ASML's (ASML) Q2 outlook fell short of consensus, but demand for extreme ultraviolet systems is exceeding supply and output forecasts, pointing to strong growth in 2027, RBC Capital Markets said Wednesday in a note.

Q1 results exceeded Wall Street and RBC estimates, while management expects Q2 revenue of 8.7 billion euros ($10.24 billion) at the midpoint, above RBC's estimate of 8.5 billion euros but below consensus of 9.1 billion euros, according to the note.

Management raised 2026 revenue guidance to 36 billion to 40 billion euros from 34 billion to 39 billion euros on strong AI demand. RBC lifted its 2026 and 2027 EPS estimates to 31.78 euros and 40.24 euros from 28.32 euros and 33.93 euros, respectively.

Memory supply is expected to remain constrained beyond 2026 while EUV intensity is rising with the adoption of 1c/1-gamma nodes. The brokerage said it expects advanced Logic to rebound strongly in H2 and sees stronger competition at the leading edge as a structural positive.

RBC maintained an outperform rating on ASML and raised the price target to $1,700 from $1,625.

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