December 23, 2025 04:30 AM GMT Investor Presentation | Japan M Foundation Semiconductor Production Equipment: Tech Monthly Dec 2025 Morgan Stanley MUFG Securities Co., Ltd.+ Tetsuya Wadaki Equity Analyst Tetsuya.Wadaki@morganstanleymufg.com +81 3 6836-8890 Equity Analyst Suzune.Tamura@morganstanleymufg.com +81 3 6836-8891 Semiconductor Production Equipment Japan Industry View Attractive Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors sho ...

Key Takeaways ASML trades just 5.3% below its 52-week high after a 55.9% YTD surge, beating the tech sector.ASML leads EUV lithography, shipped High-NA EXE:5200 systems and targets adoption in 2026-27.ASML reported Q3 revenues of 7.52B, margins of 51.6% and guides Q4 revenues up to 9.8B.ASML Holding (ASML) has had a remarkable run so far this year, with its shares soaring 55.9% year to date (YTD). At the closing price of $1,080.85 as of Dec. 12, ASML stock trades just 5.3% below the 52-week high of $1,141.7 ...

A stock split could prove to be a smart move for ASML.ASML Holding (ASML +1.93%) has become a crucial player in the artificial intelligence (AI) and semiconductor supply chains, and its stock price reflects this position. Shares of the company are up by over 50% so far in 2025 and are trading close to $1,040 (as of Nov. 28). The company's market capitalization is over $403 billion.This combination of a share price above $1,000, dominance in the lithography space, and impressive growth trajectory makes ASML ...

Core Viewpoint - ASML Holding has demonstrated significant stock performance in 2025, with a year-to-date increase of 44.9%, outperforming the broader technology sector and several semiconductor peers [2][19]. Stock Performance - ASML shares have been volatile in 2025 but have outpaced the Zacks Computer and Technology sector's 23% gain [2]. - Compared to semiconductor peers, MKS Inc., Cirrus Logic, and FormFactor, which have seen YTD increases of 34.5%, 16.1%, and 11% respectively, ASML's performance stands out [2]. Competitive Advantage - ASML holds a near-monopoly in extreme ultraviolet (EUV) lithography, essential for manufacturing advanced chips at 3nm and below, providing it with extraordinary pricing power and strategic importance [5]. - The company is advancing its High Numerical Aperture (High-NA) EUV systems, which are crucial for sub-2nm production, indicating a significant long-term growth potential [6][8]. Financial Performance - In Q3 2025, ASML reported earnings of €5.48 per share, a 3.8% year-over-year increase, and revenues of €7.52 billion, up 0.7% [11]. - The gross margin improved to 51.6%, attributed to higher volumes of low-NA EUV tools and upgrades, despite a 6.3% decline in system sales [12]. - For Q4 2025, ASML expects revenues between €9.2 billion and €9.8 billion, with gross margins projected at 51-53% [13]. Valuation - ASML's forward 12-month price-to-earnings (P/E) ratio is 33.45X, higher than the sector average of 28.15X, reflecting its market position and technology leadership [14][18]. - The premium valuation is justified by ASML's monopoly in EUV lithography and consistent margin performance [14]. Growth Drivers - The demand for artificial intelligence (AI) is a significant growth driver for ASML, as AI workloads require advanced chips that depend on the precision lithography provided by ASML's EUV machines [9][10]. - The complexity and cost of EUV technology provide ASML with deep competitive protection, ensuring its continued dominance in the semiconductor sector [10]. Conclusion - ASML's leadership in EUV technology, progress in High-NA systems, and increasing demand for AI-related chips position the company for sustained financial performance, making it a strong candidate for long-term investment [19].

Group 1 - TSMC and ASML are critical players in the semiconductor market, with TSMC being the largest contract chipmaker and ASML the leading producer of lithography systems, including the only extreme ultraviolet (EUV) systems [1][8] - TSMC has outpaced competitors like Intel and Samsung in adopting ASML's EUV systems, leading to significant stock growth, with TSMC's stock nearly tripling and ASML's stock more than doubling over the past five years [2][4] - TSMC's revenue grew at a CAGR of 24% from 2020 to 2024, driven by demand for 5nm and 3nm chips, and the expansion of the high-performance computing (HPC) market [4][6] Group 2 - In Q3 2025, TSMC generated 60% of its revenue from 3nm and 5nm nodes, with 57% from the HPC market and 30% from smartphones, leading to an upward revision of its full-year revenue growth guidance to mid-30% [6][7] - Analysts project TSMC's revenue and EPS to grow at a CAGR of 24% and 27% from 2024 to 2027, supported by the AI market expansion and new technology developments [7] - TSMC's advanced packaging technologies and AI-driven process improvements have enhanced its gross margins, while the establishment of overseas fabs aims to mitigate geopolitical risks [5][6]

