The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Jennifer Johnson
LONDON, July 15 (Reuters Breakingviews) - Anyone searching for a hint that the AI investment boom is peaking won't find one in ASML’s ASML.AS interim results, released on Wednesday. On the contrary: the Dutch group, which makes the giant machines used to print tiny patterns on computer chips, is planning to increase its production capacity in 2027, and possibly 2028, to meet soaring demand. That should help ASML shrug off accusations that it’s a bottleneck in the AI supply chain. The question now facing Europe’s largest company by market capitalisation is whether it can sustain this momentum over the much longer term.
ASML’s flagship products are its extreme ultraviolet lithography (EUV) tools, which are essential for producing the most advanced AI chips, typically manufactured by TSMC and designed by Nvidia. The €624 billion group’s CEO, Christophe Fouquet, said he plans to add 30% more capacity in this area next year, which works out at about 85 machines. It will subsequently "investigate" adding another 30% in 2028, equating to 110 units. That would far surpass analysts' previous estimate of some 89 low-NA EUV machines for 2028, based on Visible Alpha data. It would also be more than double the number of units ASML shipped in 2025. At the same time, Fouquet is planning similar production hikes for older, cheaper machines that are still widely used to make less cutting-edge chips.
These developments should put to rest any concerns about possible ASML capacity constraints, or a potential demand slowdown, for the foreseeable future. However, there are still big question marks surrounding ASML’s longer-term prospects – specifically about what its business will look like at the end of the decade. The first issue concerns the adoption of its next-generation "high NA" EUV tools, which manufacturers use to print even smaller and more precise patterns on chips. Analysts reckon they cost roughly $400 million each. Intel is already using the machines, but TSMC has indicated that it will stick with current EUV technology for now, citing high costs.
The stakes are high. Before Wednesday's release, which pushed ASML's shares up about 4%, the stock was trading at about 35 times forecast earnings for 2027, according to Visible Alpha data. That's roughly twice the equivalent valuation multiples for Nvidia and TSMC. Ever-rising sales targets help justify the eye-watering valuation. Fouquet now expects full-year 2026 revenue of between €43 billion and €45 billion – a sharp increase from his previously guided range of €36 billion to €40 billion. Capacity increases will boost investors' hopes for 2027 and 2028.
But living up to the valuation may require a boom that lasts even longer than that. Fouquet is showing that ASML can keep feeding the AI capex splurge for the next few years. What remains to be seen is whether the boom can feed ASML beyond that point.
Context news on results and guidance
ASML raised its full-year financial guidance on July 15 after demand from artificial-intelligence chipmakers drove stronger-than-expected second-quarter earnings.
Revenue for the three months ending June 30 was €9.3 billion – well above analysts' consensus estimates of €8.8 billion. The gross margin reached 54%, against the company’s prior guidance of 51% to 52%.
The chip equipment maker now expects 2026 net sales to be between €43 billion and €45 billion, with a gross margin between 54% and 56%.
ASML also expects to increase its manufacturing capacity for a key type of machine, called low-NA EUV, by 30% in 2027 and possibly also 2028.
The company's shares were up roughly 4% as of 0900 GMT on July 15.
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