This has been a great second half of the year for ASML (ASML 0.96%). The Dutch company plays a critical role in the production of high-end semiconductors, but the stock only rose 15% in the first six months of the year.
However, the third and fourth quarters have been significantly different for ASML, which has flourished recently and is now up a solid 59% on the year. It's outpacing the S&P 500, as well as some of the most popular semiconductor stocks, such as Nvidia, Broadcom, and Taiwan Semiconductor.
ASML's run helped propel it to a market capitalization of $428 billion and a position in the Top 25 of the world's largest publicly traded companies. Now trading around an all-time high, can ASML sustain this rally heading into 2026, or is this a case of a company getting a little too hot and ripe for a pullback?
I think the answer is clear, which is why I currently love ASML stock.
Image source: ASML.
About ASML stock
If you are looking for companies with a wide competitive moat, then ASML is the kind of stock you're looking for. The company builds machines that create minuscule circuits and components used in semiconductor chips. This is important because there's only so much space on a chip; the smaller the components, the more can be packed onto a chip to make it more powerful.
Most companies use deep ultraviolet (DUV) technology to manufacture chips and advanced processors, using dozens of components and multiple lenses to focus precisely positioned light and craft chip components. However, ASML's advanced extreme ultraviolet (EUV) system uses mirrors instead of lenses, enabling it to complete designs that aren't possible for DUV machines.
ASML is the only company manufacturing and selling EUV machines. This gives it a distinct advantage, as EUV systems use a shorter wavelength of light and therefore enable the printing of smaller features.
ASML sells both EUV and DUV systems -- the DUV machines are designed for high-volume manufacturing of advanced logic and memory chips, which don't necessarily require the highest resolution offered by EUV machines. The company reported selling 66 new lithography systems and six used systems in the third quarter.
Revenue for the quarter was 7.51 billion euros ($8.73 billion), which was down 2.2% from a year ago. Net bookings were 5.4 billion euros, down from 5.54 billion euros a year ago.
However, the company has a strong profit margin, with gross profit of 3.88 billion euros, marking a 51.6% margin. Net income of 2.12 billion euros resulted in bottom-line earnings of 5.49 euros per share.
NASDAQ: ASML
Key Data Points
Investors who are looking for fast earnings growth, as you'd see at Nvidia and TSMC, may perhaps be disappointed with ASML's report. However, I'm impressed with the profit margin of ASML, as well as the company's massive competitive moat. ASML issued guidance for its fourth-quarter sales of between 9.2 billion euros and 9.8 billion euros, with a margin of between 51% and 53%. For the full year, the company anticipates total net sales to be roughly 15% better than in 2024.
What do analysts say about ASML stock?
ASML receives considerable attention from analysts, with the majority of them being bullish on the stock. JPMorgan just raised its price target on the stock, from $1,175 to $1,275, which suggests potential upside of 15%. Analysts at JPMorgan said that the semiconductor capital equipment group is the most attractive segment in the sector right now, and ASML is the top pick in that segment.
Morgan Stanley analyst Lee Simpson also raised his price target on ASML, from $1,132 to $1,161, on Nov. 26. Of the 42 analysts covering ASML stock on MarketWatch, only one suggests selling ASML stock.
I think that ASML is a no-brainer stock to buy right now. With its stock price now more than $1,100 per share following its dramatic move higher, I also consider it an ideal stock-split candidate as we head into 2026. ASML hasn't conducted a forward stock split since 2000, when it completed a 3-for-1 split. Should ASML announce a stock split in 2026, I believe the stock will reach new highs.