Core Insights - ASML Holding N.V. is the only manufacturer of extreme ultraviolet (EUV) lithography systems, essential for producing sub-4nm semiconductors that are critical for AI, data centers, and advanced consumer electronics [1][10] - The company expects a revenue growth of approximately 15% for the full year, driven by increasing demand for EUV technology in logic and DRAM segments, particularly for sub-3nm nodes [12][11] - ASML's total addressable market (TAM) is projected to exceed $1 trillion by 2030, with lithography tools accounting for €40-60 billion of annual equipment demand [13][14] Technology Overview - ASML's EUV platform utilizes 13.5nm wavelength light produced by tin plasma lasers, allowing for finer resolution and enabling next-generation chips for AI and quantum computing [4][5] - The company’s High-NA EUV systems provide up to 70% finer resolution compared to previous generations, with each machine costing over €350 million [4][10] - EUV systems are critical for advanced logic and memory applications, while DUV systems are still widely used for less critical layers in semiconductor manufacturing [8][9] Financial Outlook - ASML's earnings per share (EPS) estimates for 2025 have increased from $28.15 to $29.08, and next year's profit projection has risen from $29.15 to $30.14 [10] - The company anticipates maintaining a gross margin of around 52% as it capitalizes on the growing demand for EUV systems [11][12] - The global lithography equipment market is expected to grow from $27.8 billion in 2025 to approximately $43.7 billion by 2030, reflecting a compound annual growth rate (CAGR) of 6-8% [15] Market Dynamics - The semiconductor industry is projected to surpass $1 trillion in total sales by 2030, with ASML positioned as a key player due to its monopoly in EUV technology [14][19] - AI-related data center, high-performance computing (HPC), and networking chips are expected to account for around 40% of semiconductor demand by 2030, significantly driving EUV system sales [16] - Bank of America has raised its forecast for global semiconductor sales to nearly $1 trillion by 2027, indicating a robust growth trajectory for the industry [17][18]

Core Insights - Wall Street favors long-term investment strategies over market timing, emphasizing the importance of buying and holding high-quality companies that benefit from strong secular trends [1] Company Overview - ASML Holding is a key player in the global semiconductor industry, providing essential lithography systems for chip manufacturers [2] Financial Performance - In Q3, ASML reported total net sales of 7.5 billion euros and net income of 2.1 billion euros, with net sales remaining mostly flat year-over-year [3] Future Outlook - The company is preparing for the commercial rollout of its High-NA EUV lithography system, which features a 0.55 numerical aperture, allowing for higher resolution circuit pattern etching [4] - ASML anticipates increased orders for High-NA EUV systems starting in the second half of 2026, with shipments expected to begin in 2028 [5] Market Demand - ASML is positioned to benefit from the growing demand for advanced computing and memory chips, particularly in the context of AI infrastructure development [6]

Financial Performance - ASML reported total net sales of €7.5 billion in Q3 2025[1] - The company's net income for Q3 2025 was €2.1 billion[1] - Gross margin for Q3 2025 was 51.6%[6] - Net system sales in Q3 2025 amounted to €5.6 billion[6] - Installed Base Management sales reached €2.0 billion in Q3 2025[6] - Net bookings for Q3 2025 were €5.4 billion, including €3.6 billion from EUV bookings[6] Outlook - ASML anticipates full-year 2025 total net sales growth of around 15% with a gross margin of approximately 52%[1] - Q4 2025 total net sales are expected to be between €9.2 billion and €9.8 billion[26] Market and Strategy - The semiconductor industry is projected to exceed $1 trillion in revenue by 2030, driven by AI adoption[4] - ASML sees an opportunity to achieve annual revenue between approximately €44 billion and €60 billion by 2030, with a gross margin between approximately 56% and 60%[4]

