EUV Technology's Growing Role in Reshaping Semiconductor Equipment Profitability

ASML Holding stands at the center of semiconductor manufacturing’s most critical transformation. The company’s financial trajectory increasingly hinges on how quickly extreme ultraviolet (EUV) lithography becomes the standard across the industry—particularly in both advanced logic and DRAM production lines.

The Margin Story Behind EUV Adoption

The numbers tell a compelling story. In Q3 2025, ASML Holding posted gross margins of 51.6%, representing an 80-basis-point year-over-year improvement. This expansion didn’t happen by accident. It reflects sustained client orders for EUV systems, which command significantly higher price tags than their ultraviolet predecessors, combined with a strengthening aftermarket business built on software upgrades and maintenance services.

Logic chip manufacturing remains the heavyweight, representing roughly two-thirds of system revenues. Advanced chip nodes inherently require multiple layers of EUV processing, a reality that amplifies tool utilization rates and fuels ongoing demand for software enhancements and technical support—revenue streams that typically carry fatter margins than initial equipment sales alone.

DRAM Emerges as the Next Profitability Driver

DRAM technology is quietly becoming just as important. The AI revolution has turbocharged demand for specialized memory architectures, especially high-bandwidth memory variants that demand cutting-edge fabrication steps. As memory manufacturers transition toward denser, more complex chip designs, EUV adoption accelerates within their fabs. This shift carries concrete financial implications for ASML: higher-value system orders replace aging, lower-margin legacy equipment.

The convergence matters tremendously. Broader EUV penetration across both logic and DRAM segments creates a more favorable business composition—one where recurring service revenues increasingly offset any cyclical swings in new equipment sales.

Forward-Looking Financial Guidance

Management’s Q4 2025 outlook reinforces this momentum. ASML Holding projects revenues between €9.2 billion and €9.8 billion, representing a 26.3% sequential increase at the midpoint. Gross margin guidance of 51-53% suggests a 40-basis-point sequential lift. For full-year 2025, the company anticipates approximately 15% sales growth with margins near 52%, underscoring persistent industry demand.

Competition in Chipmaking Equipment

While ASML possesses the EUV monopoly, the broader semiconductor equipment landscape remains competitive. Applied Materials supplies deposition and etching systems essential for both mature and bleeding-edge nodes. KLA Corporation specializes in yield monitoring and process control tools—systems that chipmakers rely on to optimize production efficiency as complexity increases.

Valuation and Market Position

ASML’s stock appreciated 33.3% over the past six months against the Computer and Technology sector’s 22.2% gain. Currently trading at a forward price-to-earnings multiple of 33.76—well above the sector average of 27.76—the market is pricing in meaningful future earnings expansion.

Consensus estimates project 2025 earnings growth of approximately 39.3% year-over-year, with 2026 expected to grow just 3.8%. Recent estimate revisions favor 2025 (revised upward), while 2026 projections have drifted lower. The company carries a Zacks Rank #3 rating.

The Bigger Picture

As EUV volumes scale and installed bases expand globally, ASML’s margin architecture should gradually strengthen over time. The combination of logic and DRAM transition dynamics creates a durable foundation for sustained profitability improvement—a thesis that increasingly underpins the company’s market valuation.