The DRAM Game-Changer: How EUV Technology Is Reshaping ASML's Profit Engine

ASML Holding isn’t just riding the semiconductor wave—it’s fundamentally reshaping how chips get made, and the numbers tell the story. In Q3 2025, the company’s gross margins hit 51.6%, a solid 80-basis-point jump year-over-year, fueled by two critical trends: explosive demand for EUV (extreme ultraviolet) tools and the rapid scaling of its high-margin service business.

Here’s what’s really happening: EUV adoption is no longer niche—it’s becoming standard across advanced chipmaking. These tools command premium prices compared to older deep ultraviolet systems, which means higher value per unit shipped. But the real margin magic lies in what comes after the sale.

Why Logic Dominance Masks a Bigger Opportunity

Logic chips remain ASML’s bread and butter, driving roughly two-thirds of system revenues. Advanced node manufacturing requires multiple EUV layers, creating a compounding demand cycle: more layers mean higher tool utilization, which snowballs into recurring software upgrades, maintenance contracts, and service revenues. These sticky, high-margin recurring streams dwarf the initial equipment sale.

But here’s the twist—DRAM adoption is quietly becoming the next margin lever. As AI-driven applications demand higher-bandwidth memory (HBM), memory manufacturers are racing to shrink feature sizes and increase density. This architectural shift necessitates deeper EUV penetration in the DRAM space, directly translating into higher-value system orders. When you combine this DRAM tailwind with the established logic momentum, ASML’s profit mix becomes increasingly favorable.

The Installed Base Flywheel

What makes this sustainable isn’t just volume growth—it’s architectural permanence. As EUV volumes scale across both logic and DRAM production lines, ASML’s installed base expands dramatically. A larger installed base means more opportunities for service contracts, software enhancements, and maintenance revenue streams, all carrying margins well above 60%. By Q4 2025, management is guiding for sequential margin expansion—revenues of €9.2-9.8 billion (26.3% increase at midpoint) with gross margins stabilizing at 51-53%.

For full-year 2025, the company projects 15% sales growth with margins near 52%, signaling both sustained demand and profitability confidence.

Playing the Competitive Field

ASML operates in an ecosystem where Applied Materials supplies critical deposition and etching solutions for advanced nodes, while KLA Corporation dominates process control and metrology. However, ASML’s EUV monopoly remains its fortress—no competitor offers direct equivalents, giving the company pricing power and margin expansion room that peers simply can’t match.

Valuation Reality Check

Shares have rallied 33.3% over six months versus the Computer and Technology sector’s 22.2% gain. The forward P/E of 33.76 sits well above the sector average of 27.76, reflecting market confidence in sustained growth. Consensus estimates project 39.3% EPS growth in 2025 and 3.8% in 2026, though 2026 forecasts have recently faced downward revisions while 2025 estimates remain upgraded.

Currently rated Zacks Rank #3 (Hold), ASML remains a bellwether for the semiconductor equipment cycle—with EUV and DRAM driving the narrative.