ASML Holding NV ADR (ASML.US) earnings may once again exceed expectations; Morgan Stanley raises its earnings forecasts for this year and next, maintaining an "Overweight" rating.

Morgan Stanley released a research report stating that ASML Holding NV ADR (ASML.US) third-quarter results are expected to once again deliver a positive surprise, with continued strong demand from memory chips and logic chip foundries potentially driving revenue above the upper end of the company's previous guidance. The bank also raised its earnings forecasts for ASML Holding NV ADR for 2026 and 2027, maintaining an "Overweight" rating, a target price of EUR 1,700 (approximately USD 1,950), and its status as the "top pick" in the European semiconductor sector. However, Morgan Stanley noted that significant questions remain in the market regarding growth momentum in 2028, and ASML Holding NV ADR management's commentary on EUV capacity and the China market could become key factors affecting year-end stock performance. Morgan Stanley expects ASML Holding NV ADR to report third-quarter 2026 results on October 14. The bank believes the market is currently underestimating the strength of near-term demand in memory chips and logic foundry segments, and it expects ASML Holding NV ADR third-quarter revenue to reach EUR 12.3 billion, about 5% above the consensus estimate of EUR 11.7 billion, and exceeding the upper end of the company's previous guidance. Third-quarter earnings per share are estimated at EUR 11.75, about 8% above the market expectation of EUR 10.84. Morgan Stanley expects this strong momentum to continue into the fourth quarter, forecasting ASML Holding NV ADR fourth-quarter revenue of approximately EUR 14.5 billion, with gross margin rising further to 57%; full-year revenue is expected to reach approximately EUR 45 billion, at the upper end of the company's guidance range of EUR 43 billion to EUR 45 billion. The bank expects ASML Holding NV ADR 2026 earnings per share of approximately EUR 41, about 5% above consensus. However, after ASML Holding NV ADR already substantially raised its fiscal 2026 revenue guidance from the previous EUR 38 billion to EUR 40 billion to EUR 43 billion to EUR 45 billion last quarter, Morgan Stanley believes the room for another significant upward revision to full-year revenue guidance this quarter is relatively limited. Rather than the earnings figures alone, investors this time may focus more on management's latest assessment of capacity, the China market, and 2028 order trends. Raising earnings forecasts for this year and next; 2028 growth momentum still to be observed Based on its assessment of near-term demand and improving profitability, Morgan Stanley significantly raised its earnings forecasts for ASML Holding NV ADR for this year and next. Specifically, the bank raised its ASML Holding NV ADR 2026 revenue and EPS forecasts by 4% and 7%, respectively, and its 2027 revenue and EPS forecasts by 9% and 14%, respectively. Morgan Stanley believes that a value-based pricing strategy, combined with an expanding range of foundry customer demand, is expected to jointly drive margin improvement and boost sales of DUV (deep ultraviolet lithography) and EUV (extreme ultraviolet lithography) equipment. After adjustments, Morgan Stanley expects ASML Holding NV ADR 2026 revenue of approximately EUR 44.981 billion, up about 38% year-over-year; rising further to EUR 55.607 billion in 2027, up about 24% year-over-year. EPS for the same periods is expected to reach EUR 40.99 and EUR 55.64, respectively. By 2028, the bank expects revenue to rise further to EUR 60.484 billion, with EPS reaching EUR 62.32. But Morgan Stanley believes the question truly worth the market's attention has gradually shifted from earnings upgrades for 2026-2027 to whether growth can continue to accelerate in 2028. The bank raised its ASML Holding NV ADR 2028 revenue and EPS forecasts by 7% and 10%, respectively, but this upgrade mainly stems from a higher 2027 base rather than clear signals of further demand acceleration in 2028. Morgan Stanley said it currently expects growth momentum to be sustained but "has not yet seen signs of acceleration." Under its latest forecasts, ASML Holding NV ADR revenue growth will slow from approximately 38% in 2026 and approximately 24% in 2027 to approximately 9% in 2028. Therefore, 2028 order visibility and customer capital expenditure plans may become important bases for the market to judge ASML Holding NV ADR's next-stage valuation potential. EUV capacity expected to continue rising; Morgan Stanley forecasts 98 units shipped in 2027 Capacity is another major focus of this earnings release. Morgan Stanley noted that the market had previously worried ASML Holding NV ADR might struggle to deliver more than 85 low-NA (Low-NA) EUV units next year, but the bank believes the manufacturing efficiency gains ASML Holding NV ADR has recently achieved provide