What does this company do and how does it make money?

ASML operates a near-monopoly in advanced semiconductor lithography, with revenue split almost perfectly between its two core technologies. The business depends heavily on Asia's semiconductor giants, creating both concentrated demand and geographic risk. The acceleration to 29.3% growth in Q4'25 reflects the AI-driven semiconductor supercycle.

Five legendary investment frameworks analyzed this company.

Mauboussin sees ASML's first-ever value creation with ROIC hitting 10.71% above its cost of capital, while Marks warns that 558 institutions piling in at 31x earnings marks a classic top. Who reads the semiconductor cycle better? Tap any framework below to see their complete analysis.

How much cash does it generate and where does it go?

ASML generates massive cash flow that it splits between innovation (R&D) and shareholder returns (buybacks and dividends). The low capex requirement of just 4.0% of operating cash flow reveals a capital-light business model unusual for manufacturing. With €10.2 billion in net cash and minimal dilution from stock compensation, the company operates from a position of financial strength.

Is the business getting stronger or weaker?

ASML hit an inflection point in Q4'25 with ROIC finally exceeding its cost of capital, marking genuine value creation after years of heavy investment. The combination of accelerating revenue growth and expanding margins signals a business hitting its stride. The consistency of 32%+ margins through recent quarters suggests this profitability level is sustainable, not cyclical.

What could go wrong and has it survived trouble before?

ASML's concentration in three Asian markets creates binary geopolitical risk that could halve the business overnight. The company has proven resilient through multiple shocks but the 2022 rate shock showed how quickly margins can compress. With operating leverage of 1.10x, any revenue decline gets magnified at the earnings level.

At 0.81% earnings yield versus 4.33% treasuries, ASML investors accept a -352 basis point penalty for the privilege of ownership.

Is the stock priced for perfection, fair value, or pessimism?

At 267.7% above DCF value, ASML trades at one of the widest valuation premiums in its history. The 0.81% earnings yield means investors accept returns far below risk-free rates, betting on continued hypergrowth. Yet the market's 8.13% implied growth rate suggests expectations for significant deceleration, creating a precarious setup where even strong results may disappoint.