ASML's "Peak Moment"! Morgan Stanley: Under the expansion wave of advanced processes, it may 迎来 the strongest profit growth in 2027

Morgan Stanley stated that with the AI wave driving the capacity expansion of advanced process and memory chips, ASML is at the starting point of the strongest profit cycle in history.

On January 16th, according to news from the Chasing Wind Trading Desk, Morgan Stanley released a significant research report with a very direct core viewpoint: 2027 will be the peak year for ASML's profit growth, with expected sales of approximately €46.8 billion in the fiscal year 2027, EBIT reaching €19.7 billion, and gross margin increasing to 56.2%. The expected earnings per share in 2027 is €45.74, a 35% increase from the previous estimate of €33.94, and a 57% year-on-year growth compared to the expected €29.12 in 2026. This will be the highest annual profit growth rate in the company's history.

The research report stated that this profit explosion is mainly driven by three engines: strong demand from advanced logic foundries, large-scale capacity expansion in the DRAM memory sector, and demand performance exceeding expectations. The firm issued an extremely strong bullish signal for ASML, significantly raising its target price from €1,000 to €1,400, while maintaining an "Overweight" rating and "Top Pick" status.

Stronger-than-expected Demand for Advanced Logic Foundries

TSMC's significant increase in capital expenditure has become a key catalyst.

The research report noted that TSMC provided a capital expenditure guidance of $52-56 billion for 2026 during its fourth-quarter earnings release, representing a 32% year-on-year increase, higher than the $40.9 billion in 2025. Of this, 70-80% will be allocated to advanced processes. TSMC also hinted that capital expenditures may further increase in the coming years.

Based on this, Morgan Stanley raised its forecast for TSMC's EUV equipment procurement in 2026 from about 20 units to 29 units, and for 2027, it was significantly raised from 28 units to 40 units. Analysts expect the company to build A14 process capacity in advance, preparing for use in 2028. It is expected that TSMC will receive about 18 low-NA EUV tools in 2025.

In addition to TSMC, improvements in process development at Intel and Samsung will also become apparent. Morgan Stanley expects both companies to each procure 5-6 EUV tools for foundry/logic business in 2027. Overall, it is expected that about 52 tools will be sent to the logic/foundry sector in 2027, far exceeding the previous expectation of 25-30 units

The Surge in DRAM Prices Will Trigger a Wave of Capacity Expansion

The DRAM market is experiencing unprecedented prosperity.

Morgan Stanley stated that the DRAM prices in Q4 and Q1 are maintaining a very strong momentum, primarily driven by the demand for conventional server CPUs and the large cloud service providers' AI demand for 2026-27 (especially for agent AI).

The scarcity of capacity has led to nearly unprecedented month-on-month and year-on-year price increases for HBM and general DRAM. Morgan Stanley expects this trend to last for at least 1-2 quarters, ultimately leading to large-scale capacity construction in the DRAM manufacturing sector, thereby driving demand for ASML's EUV and DUV tools.

The analysts at the firm believe that most capacity investments will materialize in 2026-27, preparing for the demand in 2027-28.

Morgan Stanley predicts that ASML will achieve approximately €15 billion in DUV sales in 2027, and this figure may have upside potential if NAND construction growth exceeds expectations.

Based on a comprehensive assessment of demand in the logic foundry and memory sectors, Morgan Stanley expects ASML to ship about 80 EUV tools in 2027, setting a historical record. This includes about 52 units shipped to logic/foundry customers, with the remainder going to memory manufacturers.

Demand Performance Better Than Concerns

The research report indicates that Morgan Stanley's survey shows that demand from leading memory chip manufacturers and major firms remains strong. Analysts expect ASML to discuss demand being better than previously guided in this earnings report.

Morgan Stanley stated that sales in 2026 are expected to be close to flat year-on-year, rather than the previously guided significant decline of 15-20%. Analysts also assume that this positive trend will continue into 2027.

Short-term Catalysts: Upcoming Q4 Earnings Report and Strong Orders

ASML will release its Q4 results on January 28, 2026. Morgan Stanley anticipates:

Order Volume: Q4 orders are expected to be €7.27 billion, stronger than Q3's €5.4 billion. This includes 19 EUV low-NA tools, primarily from TSMC (9 units) and memory demand from Samsung and SK Hynix. This will be ASML's last disclosure of order data.

Sales: Expected to be €9.675 billion, at the high end of the guidance range (€9.2-9.8 billion), with a year-on-year increase of 4%. Full-year sales are expected to reach €32.6 billion, a year-on-year increase of 15%, in line with the previous quarter's guidance.

Profit Margin: Q4 gross margin is expected to be 51.8%, close to the midpoint of the guidance (51%-53%), with a quarter-on-quarter increase of 20 basis points. Analysts maintain a positive outlook on the profit margin for 2026.

2026 Guidance: The company is expected to provide a double-digit sales growth guidance for FY 2026 (+12%), approximately €36.5 billion. Management may continue to discuss declines but will lower the level of conservatism Analysts at the bank expect ASML to achieve sales of approximately €46.8 billion in 2027, with system sales of €36.9 billion and IBM business revenue of €9.9 billion. The gross margin is expected to increase from 52.5% in 2026 to 56.2%, while the operating profit margin will reach an astonishing level of 42.2%, and the EBITDA margin will be as high as 44.6%.

Morgan Stanley maintains ASML as a preferred stock, using a 31 times price-to-earnings ratio valuation, with a target price of €1,400. In a bull market scenario, based on an earnings per share of €50 in 2027 and a 40 times price-to-earnings ratio, the target price could reach €2,000