Shares of ASML Holding (ASML 0.99%) edged higher after the semiconductor technology company saw strong orders in the third quarter. This move continues the recent rally, which started earlier this fall. The stock is now up about 45% on the year, as of this writing.
Given the stock's strong move recently, let's take a closer look at its latest results and prospects to determine whether or not it's too late to buy shares of ASML.
Strong orders but an uncertain 2026 outlook
While ASML is not a household name, it is an integral part of the semiconductor value chain. In fact, it can be argued that it may be the most important company in the world.
The reason is that it is the only company with extreme ultraviolet (EUV) lithography technology, which is the manufacturing process used to make advanced chips, such as Nvidia's graphics processing units (GPUs). Without its technology, not only would artificial intelligence (AI) not be possible, but so would other technologies such as smartphones.
Not surprisingly, given its place in the semiconductor world, ASML is benefiting from the rise of AI and the proliferation of chips needed to power the technology. However, it is also going through a transition period.
The semiconductor equipment space is notoriously lumpy, and ASML has seen a boost in orders in recent years from Chinese companies worried about which technologies they will be cut off from. So while it is barred from selling EUV equipment into the country, it has still seen a pull-forward in demand for its other machines, which it is predicting will wane next year.
At the same time, there are really only a few main buyers of its higher-end EUV equipment -- Taiwan Semiconductor Manufacturing, SK Hynix, and Samsung -- and two of them have been struggling. It's also looking to begin selling its new high numerical aperture extreme ultraviolet, or High NA EUV, lithography systems to customers, but there has been some pushback on its cost, which, at around $400 million, is much more expensive than its regular EUV machines.
Against that backdrop, ASML posted steady Q3 results. Revenue for the quarter edged 1% higher to 7.5 billion euros ($8.7 billion) and came in at the low end of the company's guidance range of 7.4 billion to 7.9 billion euros ($8.1 billion to $9.2 billion). Its equipment sales sank 7% year over year to 5.6 billion euros ($6.5 billion), while its service revenue jumped 27% to 2 billion euros ($2.3 billion).
During the quarter, the company sold 66 new lithography systems and six used systems compared to 106 new and 10 used systems a year earlier. Approximately 38% of its sales came from higher-priced EUV technology versus 35% a year ago, while 42% of its sales were to China versus 47% year ago.
What investors most liked about the quarter were ASML's net bookings, which soared from 2.6 billion euros ($3 billion) to $5.4 billion euros ($6.3 billion). That was solidly ahead of the 4.9 billion euros ($5.7 billion) in net bookings that analysts were anticipating.
Looking ahead, the company projected Q4 revenue to be between 9.2 billion euros ($10.7 billion) and 9.8 billion euros ($11.4 billion) compared to analyst estimates of 9.3 billion euros ($10.8 billion). It said it expects 2026 revenue to be at least the same as 2025 revenue, although it is expecting a big drop in revenue from China.
Is it too late to buy the stock?
There will be a lot of push-and-pulls with ASML's business next year, but the company's core EUV business should continue to be strong. The backing of Intel by the U.S. government and private companies should allow the company to continue its foundry push, which is good news for ASML.
Meanwhile, Samsung appears to be starting to get its act together. Nvidia will use its foundry for custom central processing units (CPUs) and other custom chips designed for its NVLink ecosystem. It's also set to take delivery of one of ASML's new High-NA EUV systems by the end of this year, and another in the first half of 2026.
What makes this particularly good news for ASML is that it could stoke more competition in the foundry space, where Taiwan Semiconductor (TSMC) is the clear leader. TSMC has been reluctant to push forward with ASML's new pricey machines, but this could just be the kick in the pants necessary to get it more interested.
While 2026 could be a lumpy year for ASML, with the company being a monopoly in EUV technology, its long-term outlook looks strong. The stock currently trades at a forward price-to-earnings (P/E) multiple of 34 times 2026 analyst estimates, which is right in its typical historical range for the past five years.
As such, I don't think it's too late to buy the stock for long-term focused investors.
