The build-out of artificial intelligence and computing capacity is lifting many tech stocks -- particularly in names essential to creating high-performance semiconductors for training and running AI programs. And while there are plenty of quality stocks to choose from, ASML Holding (ASML +0.60%) holds an enviable position that is paying off handsomely.
ASML stock is up 60% so far this year, making it one of the best performers in the Nasdaq-100 index. As the company prepares to release its second-quarter results on Wednesday, July 15, I think it's positioned to deliver something that could cause the stock to soar -- and have a similar impact on many chipmakers.
Image source: The Motley Fool.
What does ASML do?
ASML is critical to the semiconductor industry because it makes machines that produce the tiny circuits and components used in semiconductor chips. The smaller the components, the better, because more components on a chip can potentially make it more powerful.
The Dutch company has mastered advanced extreme ultraviolet (EUV) technology for chip manufacturing, setting it apart from the competition. Most companies use what's called deep ultraviolet (DUV) technology, which uses dozens of components and lenses to focus tiny beams of light to make chips. ASML's EUV technology uses mirrors instead of lenses, enabling it to perform tasks that DUV machines can't.
NASDAQ: ASML
Key Data Points
How did ASML do in the first quarter?
ASML posted first-quarter revenue of 8.76 billion euros ($10 billion), up 13% from a year ago. Net income was 2.84 billion euros, up 5.4%, and EPS was 7.35 euros per share, up 7% from a year ago. Gross margins were 53%, which was at the high end of the company's guidance, and revenue was in line with guidance.
"The semiconductor industry's growth outlook continues to solidify, driven by ongoing AI-related infrastructure investments," CEO Christophe Fouquet said. "Demand for chips is outpacing supply. In response, our customers are accelerating their capacity expansion plans for 2026 and beyond, supported by long-term agreements with their customers."
But here's what caught my attention -- ASML revised its guidance after posting first-quarter earnings. It's now projecting full-year net sales in the range of 36 billion euros to 40 billion euros, up from its previous guidance of 34 billion euros to 39 billion euros.
Will ASML revise its guidance once again after reporting earnings? That's the key question.
Here's what could send ASML stock soaring
Quarterly earnings reports are important because it's a report card on how the company performed over the previous three months. And yes, ASML needs to meet -- or exceed -- its revenue projections for the quarter (the company's guidance calls for total sales between 8.4 billion euros and 9 billion euros, with gross margins between 51% and 52%).
However, I am more interested in the guidance. If ASML again revises its guidance higher, and if management's commentary indicates that customers are continuing to increase their capacity, then I expect ASML stock to soar, potentially providing supply tailwinds to chipmakers such as Nvidia, Broadcom, and Advanced Micro Devices. Analysts surveyed by Yahoo! Finance project ASML to have as much as 10.34 billion euros in revenue in the third quarter, so ideally, management will at least project that much.
Even if you don't own ASML stock, Wednesday's earnings report could be a significant one for the industry. ASML holds a key position in the semiconductor supply chain, so its outlook can provide a read on whether AI infrastructure spending is remaining as strong as investors expect.