the company with greater capacity flexibility than the market expects. Morgan Stanley expects ASML Holding NV ADR management may raise its fiscal 2027 EUV capacity guidance to more than 90 units this time, while reiterating that low-NA EUV equipment capacity can reach at least 110 units in 2028. However, the bank also emphasized that whether end-customer demand can truly reach this capacity level remains to be seen. In terms of actual shipment forecasts, Morgan Stanley expects ASML Holding NV ADR's EUV equipment shipments to rise from 46 units in 2025 to 74 units in 2026, and reach 98 units and 103 units in 2027 and 2028, respectively. This means EUV will remain an important force driving ASML Holding NV ADR's equipment business expansion over the next two years. In addition, ASML Holding NV ADR's expansion project at the Brainport Industries Campus (BIC) in the Netherlands is expected to advance in 2028-2029. Morgan Stanley believes the project will initially support DUV equipment production and then gradually shift toward EUV manufacturing, thereby providing room for further EUV capacity expansion after 2029. China market risks remain in focus; domestic memory capacity expansion may instead support DUV demand Beyond capacity, the China market remains an important variable for investors watching ASML Holding NV ADR. Morgan Stanley noted that the market is mainly concerned about two issues: first, competitive pressure from domestic Chinese semiconductor equipment makers, and second, potential further export restrictions. These risks may still limit ASML Holding NV ADR's valuation level. But the bank believes the market may be overlooking the potential demand for ASML Holding NV ADR arising from continued capacity expansion by Chinese memory chip makers. Morgan Stanley's Asia-Pacific team expects that by 2028, Chinese memory chip companies will further increase their share of the global market. Among them, CXMT Corporation (688825)'s DRAM capacity is expected to surpass that of Micron Technology, Inc. (MU.US), currently the world's third-largest DRAM maker, while Yangtze Memory may become the world's second- or third-largest NAND maker. The bank expects global DRAM capacity to reach approximately 3.374 million wafers per month (measured in wafers) in 2028, of which CXMT Corporation may account for about 15%, corresponding to monthly capacity of approximately 500,000 wafers. Morgan Stanley believes that capacity expansion by emerging Chinese memory makers could become a driver of ASML Holding NV ADR DUV equipment demand in 2027 and 2028, respectively, and this potential positive has not yet been fully priced in by the market. It is worth noting that ASML Holding NV ADR previously expected China market sales to account for approximately 20% of total company sales, roughly in line with levels of the past few years. At the same time, the company previously expected low-NA EUV capacity to rise to approximately 85 units and 110 units in 2027 and 2028, respectively. Memory and advanced logic demand jointly support; ASML Holding NV ADR remains Morgan Stanley's top European semiconductor pick From a demand structure perspective, Morgan Stanley believes ASML Holding NV ADR's growth over the next two years does not depend on a single market. On the memory side, continued expansion in HBM and DRAM demand is expected to drive memory makers to increase capital expenditure; on the logic side, a recovery in investment by advanced-process foundry customers will also continue to support EUV equipment demand. In addition, as the installed base of EUV equipment continues to expand, ASML Holding NV ADR's service business is also expected to generate more recurring revenue. The bank expects ASML Holding NV ADR's gross margin to rise from 52.9% in 2025 to 55.3% in 2026, and further to 55.6% in 2027; EBIT margin is expected to jump from 34.7% in 2025 to 41.2% in 2026, and reach 43.7% in 2027. On valuation, Morgan Stanley continues to assign ASML Holding NV ADR an "Overweight" rating and lists it as its top pick within its European semiconductor coverage, maintaining a target price of EUR 1,700. Based on the September 16 closing price of EUR 1,396.20, this target price implies approximately 22% upside. The report also noted that ASML Holding NV ADR is the company in the bank's European semiconductor coverage most likely to post an earnings beat this quarter. Morgan Stanley values the stock using 2028 estimated EPS of EUR 62.32 and a 27x P/E multiple. The bank believes that significantly increased foundry capital expenditure, a broader foundry customer base, and continued strength in memory chip prices could still bring further upside. However, given the lack of clear evidence for accelerated growth in 2028 and lingering China market risks, the bank also shifted its valuation multiple from the previously referenced cyclical peak range to the upper end of the normal-cycle valuation range.