Wall Street turns bullish en masse: ASML's surging capacity spells the end for memory 'peak price' talk

Author: Wall Street News

ASML delivered second-quarter results far surpassing expectations, substantially raised its full-year guidance, and—unusually—provided a clear 2027–2028 capacity expansion roadmap, directly addressing core market concerns about the sustainability of AI-driven demand. Leading Wall Street banks immediately responded in unison, with Goldman Sachs, JPMorgan, Barclays, and others uniformly maintaining or reiterating Buy ratings,arguing that these results conclusively validate the AI supply bottleneck thesis and deliver a strong rebuttal to bearish narratives predicting memory prices will peak in 2028.

ASML reported second-quarter revenue of EUR 9.3 billion, exceeding Bloomberg’s consensus estimate of EUR 8.9 billion, with a gross margin of 54%, well above the guided range of 51%–52%. The company promptly raised its full-year 2026 revenue guidance from EUR 36–40 billion to EUR 43–45 billion—the midpoint now approximately 11% above market consensus—and also lifted its full-year gross margin guidance to 54%–56%. More importantly, management explicitly stated it would expand low numerical aperture EUV and immersion DUV capacity by roughly 30% in both 2027 and 2028, a statement that directly triggered significant upward revisions to 2028 earnings expectations.

Following the announcement, ASML's Amsterdam-listed shares rose by approximately 4%, while Nasdaq 100 futures advanced in tandem by about 40 basis points. SK Hynix's Seoul-listed stock surged 8.8% in a single day, catching up with the earlier 27% gain in its U.S.-listed American Depositary Receipts (ADRs). Goldman Sachs maintained a Buy rating with a 12-month price target of EUR 2,000, implying roughly 29% upside from current levels; JPMorgan also reiterated an Overweight recommendation with a EUR 1,900 price target.

All key financial metrics for ASML’s second quarter significantly exceeded market expectations. According to Goldman Sachs’ research report, Q2 revenue reached EUR 9.327 billion, 6% above consensus; EBIT came in at EUR 3.456 billion, surpassing consensus by 13%; earnings per share (EPS) were EUR 7.58, approximately 11% above consensus. The gross margin of 54% not only far exceeded the upper end of guidance but also stood about 230 basis points above market consensus.

Third-quarter guidance also substantially surpassed expectations. The company forecasts Q3 revenue of EUR 11–12 billion, with a midpoint approximately 11% above consensus; gross margin guidance of 55%–57% implies Q3 EBIT will exceed consensus by roughly 26%. According to JPMorgan’s research report, the Q3 revenue midpoint of EUR 11.5 billion is 12% above consensus, and the gross margin midpoint of 56% exceeds consensus by 350 basis points.

JPMorgan analyst Sandeep Deshpande noted that the earnings beat was partly driven by Installed Base Management (IBM) business, which generated approximately EUR 300 million more revenue than expected. Software-led productivity upgrades and the continued expansion of EUV serviceable installed base are expected to drive this segment’s growth of over 30% this year, providing additional support to gross margins.

The most market-anticipated aspect of this earnings release was management’s clear commentary on capacity expansion for 2027–2028. ASML stated that building on approximately 65 low-numerical-aperture (low-NA) EUV units in 2026, it plans to increase production by roughly 30% to about 85 units in 2027 and is exploring a further 30% capacity increase in 2028 to reach around 110 units. Meanwhile, DUV immersion capacity will expand from approximately 130 units in 2026 to about 169 units in 2027, and further to roughly 220 units in 2028.

According to Goldman Sachs’ estimates, this capacity plan implies low-NA EUV shipments of 85/110 units in 2027/2028, significantly exceeding consensus expectations of 85/89 units; immersion DUV shipments are projected at 169/220 units, also well above consensus figures of 137/146 units.

JPMorgan pointed out that ASML’s 2028 capacity guidance already exceeds the bank’s previous sell-side high-end forecast. Based on rough calculations, if this capacity plan materializes, ASML’s 2028 EPS could surpass EUR 65, and actual earnings may be even higher when combined with the strong momentum in Installed Base Management. Goldman Sachs’ trading desk also noted that the 2028 EUV capacity target of approximately 110 units falls squarely within the 'super-bullish range' (110–120 units), far exceeding the sell-side consensus expectation of around 89 units.

Goldman Sachs stated that ASML has largely secured most of the EUV orders needed for 2027 and has already received a substantial number of orders for 2028, with management describing order intake as 'extremely strong.'

Management explicitly stated that AI-driven demand continues to strengthen in both logic and memory segments, supporting customers’ further capacity expansion at advanced process nodes. In advanced logic, ASML noted that customers are simultaneously ramping up capacity at the 5/4/3-nanometer nodes to meet AI demand, aggressively pushing toward volume production of 2-nanometer technology, and beginning preparations for the transition to the 1.4-nanometer node. The company expects advanced logic revenue to grow by approximately 25% year-over-year in 2026.

On the memory side, ASML indicated that tight supply of DDR and HBM is prompting customers to accelerate investments, with increased adoption of EUV and advanced immersion lithography further boosting equipment demand. The company forecasts memory revenue to increase by about 75% year-over-year in 2026.

Goldman Sachs trading desk commentary noted that as the memory market transitions toward HBM4/HBM5 and traditional server DRAM requiring advanced 1c/1d-nanometer nodes, memory manufacturing is undergoing a fundamental paradigm shift. The number of EUV layers in 1c DRAM has already risen to more than five, while 1d and 0a generations are planned to adopt EUV across all layers. Deep ultraviolet multi-patterning processes have now hit physical limits, making ASML a primary beneficiary of this structural transformation.

Goldman Sachs further noted that wafer intensity for HBM is significantly higher than for conventional DRAM, and this dual expansion is severely straining global foundry capacity, keeping memory prices elevated for an extended period. Given the structural complexities involved in transitioning to advanced nodes, bearish arguments predicting that memory prices will peak before 2028 or that supply shortages will ease substantially 'sound premature.'

Multiple major investment banks swiftly issued positive assessments following the earnings release, though they showed minor divergence in interpreting the 2027 EUV capacity guidance.

Barclays analyst Simon Coles stated that ASML delivered most of what investors were hoping for, and that the low-NA EUV capacity guidance for 2027 and 2028 should alleviate market concerns over potential supply constraints. He noted that first-half low-NA EUV order value could reach as high as EUR 22 billion, setting a record level.

JPMorgan’s Sandeep Deshpande remarked that although the company did not achieve 90 EUV units of capacity in 2027, 'we believe this is immaterial,' as the 2028 guidance for both EUV and DUV capacity significantly exceeded expectations. Moreover, the projected ~35% revenue growth in 2026 already surpasses current market expectations for the overall wafer fab equipment sector, effectively signaling roughly 30% growth over the next two years.

Morgan Stanley analyst Lee Simpson noted that although the company no longer discloses order data, management indicated that order intake remained 'very strong' in the first half, with customers actively seeking to accelerate capacity expansion—signaling robust sales momentum into 2027.

Jefferies analyst Janardan Menon maintains a relatively cautious stance, noting that the company's forward-looking commentary was mixed: strong growth in sales and gross margins from its installed-base management business was particularly positive, but its 2027 EUV guidance fell short of recently elevated market expectations.

Oddo BHF expects consensus earnings forecasts to be revised upward by approximately 20% and stated, 'ASML remains the story of unmatched technological leadership, now benefiting from an AI-driven cycle that is fundamentally different.'

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