ASML Holding N.V. (ASML): A Bull Case Theory

We came across a bullish thesis on ASML Holding N.V. (ASML) on Substack by Best Anchor Stocks. In this article, we will summarize the bulls’ thesis on ASML. ASML Holding N.V. (ASML)'s share was trading at $666.72 as of May 1^st. ASML’s trailing and forward P/E were 26.46 and 24.57 respectively according to Yahoo Finance.

ASML’s latest earnings release came in the midst of a challenging macro environment and a shaky semiconductor sector, yet the market once again latched onto its quarterly results—a reaction that has become increasingly disconnected from the underlying long-term trajectory of the business. The volatility in ASML’s quarterly numbers is largely a result of its transition to EUV lithography, which has dramatically raised the average selling prices (ASPs) of its systems. With EUV machines often costing upwards of €200 million, the timing of order placement and revenue recognition can swing reported numbers by hundreds of millions of euros due to what amounts to calendar quirks. A single day’s delay in a major order or system acceptance can materially alter bookings or revenue figures, making quarterly comparisons almost meaningless. Despite this, investors continue to treat these short-term figures as bellwethers of future demand, a strategy that has proven unreliable time and again.

Take, for instance, the Q1 2024 net bookings figure of €3.9 billion—below the market’s €4.5 billion expectation—leading some to question the credibility of ASML’s 2025 revenue guidance. Yet this skepticism ignores the broader context: management has consistently reiterated that their 2025 revenue targets are largely “locked in” due to the strength of the order book accumulated over the past year. The company closed 2023 with a massive €7.1 billion in net bookings in Q4, comfortably exceeding the average €4 billion per quarter needed to secure its €35 billion 2025 revenue midpoint. Furthermore, in the most recent earnings call, management emphasized that 100% of 2025 EUV revenue is already in backlog, while 90% of DUV system revenue is also accounted for. Given the long lead times involved, especially for EUV systems, this backlog provides a much firmer foundation for future revenue than many give credit for.

Critics who extrapolate weak Q1 order numbers to project 2025 revenue often make the mistake of ignoring this backlog, instead opting for flawed heuristics like annualizing one quarter's orders and adding installed base management (IBM) sales. This approach not only disregards the timing mismatch between orders and revenue but also fails to capture the complexity of ASML’s business cycle. History has shown that weak bookings in one quarter are often followed by blowout figures the next, undermining the predictive value of short-term order trends. This recurring disconnect between short-term numbers and long-term fundamentals has led ASML to announce that, beginning in Q1 2026, it will stop disclosing quarterly order figures entirely. Backlog disclosures will shift to an annual cadence, reinforcing the message that investors should focus on structural demand drivers, not quarterly noise.

Despite the lumpy nature of its earnings, ASML posted solid growth in both sales and EPS this quarter. Still, management and thoughtful investors alike caution against annualizing these figures, given the erratic nature of order delivery and revenue recognition. Free cash flow, for example, was negative in Q1—an entirely normal outcome for the company given the seasonal nature of cash flows, not an indicator of financial distress. The real story lies not in the quarterly metrics but in the qualitative reaffirmation of long-term targets. Management reiterated both its 2025 and 2030 guidance, with revenue targets of €32.5 billion and €52 billion, respectively. They also maintained that 2026 is expected to be a growth year, backed by robust customer roadmaps and backlog visibility.

The real proxy for ASML’s long-term value lies in its unmatched technological leadership and its role in enabling the semiconductor industry's most advanced processes. As the only company capable of manufacturing high-NA EUV systems, ASML remains irreplaceable in the supply chain for advanced chip production. While headlines may continue to sway the stock in the short term, the underlying fundamentals—strong customer relationships, high barriers to entry, long lead times, and an expanding backlog—paint a picture of enduring strength. Investors who can look past quarterly volatility and focus on ASML’s structural advantages stand to benefit as the company continues to deliver on its multi-year roadmap.

ASML Holding N.V. (ASML) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 86 hedge fund portfolios held ASML at the end of the fourth quarter which was 64 in the previous quarter. While we acknowledge the risk and potential of ASML as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ASML but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.