Leading semiconductor equipment manufacturer ASML Holding NV (ASML:US) is scheduled to announce its second-quarter 2026 results on July 15th. Amidst recent market concerns over the sustainability of artificial intelligence (AI) capital expenditure, ASML's stock price, positioned upstream in the AI supply chain, has shown relative weakness, declining over 11% since the beginning of July.

JPMorgan's Q2 Preview and Key Focus

In a recent research note, JPMorgan provided a preview of ASML's upcoming quarterly results. The bank emphasized that for the stock to see a significant breakout, the company needs to signal robust capacity expansion and strong demand for 2027 and beyond.

For the second quarter itself, JPMorgan forecasts revenue of €8.7 billion, representing year-on-year growth of 13.1% but a slight sequential decline of 0.8%. This estimate is 1.4% below the current market consensus but sits at the midpoint of the company's own guidance range of €8.4 to €9.0 billion. On profitability, the bank expects a gross margin of 51.7%, within ASML's guided range of 51%-52% though marginally below the consensus estimate of 52%. Earnings per share are projected at €6.67, approximately 2.3% below the market's average expectation.

Looking Beyond 2026 to 2027

ASML has previously guided for 2026 revenue growth of around 16.3% to approximately €38 billion (at the midpoint). The current market consensus for 2026 growth is 19.8%, which is higher than the company's midpoint guidance but still within the provided range. JPMorgan anticipates that due to stronger-than-expected shipments of DUV lithography systems, ASML may raise its 2026 guidance.

However, the analysis suggests that near-term quarterly results may hold limited significance for the stock price. The market's primary focus is shifting to the outlook for 2027. JPMorgan believes ASML's growth in 2027 is poised to significantly outpace the overall growth of the global wafer fab equipment (WFE) market. This acceleration is not expected in 2026 due to later customer order start times (beginning December 2025), which constrain the supply chain's ability to ramp capacity and deliver more EUV systems within the current year.

The bank forecasts ASML's earnings per share for 2027 and 2028 at €54.4 and €64.4, respectively. These figures are 26.5% and 23.8% above current market expectations.

Addressing Relative Underperformance

JPMorgan notes that for ASML to end its prolonged underperformance relative to U.S. semiconductor equipment peers, it needs to provide a strong forward outlook. Data shows that since September 2025, despite being the world's most strategic and advanced WFE supplier, ASML's stock has underperformed Applied Materials Inc (AMAT:US) and Lam Research Corp (LRCX:US) by approximately 100%-125% and has also trailed KLA Corp (KLAC:US) by over 15%.

This disparity is largely attributed to a valuation gap. ASML's current forward price-to-earnings ratio remains below its historical peak of 45x, whereas its U.S. peers are currently trading at valuations 76%-86% above their respective historical highs. Furthermore, ASML currently trades at an approximate 11% discount to a basket of these U.S. peers, a stark contrast to its historical average of an 84% premium.

Given ASML's already high weighting in major European indices, incremental capital flows from Europe alone are unlikely to drive a re-rating. The company must attract incremental investment from U.S. and Asian investors. To achieve this, ASML must demonstrate a future growth trajectory that is superior to its American counterparts to rekindle interest from these investor groups.

The Crucial Question for Management

Consequently, JPMorgan views the most critical aspect of the upcoming earnings report as management's commentary on the 2027 growth outlook. The bank points out that ASML provided early guidance for 2026 around the same time last year, suggesting it should offer similar forward-looking statements for 2027 this time.

The bank outlines potential scenarios: indicating the ability to deliver around 90 EUV systems in 2027 would be a mild positive for the stock. A forecast of 90 to 100 EUV systems would constitute a very strong positive catalyst. Additionally, any signal that demand for immersion lithography systems remains robust would also help improve market sentiment. Information regarding capacity planning for 2028 and beyond, including potential plans for new capacity expansions post-2028, will be closely watched by the market.

Investment Thesis and Price Target

JPMorgan maintains an "Overweight" rating on ASML with a price target of $2,200. This target implies an upside of approximately 24% from Wednesday's closing price of $1,768.65. The bank's rationale is based on ASML's unique position as the sole global supplier of extreme ultraviolet (EUV) lithography systems. With the continued increase in the average selling price (ASP) of EUV tools, ASML's share of the lithography market is expected to exceed 80%-89%, extending its leadership of the past decade.

The transition to High-NA EUV technology, expected to ramp from 2027, is anticipated to further increase the lithography intensity per wafer. Simultaneously, the ongoing rise in EUV adoption within the DRAM segment presents a new growth vector. The industry landscape has shifted significantly in recent quarters, with DRAM prices experiencing substantial increases. As ASML supplies all major global memory chipmakers, it is positioned to be one of the primary beneficiaries of the current memory upcycle.