ASML Holding (ASML 1.87%) is one of the most important companies in the global semiconductor supply chain. It makes the machines that help chipmakers and foundries print advanced chips that power several artificial intelligence (AI)-focused applications, ranging from data centers to smartphones to computers to cars, among other things.
The Dutch company has clocked respectable gains of 49% on the stock market in the past year, though it is worth noting that almost all of those gains have arrived in the past three months. ASML stock struggled for traction last year owing to various factors such as the ban on the sale of its machines to China, followed by the tariff-fueled trade war and the slower-than-expected recovery in certain semiconductor niches.
However, the stock has picked up impressive momentum of late thanks to its improving 2026 outlook. But will it be able to sustain this trajectory over the next year?
ASML is now confident of achieving growth in 2026
ASML stock took a big hit a year ago after the company's guidance for 2025 disappointed investors. The chip bellwether said its revenue for this year would land between 30 billion euros and 35 billion euros, which was the lower half of its original guidance range of 30 billion euros to 40 billion euros.
NASDAQ: ASML
Key Data Points
Again, investors were spooked earlier this year when ASML said it couldn't "confirm" if it would report growth in 2026. Management's cautiousness was driven by macroeconomic and geopolitical concerns, which can be attributed to tariff-related concerns. However, ASML changed its tone when it released its third-quarter results recently.
The company stated in its press release that it "does not expect 2026 total net sales to be below 2025." That's not surprising, as ASML has witnessed a nice pickup in the value of orders it received last quarter. Its net bookings, which refer to system sales orders for which the company has received written authorizations, came in at 5.4 billion euros last quarter. That was a major improvement over the year-ago period's bookings of 2.6 billion euros.
It is worth noting that two-thirds of ASML's bookings were for its extreme ultraviolet (EUV) lithography systems last quarter, coming in at 3.6 billion euros. That's a massive leap from the year-ago period, when ASML received 1.4 billion euros worth of orders for its EUV machines.
It is easy to see why the demand for the company's EUV systems has shot up remarkably. These machines enable chipmakers and foundries to manufacture advanced chips using small process nodes below 7 nanometers (nm). The chips that are being used in AI data centers, smartphones, and computers are all manufactured on process nodes measuring 3nm to 5nm in size.
That's the reason why foundry giant TSMC, which is one of ASML's customers, got 60% of its Q3 revenue from fabricating 3nm and 5nm chips for its customers. Another point worth noting is that 87% of TSMC's revenue last quarter came from selling chips for high-performance computing and smartphone applications.
The good part is that both of these markets are on track to grow nicely in 2026. Market research firm Gartner forecasts an increase of 51% in shipments of generative AI smartphones next year. Meanwhile, Citigroup is now expecting AI infrastructure capital spending by big tech companies to hit $490 billion in 2026, compared to its prior estimate of $420 billion.
That would be a big increase over 2025's estimated big tech capital expenditures of $364 billion. This heavy spending is going to be a tailwind for ASML as it is likely to receive more orders for advanced chipmaking equipment. In fact, TSMC pointed out on its latest earnings call that 70% of its $41 billion capital spending for 2025 will be directed at advanced process nodes.
As such, it won't be surprising to see ASML eventually upgrading its guidance for 2026 in the coming months.
Investors can expect the stock to head higher in the coming year
ASML's median 12-month price target is $1,140, as per 40 analysts who cover the stock. That points toward a potential jump of 7% from current levels. Consensus estimates are projecting an increase of just 5% in ASML's earnings in 2026, which would be a step down from its estimated 2025 earnings growth of 28%.
But then, investors should note that 17 analysts have raised their earnings expectations for 2026 in the past month. The company's improving order inflow and the solid spending that's expected on AI chips used in data centers and other devices next year should allow ASML to continue building its momentum and clock stronger growth than what analysts are expecting.
So, don't be surprised to see ASML exceeding its 12-month price target in the next year, which is why it would be a good idea to continue holding this AI stock in anticipation of more upside.
