ASML is the Most Important Company in the AI Ecosystem, and It Just Delivered Record Results. Here’s Where the Stock Will Be in 2028

The art of crafting AI hardware has faced turbulence due to high interest rates, worries about funding AI infrastructure, possible access to capital difficulties, and increased competition from China. However, the latest third-quarter results from ASML Holding (ASML -0.96%), potentially the most crucial company in the AI infrastructure ecosystem, defy such concerns. Not only did ASML achieve record revenue of 11.7 billion euros, a 56% increase from the previous year, but it also boosted its full-year guidance.

ASML's gross margin improved to 57.5% in the third quarter, up from 51.6% the year before. This surge in margins is unsurprising, as ASML holds a monopoly on extreme ultraviolet (EUV) lithography machines. These machines are vital for creating advanced chips, such as those used in AI data centers for training and inference tasks. Key players like TSMC and Intel, alongside major memory manufacturers, rely on ASML's technology to manufacture state-of-the-art chips.

ASML's management expressed confidence that the robust demand for its machines will persist until at least 2028. CEO Christophe Fouquet emphasized that customers expect supply to not keep up with demand during this period, and the company won't be able to meet customer demand despite plans to increase supply by 30% in 2027 and 2028. This continued demand and ASML's position as the sole EUV lithography machine manufacturer enable the company to maintain premium pricing, benefiting its financial performance.

ASML's guidance mirrors this outlook, projecting a 51% increase in revenue to 14.7 billion euros for the current quarter, with gross margins expected to rise to 57% from 52.5% the same period last year. Given this strong performance, ASML appears to be an attractive growth stock, currently trading at 29 times forward earnings, higher than the S&P 500's forward earnings multiple of 20.

However, this premium is justified by ASML's projected earnings growth, expected to surge by 67% in 2026, outpacing the projected 32% for S&P 500 companies.

Assuming a 45% annual increase in earnings per share for the following two years, ASML's EPS could reach $97.49 by 2028, based on a 2026 projection of $46.37. If ASML maintains its current stock valuation of 29 times earnings, its stock price could reach $2,827, representing a potential 72% gain over just two years. This indicates that it may still be an opportune time for investors to buy ASML shares following its impressive 53% rally in 2026.