case Remains Powerful

ASML reported second-quarter revenues of $10.8 billion (€9.3 billion), up 24.2% year over year, aided by robust Installed Base Management sales. Net system sales totaled €6.6 billion, including €3.8 billion from EUV systems and €2.8 billion from non-EUV products.

Net system sales were almost evenly split between logic at 51% and memory at 49%. Gross margin and net income in the June quarter came in at 54% and €2.9 billion, respectively.

The semiconductor company gave impressive guidance for the third quarter, expecting total net sales between €11 billion and €12 billion, and a gross margin between 55% and 57%. For full-year 2026, ASML expects net sales between €43 billion and €45 billion, with a gross margin in the band of 54-56%.

In the second quarter, the company purchased around EUR 1.1 billion worth of shares under the 2026-2028 share buyback program. It has also declared an interim dividend of €1.88 per share for 2026, which was paid on Aug. 5, 2026.

The bottom-line performance was impressive, outshining the Zacks Consensus Estimate. This was the third earnings beat in the past four quarters, missing the mark on the other occasion by the semiconductor giant. The average beat is 3.9%.

AI Driving ASML’s Growth Story

ASML sees AI as a major long-term catalyst, strengthening demand for its EUV lithography systems. The company is using AI in engineering, product development and customer support to improve efficiency.

Its collaboration with Mistral AI to deploy generative AI capabilities across engineering workflows and customer service further strengthens operational efficiency while accelerating problem-solving and design processes.

Supported by billions invested in annual research and development, an unmatched technological moat and leadership in advanced lithography, ASML is well-positioned to capitalize on the AI-driven semiconductor investment cycle. With AI serving as both a powerful demand driver and an internal productivity enabler, the company remains a critical force underpinning the global AI revolution and long-term semiconductor innovation.

ASML’s Price Performance Surpasses Its Industry

Driven mainly by upbeat AI demand, shares of ASML have gained in double digits (% wise) so far this year, outperforming its industry. Peers Lam Research LRCX and Applied Materials AMAT have performed even better. While Applied Materials' shares have gained in triple digits, Lam Research's shares have gained in high double digits year to date.

YTD Price Comparison

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ASML’s Premium Valuation Demands Execution

ASML trades at 12.6X forward 12-month sales, above the 11.71X multiple for the Zacks sub-industry and its own five-year median of 9.43X. Its Value Score of F reinforces the valuation challenge. Lam Research and Applied Materials have a Value Score of D and F, respectively.

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Don’t Buy ASML Stock Now

Agreed that ASML’s growth trajectory remains attractive, but the stock’s premium valuation means execution must remain consistent. Increased competition, elevated debt levels (long-term debt at 2025-end was roughly $3 billion) and geopolitical trade restrictions represent major headwinds for the company.

The Zacks Consensus Estimate for ASML’s 2026 EPS calls for a year-over-year expansion of 60.5%. The consensus mark for 2027 EPS implies a year-over-year increase of roughly 32% from projected 2026 levels. See how the earnings estimates have been revised over the past 60 days.

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ASML currently carries a Zacks Rank #3 (Hold). Its Growth Score of A and Momentum Score of B point to favorable growth and price-trend characteristics, but the Value Score of F is a clear offset. The VGM Score of C also suggests a mixed overall Style Score profile.

The combination supports patience rather than an aggressive entry. Despite its impressive growth profile, investors may want to see continued execution and better alignment between growth and valuation before taking a more constructive view.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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