ASML’s Q2 2026 earnings land on July 15, and right now the stock sits at €1,222.40 — roughly 17% below the analyst consensus target of €1,468.71 per Yahoo Finance. I want to argue that the gap isn’t a fluke or a valuation quirk. It’s what happens when a world-class business gets caught in the crosshairs of a geopolitical news cycle and the market forgets to separate the noise from the engine.
Let me start with what the business is actually doing. For FY 2025, ASML reported operating income of €11,301 million on an operating margin of 34.6%, per stockanalysis.com. The trailing twelve-month figure ticked slightly higher to €11,721 million and 34.8%, also per stockanalysis.com. That’s not a company under margin pressure — that’s a company where revenue growth is outrunning cost growth. Free cash flow for FY 2025 came in at €11,085 million per stockanalysis.com, which means the earnings aren’t a paper exercise in accounting. They’re cash, sitting there, real. Diluted EPS for FY 2025 hit €24.71, a 28.5% increase year over year per stockanalysis.com. If you handed me those numbers on a blank sheet of paper and asked me to guess the stock’s recent trajectory, I would not have guessed “down on high volume.”
Here’s how I think about the valuation. The analyst consensus target sits at €1,468.71 per Yahoo Finance, with a low of €980.00 and a high of €1,700.00. The market is currently pricing ASML as if the bear case is guaranteed. I’ve been around long enough to know that “the bad thing is guaranteed” is usually when you want to be leaning in, not running out.
The macro backdrop deserves honest treatment, because it’s genuinely complicated. US lawmakers have proposed legislation to further restrict chipmaking tool sales to China, and ASML shares dropped nearly 5% on the news per Reuters. China is expected to represent roughly 20% of ASML’s 2026 revenue, and tighter curbs on DUV lithography sales could shave up to 10% off EPS if the restrictions land hard and demand doesn’t get rerouted. At the same time, Middle East energy tensions have pushed euro-area inflation higher, prompting the ECB to hold key rates steady at a range of 2.00–2.40% on April 30 per the ECB, while flagging upside inflation risks and downside growth risks. Elevated energy costs weigh on European industrial margins broadly, and a slower-easing ECB keeps a lid on tech valuation multiples across the continent. None of that is trivial. But here’s what I keep coming back to: macro headwinds are what create the entry point, not what eliminate the business case.
The currency story quietly helps while everyone watches the geopolitics. The EUR/USD rate has moved from around 1.18 in February 2026 down to approximately 1.1723 currently, a roughly 2% depreciation over three months per Yahoo Finance FX data. Since a meaningful share of ASML’s revenue is transacted in dollars, a weaker euro translates directly into higher euro-denominated revenue and operating income. Think of it as a quiet subsidy from the foreign exchange market — not the kind of thing that shows up in a headline, but the kind that shows up in a margin line. Combined with sustained copper prices around $5.90 per pound per Yahoo Finance commodity data, which create real cost pressure on the high-grade inputs required for EUV system assembly, the FX tailwind provides a natural partial offset. The pricing power to pass through residual cost inflation is something ASML has demonstrated cycle after cycle, which is why these margins have held at 34–35% even as the business has scaled.
A similar dynamic played out with ASML itself during the EUV ramp-up cycle, when operating margins expanded sharply alongside accelerating revenue growth in a strong semiconductor equipment demand environment, per macrotrends.net — and the stock followed margins higher by a wide margin over the subsequent twelve months. I’ve watched this pattern before in capital equipment: the street discounts the margin expansion as unsustainable right up until the next earnings call confirms it wasn’t.
One variable I’d flag that doesn’t get enough airtime is legacy node utilization. EUV demand is well-covered in analyst reports — every sell-side note has an EUV slide. What’s less discussed is what happens to the blended margin profile if utilization rates at older fabs soften and customers start asking for pricing flexibility on non-EUV lithography systems. That’s a real risk, and a sudden shift there could compress the overall margin picture in a way that doesn’t show up in the EUV demand narrative.
If China revenue falls below 15% of total sales on a sustained basis and non-China demand fails to compensate, this bull case breaks down and the current discount to consensus becomes justified rather than an opportunity.
But I don’t think that’s where we’re headed. I think we’re sitting at €1,222 because the market has priced in a scenario that assumes the worst trade restriction outcome, persistent macro drag, and no demand recovery — all at once. That’s a lot of bad news baked into a business generating €11,085 million in free cash flow. Sometimes the market hands you a perfectly good business at a scared price, and the only question is whether you have the patience to wait for the fear to pass.
The July 15 earnings call will matter. But honestly, I’d rather own the stock before the answer than after everyone agrees it was obvious.