<p>ASML's first-quarter overall performance exceeded market expectations. Although its second-quarter revenue guidance was slightly below market expectations, management simultaneously raised its full-year guidance and announced an expansion of EUV capacity to meet strong demand in 2027, leading mainstream Wall Street institutions to generally maintain a bullish stance.</p>
<p>According to Trading Desk, the core judgment from Citigroup and Morgan Stanley is: <strong>Management has publicly committed to delivering at least 80 Low NA EUV units more than 20 months before the end of 2027. This figure is significantly higher than the market consensus expectation of 72 units, implying an incremental revenue of at least €2 billion, which is over 4% higher than the current consensus. Considering the early timing of the commitment, analysts believe this number itself is conservative.</strong></p>
<p>The softness in the second-quarter guidance is a distraction, not the main theme. Management set the second-quarter revenue guidance at €8.7 billion, lower than the market consensus expectation of €8.94 billion, and the gross margin guidance of 51-52% was also slightly below the expected 52.3%. However, the logic worth focusing on is that <strong>demand has already outstripped supply, and decisions on expanding supply capacity have just been made.</strong></p>
<h2>First-Quarter Performance Exceeded Expectations Across the Board: Gross Margin and EPS Both Impressive</h2>
<p>ASML's first-quarter revenue reached €8.77 billion, slightly above the market consensus (Citigroup forecast €8.70 billion, Visible Alpha consensus €8.69 billion), and at the upper end of the company's own guidance range of €8.2 billion to €8.9 billion.</p>
<p>Gross margin performance was particularly outstanding, reaching 53.0%, higher than Citigroup's forecast of 52.3% and the market consensus expectation of 52.2%, also at the upper end of the company's guidance range, primarily benefiting from the high profitability contribution of Installed Base Management business.</p>
<p>Operating profit margin was 36.0%, approximately 120 basis points higher than the market consensus expectation of 34.8%. Although SG&amp;A and R&amp;D expenses were slightly higher than expected, overall profitability remained strong. Earnings per share (EPS) was €7.15, approximately 7% higher than the market consensus expectation of €6.70. The excess mainly came from higher earnings before interest and taxes (EBIT).</p>
<h2>Second-Quarter Guidance Below Expectations: Short-Term Disturbance, Unchanged Strong Momentum</h2>
<p>ASML's revenue guidance for the second quarter is approximately €8.70 billion, about 3% lower than the market consensus expectation of €8.94 billion. The gross margin guidance range is 51% to 52%, with the median approximately 78 basis points lower than the market consensus expectation of 52.3%. Combined operating expense guidance (R&amp;D expenses approximately €1.2 billion, SG&amp;A approximately €0.3 billion), Morgan Stanley calculated that second-quarter operating profit would be approximately €2.98 billion, with an operating profit margin of approximately 34.4%, lower than the market consensus expectation of 34.9%.</p>
<p>Despite this, management emphasized that demand for advanced logic processes (transitioning to 2nm) and memory chips (DDR5 and HBM) continues to accelerate. Installed base revenue is expected to reach €2.5 billion, and demand momentum remains strong.</p>
<h2>Full-Year 2026 Guidance Raised: Unexpected Strength in Non-EUV Demand as Main Driver</h2>
<p>Management raised the full-year 2026 revenue guidance to approximately €38 billion (guidance range €36 billion to €40 billion), with the median significantly higher than the previous expectation of approximately €36.5 billion.</p>
<p>The core driver for the increase is that customers are beginning to accelerate capacity expansion, especially immersion lithography machine (Immersion, i.e., non-EUV) demand far exceeding expectations. Management stated that while EUV demand had already been within expectations, the strength of immersion lithography machine demand exceeded predictions.</p>
<p>Notably, the raised full-year guidance now takes into account potential outcomes of export control discussions, though management provided no further specific details. Additionally, sales in China fell 56% quarter-on-quarter and 23% year-on-year, consistent with the company's prior assessment of weakening sales in that region.</p>
<h2>2027 Capacity Expansion: At Least 80 EUVs, Clear Upside Potential</h2>
<p>The most forward-looking information in this earnings report is capacity expansion.</p>
<p>ASML management clearly stated it will raise 2026 Low NA EUV capacity to at least 60 units (Visible Alpha consensus expectation is 59 units) and set the 2027 capacity target at at least 80 units, whereas the market consensus expectation is only 72 units.</p>
<p>Citigroup Research pointed out that <strong>management made a clear commitment regarding full-year delivery volume for 2027 (more than 20 months after April 2026), which likely includes certain conservative assumptions. If at least 80 Low NA EUV units are delivered in 2027, it will bring an additional revenue increment of at least approximately €2 billion, making total sales over 4% higher than the current market consensus expectation.</strong></p>
<p>Morgan Stanley also believes that the company's mention of demand surpassing supply and accelerating customer capacity expansion plans is strong evidence of robust sales momentum in 2027, and expects the market consensus expectation for 2026/2027 revenue to see an upward adjustment in the single-digit percentage range.</p>
<h2>Both Citigroup and Morgan Stanley Maintain Bullish Stance</h2>
<p><strong>Citigroup Research</strong> maintains a &#34;Buy&#34; rating on ASML with a target price of €1,600 (current stock price €1,284.20, implying upside of approximately 24.6%, total return including dividends approximately 25.1%). Citigroup believes ASML has strong execution capabilities, a clear path for capacity expansion, and clear upside potential for 2027 performance, forecasting that the company's EPS will achieve a compound annual growth rate (CAGR) in the high teens percentage range before 2030. Regarding valuation, Citigroup uses a 38x 2027 P/E ratio or 1.7x PEG for valuation.</p>
<p><strong>Morgan Stanley</strong> maintains an &#34;Overweight&#34; rating with a target price of €1,400 and lists ASML as a &#34;Top Pick.&#34; Morgan Stanley uses a 31x P/E valuation, believing this earnings report strengthens its investment logic, with an impact assessment on performance rated as &#34;slightly positive, slight upgrade.&#34;</p>

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<p>Citigroup and Morgan Stanley believe that with more than 20 months remaining until the end of 2027, ASML management publicly committed to delivering at least 80 Low NA EUV units. This figure is significantly higher than the market consensus expectation of 72 units, implying an incremental revenue of at least €2 billion. Given the early timing of this commitment, analysts consider this number itself to be conservative</p>

- ASML's Q1 performance surpassed market expectations, and while the Q2 revenue guidance is slightly below expectations, management raised the full-year outlook and announced EUV capacity expansion in response to strong demand projected for 2027.  
- Q1 revenue reached €8.77 billion, exceeding predictions, with a gross margin of 53.0% and an EPS of €7.15, both outperforming market consensus.  
- Management's commitment to deliver at least 80 low NA EUV machines by 2027 indicates strong future revenue potential, prompting analysts to maintain optimistic ratings for ASML's stock.

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Wall Street Reviews ASML Earnings: Q2 Guidance 'Minor Flaws Do Not Obscure Overall Excellence', Advanced Process + Memory Chip Demand Momentum Remains Strong