ASML Holding N.V. ASML shares have plunged 8.6% since it reported first-quarter 2025 results on April 15. The stock has fallen largely due to slower booking growth and concerns related to the escalating Chinese trade restrictions.
With this, investors must be wondering whether to exit the investment or if it is a buy-the-dip opportunity.
Why Did ASML Holding Struggle?
Although ASML Holding’s first-quarter bookings grew 9% year over year to €3.94 billion, it was down 44.5% sequentially, turning investors cautious about its near-term prospects. Bookings for ASML’s high-value lithography systems have slowed as key customers are reducing their capital expenditures amid ongoing macroeconomic uncertainties.
Another key challenge is geopolitical risk, which poses a threat to ASML Holding’s sales expansion. The U.S. government’s export restrictions on ASML’s advanced lithography tools to China, along with its new tariff policies, have created new uncertainties. In the first quarter of 2025, China accounted for 27% of ASML’s lithography shipments, making it a vital revenue source. Further trade restrictions or retaliatory measures could significantly reduce ASML’s sales pipeline.
Net Systems Sales Breakdown
ASML Holding N.V.
Image Source: ASML Holding N.V.
However, despite short-term headwinds, ASML’s dominant market position, technological leadership and strong financials make a compelling case for buying the stock.
Despite short-term volatility, ASML Holding’s technological leadership in lithography equipment makes it indispensable to the semiconductor industry. The company maintains a near-monopoly on extreme ultraviolet (EUV) lithography, which is essential for producing advanced chips at 3nm and below. Its EUV systems are crucial for leading chipmakers such as TSMC, Samsung and Intel, positioning ASML as a key enabler of cutting-edge semiconductor manufacturing.
ASML Holding’s High-NA EUV technology represents the next frontier in chip manufacturing. Designed for sub-2nm nodes, these advanced systems will be critical for the industry’s future. While the adoption of High-NA EUV has been slower than expected, the long-term potential remains enormous. As chipmakers ramp up production of smaller, more powerful chips, ASML’s High-NA EUV tools will play a pivotal role, driving sustained demand.
The company’s technological superiority ensures high barriers to entry, giving it a competitive moat. With EUV technology being essential for advanced semiconductor fabrication, ASML Holding’s dominance remains intact, supporting its long-term growth outlook.
AI-Driven Semiconductor Demand to Fuel ASML Growth
ASML Holding is well-positioned to capitalize on the AI revolution, which is driving massive demand for advanced semiconductors. With AI workloads requiring cutting-edge GPUs, high-bandwidth memory and AI accelerators, the demand for smaller and more powerful chips is rising. This trend plays directly into ASML’s hands, as its EUV and High-NA EUV machines are vital for manufacturing these advanced chips.
As cloud providers, data centers and tech giants expand their AI infrastructure, ASML Holding’s lithography tools will be in greater demand. This AI-driven semiconductor expansion ensures long-term growth tailwinds for ASML, making it a compelling buy.
ASML Holding’s first-quarter 2025 financial results demonstrated its resilience. The company posted €7.74 billion in net sales, marking a 46% year-over-year increase. Net income surged 92% to €2.36 billion, while earnings per share (EPS) grew 93% to €6.00, highlighting the company’s operational efficiency.
The gross margin expanded 300 basis points year over year to 54%, driven by strong cost management and improved productivity in its advanced lithography systems. This margin expansion reflects ASML’s ability to maintain profitability even in a challenging macro environment.
ASML Holding’s 2025 guidance also signals confidence in its future growth. The company expects 15% revenue growth for the year, driven by rising demand for both EUV and DUV (deep ultraviolet) lithography systems. Additionally, ASML forecasts a 70-basis-point margin expansion in 2025, indicating higher profitability ahead.
ASML stock currently trades at a premium to the Zacks Computer and Technology sector. Its forward 12-month price-to-earnings (P/E) ratio of 22.65 exceeds the sector’s average of 21.14. However, the company’s near-monopoly in EUV lithography and strong growth prospects justify this premium valuation.
Zacks Investment Research
Image Source: Zacks Investment Research
ASML Holding also trades at higher P/E multiples compared with other semiconductor players, including KLA Corporation KLAC, Lam Research LRCX and Applied Materials AMAT. Currently, KLA Corporation, Lam Research and Applied Materials trade at P/E multiples of 19.63X, 16.58X and 14.10X, respectively.
However, shares of ASML Holding have underperformed the broader tech sector over the past year. ASML stock has plunged 30.7% in the trailing 12 months, while the sector has fallen 1.8%. It has also underperformed KLA Corporation, Lam Research and Applied Materials, which have declined 4.2%, 29.7% and 29.7%, respectively.
One-Year ASML Stock Price Return Performance
Zacks Investment Research
Image Source: Zacks Investment Research
Conclusion: Buy ASML Stock for Now
While ASML faces near-term headwinds from geopolitical risks, its technological leadership and robust financials offer strong long-term growth potential. The company’s dominance in EUV and High-NA EUV technology makes it well-positioned for future growth. With rising demand for advanced nodes, AI chips and high-bandwidth memory, ASML’s lithography tools will remain mission-critical, making the stock worth buying into.
ASML sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
