Record profits, sold-out machines, and a valuation that punishes mistakes
The company reported quarterly revenue of €9.33 billion and net profit of €2.92 billion, both above its own management estimates. On the same day, it raised its full-year outlook for the second time in a single year, this time from a range of €36 to €40 billion to €43 to €45 billion. The market reaction was mixed: despite initial enthusiasm, the stock ultimately closed slightly down by around half a percent, dragged by a slump at a South Korean memory maker that hit technology stocks across the sector, including chip-equipment suppliers.
Key points
An absolute monopoly. The company is the world’s sole producer of EUV machines and holds over 90% of the lithography market overall, giving it the negotiating power to raise prices further without risking customer defections.
2027 is nearly sold out, 2028 is filling up. Management described demand as “extremely strong” and stopped publishing quarterly bookings, depriving investors of what was their most reliable forward-demand indicator.
Stellar results, thinner cash cushion. Net cash roughly halved in just six months (from €8.9 billion to €3.9 billion), as the company funds its capacity expansion and the €12 billion share buyback more from reserves than from current cash flow.
Valuation punishes mistakes. The stock trades at a forward P/E of around 49–50x, noticeably above sector peers and some analysts’ estimates, so even a small misstep can trigger a disproportionately sharp share-price reaction.
Political risk from Washington. The proposed MATCH Act could end sales and servicing of DUV machines to China (roughly one-fifth of revenue), and the company also faces an investigation over suspected circumvention of export rules.
More interesting than the share-price move itself is what the company simultaneously announced. It stopped publishing the quarterly value of new orders, which took away investors’ most reliable forward-demand indicator. Instead, they must now rely on the CEO’s words: according to him, the expanded EUV capacity for 2027 is already nearly fully covered by orders, even though half a year still remains in the current year. For 2028, the company says it has a significant volume of orders, though not full coverage, and that is exactly why it is considering expanding capacity for that year as well.
Therefore, according to management, the expanded capacity for the most advanced machines for the next year is effectively sold out, and the company has significant orders for the following year too, giving it negotiating leverage that few in the industry possess: it can raise prices without risking customer defections, because switching elsewhere is simply impossible.
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