How ASML Is Positioning Itself for Sustained Profitability Growth in Advanced Chip Manufacturing

ASML Holding remains the exclusive provider of extreme ultraviolet (EUV) lithography equipment, a technological moat that directly translates into pricing power and margin expansion. While competitors like Applied Materials and KLA Corporation operate in adjacent segments of the chipmaking equipment ecosystem, none can replicate ASML’s dominance in EUV tools—a capability that increasingly determines the profitability trajectory of semiconductor manufacturers worldwide.

The EUV Advantage: Why Logic and DRAM Demand Matters

The semiconductor industry’s pivot toward advanced manufacturing nodes has created two critical demand drivers for ASML’s premium-priced EUV systems. Logic chipmakers, accounting for roughly two-thirds of ASML’s system sales, require multiple EUV exposure layers to achieve cutting-edge node density. This translates into sustained tool utilization and growing demand for software licenses and maintenance services—revenue streams that carry significantly higher margins than initial equipment sales.

DRAM represents an equally compelling growth vector. As AI workloads demand higher-bandwidth memory solutions, DRAM manufacturers are transitioning to denser chip architectures that rely heavily on EUV process steps. This shift fundamentally reshapes ASML’s revenue mix, reducing reliance on lower-margin legacy equipment while positioning the company to capture value from the next generation of memory technology.

Financial Proof Points: Q3 2025 and Forward Guidance

In the third quarter of 2025, ASML Holding delivered gross margins of 51.6%, representing an 80-basis-point year-over-year expansion. This improvement was anchored by steady EUV adoption and a growing installed customer base, signaling that the company’s business model is transitioning toward a higher-margin, recurring-revenue structure.

Looking ahead, ASML projects Q4 2025 revenues between €9.2 billion and €9.8 billion, implying a 26.3% sequential increase at the midpoint. Gross margins are expected to range from 51% to 53%, indicating a 40-basis-point sequential improvement. For full-year 2025, management anticipates approximately 15% sales growth and sustained margins near 52%.

The Competitive Landscape: Where Others Fit

While ASML dominates EUV, the broader chipmaking equipment market remains fragmented. Applied Materials supplies deposition and etching tools critical for both advanced and legacy nodes, benefiting indirectly from the industry’s AI-driven complexity. KLA Corporation focuses on process control and yield optimization, providing complementary solutions that chipmakers need as they scale advanced manufacturing.

None of these peers, however, controls the chokepoint technology that ASML does. This strategic positioning allows ASML to maintain pricing discipline and expand gross margins as EUV penetration deepens across logic and DRAM fabs globally.

Valuation Perspective: Premium Justified by Growth Trajectory

ASML trades at a forward P/E ratio of 33.76, materially above the computer and technology sector average of 27.76. This valuation premium reflects the logical quotes of investors who believe ASML’s earnings growth justifies the heightened multiple. Consensus estimates project 2025 earnings to increase approximately 39.3% year-over-year, followed by a more modest 3.8% gain in 2026.

Share performance underscores this bullish sentiment—ASML has gained 33.3% over the past six months, outpacing the sector’s 22.2% advance. Recent estimate revisions have been mixed, with 2025 forecasts revised upward and 2026 expectations trimmed, suggesting investors are digesting the company’s near-term strength while remaining cautious on longer-term growth rates.

The Bottom Line: Margin Expansion Supported by Technology Leadership

ASML’s profitability profile stands to benefit materially as EUV adoption accelerates and the installed base expands. Each incremental EUV tool sold generates not just one-time revenue, but a multi-year stream of high-margin software licenses, maintenance contracts, and process optimization services. As both logic and DRAM manufacturers scale EUV deployments to achieve competitive advantage in AI and advanced computing, ASML’s position as the sole supplier translates into durable earnings growth and margin strength. ASML Holding currently carries a Zacks Rank #3 (Hold), reflecting a balanced view of the company’s prospects relative to near-term valuation.