Core Viewpoint - ASML, the leading producer of lithography systems, faces near-term challenges despite a strong performance in 2023, with a significant slowdown in 2024 due to various market pressures and geopolitical factors [3][4][10] Group 1: Company Performance - In 2023, ASML's net sales surged by 30% driven by increased shipments of DUV and EUV systems and a rise in service revenues as chipmakers ramped up AI chip production [3] - For 2024, ASML's net sales growth is projected at only 3%, with gross margins flatlining and EPS declining by 3% due to tough comparisons and reduced demand for non-AI chips [4] - Despite the slowdown in the first half of 2024, ASML's net sales and EPS showed double-digit growth over the past four quarters, largely supported by AI demand in the DRAM memory chip market [5] Group 2: Financial Metrics - ASML's financial metrics for upcoming quarters indicate a mixed outlook: Q2 2024 shows a net sales decline of 9.5%, while Q3 and Q4 are expected to rebound with growth rates of 11.9% and 28%, respectively [6] - Gross margins are projected to fluctuate around 51.5% to 54% from Q2 2024 to Q1 2025, with EPS growth expected to recover significantly in Q1 2025 at 92.9% [6] Group 3: Market Outlook - Analysts forecast ASML's revenue and EPS to rise by 14% and 25%, respectively, in the current year, with a compound annual growth rate (CAGR) of 10% for revenue and 16% for EPS from 2024 to 2027 [7] - The company anticipates a 15% increase in net sales for the full year, with gross margins expected to rise from 51.3% to approximately 52% [6] Group 4: Challenges and Risks - ASML faces significant near-term challenges, including tightened export controls from the Chinese government and potential new tariffs from the U.S. government, which could impact sales forecasts [9][10] - The stock is currently valued at 34 times next year's earnings, raising concerns about whether the current valuation reflects too much optimism regarding AI growth [8]

Core Insights - ASML Holding N.V. (ASML) shares have increased by 15.9% over the past month, outperforming the broader Zacks Computer and Technology sector, which rose by 6.2% [1] - ASML's stock has also surpassed several semiconductor peers, including Intel, AMD, and NVIDIA, which saw lower or negative returns during the same period [1] Group 1: Technological Leadership - ASML holds a near-monopoly on extreme ultraviolet (EUV) lithography, essential for producing advanced chips at 3nm and below, positioning the company as a key enabler for major chipmakers like TSMC, Samsung, and Intel [3][4] - The company's High Numerical Aperture (NA) EUV technology is designed for sub-2nm nodes and is critical for the future of chip manufacturing, with significant long-term potential despite slower-than-expected adoption [4] - ASML made progress in High NA EUV during Q2 with the shipment of the first EXE:5200B system, which is crucial for enabling the 1.4nm node and beyond, with high-volume manufacturing expected to begin in 2026-2027 [5] Group 2: Market Demand and AI - ASML is well-positioned to benefit from the AI revolution, which is driving demand for advanced semiconductors, as AI workloads require cutting-edge GPUs and high-bandwidth memory [6] - The demand for smaller and more powerful chips aligns with ASML's offerings, as its EUV and High-NA EUV machines are vital for manufacturing these advanced chips [6] Group 3: Financial Performance and Outlook - ASML reported a strong Q2 with a 23% revenue growth and a 47% increase in EPS [8][10] - Despite strong quarterly results, management expressed uncertainty about growth in 2026, citing customer hesitation and ongoing market uncertainty [11] - The company acknowledged that U.S.-China tariff discussions are negatively impacting customer capital spending timelines, which may delay orders and revenue recognition [12] Group 4: Guidance and Valuation - ASML issued disappointing guidance for Q3, expecting revenues between €7.4 billion and €7.9 billion, indicating only a 2% year-over-year increase [13] - The expected gross margin for Q3 is projected to be in the 50-52% range, down from 53.7% in Q2, primarily due to margin-dilutive High NA system revenues [14] - ASML's stock trades at a premium valuation with a forward 12-month P/E ratio of 30.63, higher than the sector average of 28.69, but lower than some peers like Intel and NVIDIA [15][18] Group 5: Investment Recommendation - Given ASML's leadership in EUV technology and its essential role in future chipmaking, the company remains well-positioned for growth [19] - However, management's uncertainty regarding the 2026 growth outlook and the premium valuation suggest a cautious approach, recommending to hold the stock for now [19]