Freedom Broker moved ASML Holding N.V. from "hold" to "buy" and increased its price target to $1,650 from $950 following first-quarter results that outperformed expectations and a revised full-year revenue outlook.
ASML reported Q1 revenue of 2.77 billion, a 13.2% increase year-on-year and a 9.8% decline quarter-on-quarter. Freedom Broker noted that this result sat near the top of ASML's guidance and was about 1.5% above consensus.
Profitability metrics also beat street estimates. Gross margin came in at 53%, the upper end of the company's 51%-53% guidance band. Diluted earnings per share were 7.15, roughly 8.3% ahead of the 6.60 consensus.
The broker highlighted a pronounced shift in ASML's product mix toward extreme ultraviolet (EUV) systems. EUV made up 66% of system revenue - roughly 4.1 billion - compared with 48% in the prior quarter. Net system sales totaled 6.28 billion, and installed base management revenue reached 2.49 billion, above the 2.37 billion consensus.
On the topic of installed base results, Chief Financial Officer Roger Dassen said installed base revenue was "a little bit above the guidance" and that components "actually come in at quite some strong gross margins." Those comments underscore the contribution of aftermarket and service-related revenue to the quarter's margin performance.
Geographic composition of shipments shifted meaningfully during the quarter, according to Freedom Broker. South Korea accounted for 45% of shipments, up from 22% in the prior quarter, while China fell to 19% from 36%. The brokerage also called out end-market demand composition: memory made up 51% of system sales versus 30% in the fourth quarter, reflecting demand tied to high-bandwidth memory.
ASML did not disclose a Q1 order intake figure in its report. Freedom Broker referenced large orders from major customers, including an $8 billion order from SK Hynix and a $7.4 billion order from Samsung.
Chief Executive Christophe Fouquet said, "ASML's order intake continues to be very strong" and that "customers have increased their expected short- and medium-term demand for our products."
For the second quarter, ASML guided revenue to a range of 8.4 billion to 9 billion, below the 9.08 billion consensus. Despite the softer near-term guide, the company raised its full-year 2026 revenue outlook to 36 billion-40 billion from a previous range of 34 billion-39 billion. Full-year gross margin guidance was left unchanged at 51%-53%.
Following the results and updated guidance, Freedom Broker raised its projections. The brokerage now models 39.6 billion in revenue and 32.28 in EPS for 2026, and 46.4 billion and 39.35 respectively for 2027. Its new price target of $1,650 is based on a multiple of 36 times projected 2027 earnings.
Freedom Broker said the decision to upgrade reflected higher estimates, continued signals of demand strength, and greater visibility stemming from multi-year orders and rising installed base revenue. These factors drove the brokerage to change its view from hold to buy and to substantially raise its valuation target.
What this means
- ASML's quarter combined stronger revenue and above-guidance margins, helped by a larger share of higher-value EUV systems and resilient installed base revenue.
- The company's customer and regional mix shifted noticeably toward South Korea and memory-related demand, while China exposure declined in the quarter.
- Management raised the full-year revenue range for 2026 even as the near-term quarterly guide came in below consensus, creating a mix of shorter-term caution and longer-term optimism.