ASML's Q2 2025 Earnings Beat Potential: Riding the AI Chip Revolution

The global semiconductor industry is undergoing a structural shift, driven by the insatiable demand for artificial intelligence (AI) chips. At the heart of this transformation is ASML Holding NV (ASML), the sole supplier of extreme ultraviolet (EUV) lithography systems critical for manufacturing advanced logic and memory chips. As ASML prepares to report Q2 2025 earnings, the company is positioned to benefit from a confluence of secular tailwinds: foundries' race to 3nm and smaller nodes, AI-driven demand for high-performance computing, and prolonged chip shortages in key markets. While near-term macroeconomic concerns linger, the structural demand for EUV technology makes an earnings beat highly probable. Let's dissect why.

ASML's EUV Monopoly: The Indispensable Tool for Advanced Nodes

EUV lithography is the only technology capable of printing the intricate patterns required for chips at 7nm and below. ASML's dominance in this space—90% of advanced logic chips now use EUV—gives it a near-monopoly on the $50 billion+ EUV systems market. Its Q2 2025 revenue guidance of €7.2–7.7 billion is underpinned by a robust contracted backlog of €38 billion as of Q1 2025, driven largely by orders for next-gen High-NA EUV systems (EXE:5200). These systems, now shipping to customers like Intel and Taiwan Semiconductor Manufacturing Company (TSMC), are essential for 3nm and 2nm (N2) nodes, which are critical for AI accelerators and high-bandwidth memory (HBM).

Catalyst 1: TSMC's 2nm Ramp-Up and EUV Demand

TSMC, ASML's largest customer, is aggressively expanding its 2nm (N2) capacity, targeting volume production in late 2025. The N2 node requires EUV layers to achieve performance gains over its 3nm (N3) predecessor. TSMC's Q2 2025 revenue rose 38.6% year-over-year, with advanced nodes (7nm/5nm/3nm) contributing 73% of wafer revenue. To support this, TSMC plans to double its CoWoS (Chip-on-Wafer-on-Substrate) packaging capacity in 2025—a technology central to AI GPUs like NVIDIA's Blackwell.
While Q1 2025 EUV bookings dropped to €1.2 billion (vs. €7.1 billion in Q4 2024), this reflects a shift to longer-term High-NA orders rather than a demand collapse. TSMC's N2 rollout ensures sustained EUV demand, with ASML's CEO, Christophe Fouquet, confirming that 2025–2026 will be “growth years” driven by AI and High-NA adoption.

Catalyst 2: AI GPU Manufacturer Capex Surge

The AI boom is fueling a gold rush in data center infrastructure. Hyperscalers like Amazon, Google, and Meta have collectively raised 2025 capex to $392 billion, with 44% allocated to AI-related projects. NVIDIA, the AI GPU leader, benefits directly from this spending, as its chips require TSMC's advanced nodes.
Meanwhile, foundries like TSMC are investing $42 billion in 2025 to expand 3nm/2nm capacity and advanced packaging. This capex frenzy creates a virtuous cycle: more AI chips mean more demand for EUV systems. Even as some memory manufacturers delay capacity expansions, foundries' investments in logic nodes—where ASML's EUV is indispensable—are unshaken.

Near-Term Concerns: Transient or Structural?

Bearish arguments often center on U.S.-China trade tensions, weaker Chinese sales (now 20% of ASML's revenue vs. 49% in 2024), and margin pressures from tariffs. However, these risks are manageable. TSMC's shift to its U.S. Arizona fabs—which will house 2nm capacity—and Intel's $100 billion U.S. expansion reduce ASML's China dependency. Meanwhile, the gross margin guidance of 50–53% in Q2 accounts for tariff impacts but remains elevated, reflecting high-margin services revenue from its installed base of over 500 tools globally.

Valuation and Investment Thesis

ASML trades at ~12x 2025 consensus EPS of €6.60, a discount to its five-year average of 14x. With structural demand for EUV likely to outpace near-term macro headwinds, earnings revisions are likely to accelerate. A beat in Q2—driven by N2 ramp-up and High-NA deliveries—could push shares toward €500, a 20% upside from current levels.

Final Take

ASML's leadership in EUV technology positions it as a critical supplier in the AI chip revolution. While geopolitical risks and temporary demand softness in memory markets merit caution, the secular growth of foundries' advanced nodes and AI infrastructure spending creates a durable demand backdrop. Investors should view dips as buying opportunities, as ASML's backlog and EUV's irreplaceable role in next-gen chips ensure long-term dominance. For now, the structural tailwinds are too strong to dismiss.