ASML set to report Q2 earnings as AI demand tests capacity limits

ASML Holding, Europe's most valuable company at €610 billion ($696 billion), reports second-quarter earnings Wednesday as the Dutch chip-equipment maker races to expand capacity amid surging AI demand and navigates U.S. export restrictions targeting China.

"The semiconductor industry's growth outlook continues to solidify, driven by ongoing AI-related infrastructure investments," Chief Executive Christophe Fouquet said after the company's first-quarter results. "Demand for chips is outpacing supply."

ASML is forecast to report net profit of €2.61 billion, up 8.8% from a year earlier, on revenue of €8.8 billion, a 14% increase, according to LSEG estimates. The company raised its full-year revenue forecast to €36 billion to €40 billion in April from a prior range of €34 billion to €39 billion, and analysts expect another upgrade Wednesday.

The company dominates the market for extreme ultraviolet lithography systems, the $300 million machines essential for producing the most advanced AI chips. ASML plans to ship 60 EUV tools this year and 80 in 2027, though JPMorgan analysts believe it could produce as many as 110. Susquehanna analyst Mehdi Hosseini said all of ASML's capacity through the end of 2027 may already be booked.

Export Controls Cloud Outlook

Clouding the outlook is a proposed U.S. law requiring allies to align with export restrictions curbing China's ability to make advanced chips, with ASML named in the legislation. The company has denied selling its most advanced EUV tools to China, which is forecast to account for up to 20% of ASML's sales this year through legal purchases of less-advanced DUV systems for automotive and industrial chips.

Morningstar analyst Javier Correonero said ASML's 2030 sales target of at least €44 billion now looks "overly conservative," forecasting €60 billion instead. The stock trades at 49 times estimated 2027 earnings, leading some analysts to caution that valuation is stretched. KBC analyst Thomas Couvreur maintained a "hold" recommendation, saying "much of the upside is reflected in the current price."

Others see room for gains. ING analyst Marc Hesselink said "strong results combined with further capacity expansion could support a catch-up" after ASML's 55% dollar-denominated gain this year trailed the Philadelphia Semiconductor Index's 76% surge. ASML has secured extra supplies of long-lead-time parts including lenses and mirrors from German supplier Zeiss and high-power lasers from Trumpf, the company said.

The guidance raise would signal management expects AI-driven demand to accelerate further. Investors will watch Wednesday's earnings call for updates on capacity expansion plans and the impact of proposed U.S. export controls on China sales.

This article is for informational purposes only and does not constitute investment advice.