UBS analysts said they emerged from a roadshow with ASML’s chief executive officer and chief financial officer with greater conviction that market anxiety over the company’s ability to supply equipment is excessive. The bank reiterated a Buy recommendation on ASML and maintained its price target of €1,600.
Management reiterated a target for potential extreme ultraviolet (EUV) capacity of more than 80 systems in 2027, while stressing that shipments and output will remain aligned with end-customer demand and that the company will avoid overbuilding. UBS said this guidance, combined with ASML’s internal productivity improvements, underpins the bank’s more sanguine view on capacity risk.
"In our view, investors continue to underestimate ASML’s manufacturing flexibility and ongoing productivity gains across its tool portfolio," the analysts led by Francois-Xavier Bouvignies wrote in their note.
UBS highlighted that ASML plans to introduce a new EUV model, referred to as model F, in 2027. The bank said this model should lift effective capacity without requiring a matching increase in physical tool output, effectively improving throughput per system.
Turning to regional demand, the analysts described near-term softness in China. They said lithography demand in the country has recovered more slowly than anticipated, which they attributed to fab readiness constraints and mismatches in lead times. UBS’s modeling calls for ASML’s China revenues to decline 10% in 2026 before rebounding by 9% in 2027. The bank believes that stronger demand outside China, particularly for advanced logic and memory, will more than offset the shortfall in the Chinese market.
UBS also noted that record lithography spending projected for the second half of 2025 is more likely to translate into benefits for deposition and etch equipment in 2026 rather than immediate upside for lithography. The bank therefore sees a more pronounced lithography recovery arriving in 2027.
On ASML’s next-generation High NA EUV technology, UBS pointed to feedback from the SPIE conference as reinforcing confidence in the technology’s adoption. The bank cited estimated cost savings of 20-40% versus alternative patterning approaches, an expectation that tool availability will exceed 90% in the second half of 2026, and meaningful process simplification as factors supporting initial High NA insertion in the 2028-2029 timeframe.
ASML reported a first-quarter gross margin of 53%, and management reiterated full-year guidance of 51-53%. UBS interprets that guidance as conservative given limited visibility on upgrades, and the analysts model a full-year gross margin of 53.8%, toward the upper end of the company’s range.
Summary
After direct discussions with ASML executives, UBS reiterated a Buy rating and €1,600 target, arguing that the company’s stated potential to exceed 80 EUV systems in 2027, internal productivity gains, and a new model due in 2027 reduce the risk that production capacity will constrain business. The bank flagged short-term weakness in China but expects international strength in advanced logic and memory to offset it, and it models modest margin upside within reiterated guidance.
Key points
- UBS reaffirmed a Buy rating and €1,600 price target for ASML after a roadshow with company management - sectors impacted: semiconductor equipment, capital goods.
- Management reiterated potential EUV capacity of more than 80 systems in 2027 and plans a new EUV model F in 2027 to raise effective capacity without proportional tool volume increases - sectors impacted: chip manufacturing, advanced logic and memory.
- UBS models a 10% decline in China revenues in 2026 followed by a 9% rebound in 2027, with non-China advanced logic and memory demand expected to offset the China weakness - markets impacted: regional electronics demand, semiconductor supply chain.
Risks / uncertainties
- Near-term softness in China due to fab readiness constraints and lead time mismatches could depress ASML’s China revenues in 2026 - impacts semiconductor equipment and regional capital spending.
- Limited visibility on upgrade cycles means full-year margin guidance may reflect conservatism; actual upgrade timing remains uncertain - impacts company profitability and supplier margins.
- Shifts in the timing of lithography spending versus spending on deposition and etch equipment could delay lithography recovery until 2027 - impacts equipment vendors and fab investment schedules.