ASML Holding NV (NASDAQ:ASML) exceeded first-quarter expectations and raised its 2026 guidance, despite disappointing Q2 forecasts. RBC Capital Markets analyst Srini Pajjuri sees strong growth potential in 2027, driven by better-than-expected EUV demand.

The ASML Holding Analyst: Pajjuri maintained an Outperform rating, while raising the price target from $1,625 to $1,700.

The ASML Holding Thesis: The company reported revenue and earnings of €8.8 billion and €7.15 per share. It topped consensus estimates of €8.6 billion and €6.57 per share, respectively, Pajjuri said in the note.

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EUV revenue grew 14% sequentially to €4.1 billion, with ASML shipping 16 tools. Memory remained "particularly strong" in the quarter, Pajjuri said. Although Advanced Logic declined, this was likely due to timing issues and China. He expects Advanced Logic to "rebound strongly" in the back half of 2026.

The company's healthy gross margin, at 53%, was driven by stronger Services revenue in the first quarter, Pajjuri said.

Despite the solid first-quarter results, management projected second-quarter revenue of €8.7 billion at the midpoint, missing consensus of €9.1 billion, with gross margin tracking to 51.5%, the analyst mentioned.

Management raised their 2026 revenue guidance from €34-€39 billion to €36-€40 billion, representing 16% growth at the midpoint, driven by strengthening AI demand.

"EUV demand is outpacing supply and output projections," with management guiding to 60 tools in 2026 and more than 80 in 2027, Pajjuri wrote. He added that this suggests strong growth in 2027.

ASML should sustain revenue momentum through 2027 and 2028 "driven by GenAI, Memory tightness, and growing Foundry competition," the analyst said. Average selling price should also increase, "driven by productivity gains and higher mix of more advanced tools," he further stated.

ASML Price Action: Shares of ASML Holding had declined by 4.24% to $1,418.96 at the time of publication on Thursday.

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