ASML Holding NV ADR (ASML.US) backlog may increase 44% to 56 billion; Bernstein sees nearly 70% upside

On Monday, Bernstein noted in its latest research report that although ASML Holding NV ADR (ASML.US) has stopped disclosing new order and backlog data, by analyzing changes in customer prepayments and contract liabilities, the firm estimates that ASML Holding NV ADR's backlog in the third quarter of 2026 may have reached a record high of approximately EUR 56 billion, an increase of about 44% from the EUR 38.8 billion last disclosed in the fourth quarter of 2025. This suggests that the company's future equipment demand may be stronger than market expectations, especially as order visibility for extreme ultraviolet (EUV) lithography equipment has extended to 2028. Bernstein believes that ASML Holding NV ADR's current business upcycle is expected to last until 2028 or even longer, reiterating its "Outperform" rating and maintaining its target price of EUR 2,500 for the Amsterdam-listed shares and USD 2,859 for the U.S.-listed shares. Based on the Amsterdam closing price of EUR 1,477.20 on October 16, the potential upside is approximately 69%. ASML Holding NV ADR has not disclosed new order and backlog data since the fourth quarter of 2025. The company last reported quarterly new orders of EUR 13.2 billion and a backlog of EUR 38.8 billion. Since then, investors have found it difficult to directly assess the company's equipment demand for the coming quarters and even years. However, Bernstein analyst David Dai and his team found that the contract liability data on ASML Holding NV ADR's balance sheet can still provide important clues for judging order trends. Contract liabilities mainly reflect payments already made by customers that ASML Holding NV ADR has not yet recognized as revenue, including prepayments corresponding to future equipment deliveries, installations, upgrades, and services. Bernstein believes that the vast majority of these are related to equipment order prepayments, and therefore can serve as an important indicator for estimating backlog size. According to the firm's calculations, ASML Holding NV ADR's total contract liabilities in the third quarter reached a record EUR 24.6 billion, up from EUR 19.4 billion at the end of 2025. Among these, non-current contract liabilities increased sharply from EUR 3.6 billion in the second quarter to EUR 9.0 billion in the third quarter, a quarter-over-quarter increase of about 150%. Bernstein particularly emphasized that the rapid growth of non-current contract liabilities is significant, because such payments typically correspond to equipment or services to be delivered more than a year later. This means that ASML Holding NV ADR not only has ample near-term orders, but support from delivery demand in 2028 and beyond may also be strengthening. By comparing ASML Holding NV ADR's previously disclosed order data with customer prepayments, the firm found that a relatively stable relationship exists between the two. According to historical data, ASML Holding NV ADR's total undelivered orders are typically about 2.2 times customer prepayments and related contract liabilities, so this relationship can be used to infer the company's current backlog size. This implies that, taking into account that some contract liabilities are related to the service business, ASML Holding NV ADR customers typically need to prepay about 35% to 40% of the equipment order value, close to the upper end of the company's previously disclosed 20% to 50% prepayment range. Based on contract liabilities of approximately EUR 24.6 billion in the third quarter, Bernstein estimates that ASML Holding NV ADR's backlog may have reached about EUR 56 billion, an increase of about EUR 17.2 billion, or about 44%, from the EUR 38.8 billion last disclosed at the end of 2025. Divided by expected order delivery timing, the firm estimates that about EUR 35 billion of the backlog will be fulfilled within the next year, while another approximately EUR 21 billion corresponds to delivery demand more than a year out. Bernstein pointed out that this estimate is broadly consistent with ASML Holding NV ADR management's previous comments on capacity bookings for 2027, and also implies that the market may be underestimating the certainty of the company's revenue over the next two years. However, EUR 56 billion is not ASML Holding NV ADR's latest officially disclosed order data, but an estimate derived from the relationship between contract liabilities and historical orders. By specific product, Bernstein believes that ASML Holding NV ADR's orders for advanced lithography equipment are particularly strong. The firm noted that, according to management's previous statements, ASML Holding NV ADR's EUV equipment capacity for 2027 has already been fully booked by customers. Bernstein expects EUV equipment sales to reach approximately EUR 24 billion in 2027. At the same time, according to the firm's model estimates, sales of deep ultraviolet (DUV) lithography equipment and metrology equipment in 2027 will be approximately EUR 19 billion, and about 60% of the related capacity may already be supported by orders. This means that, in addition to EUV equipment, DUV equipment also has a strong demand base, and the remaining capacity may still provide room for subsequent order growth and price increases. More noteworthy is EUV equipment demand in 2028. Bernstein expects ASML Holding NV ADR's EUV equipment sales to reach approximately EUR 35 billion in 2028. If all of the approximately EUR 21 billion of estimated backlog with delivery periods exceeding one year is treated as 2028 EUV equipment orders, then about 60% of its 2028 EUV revenue may already be supported by customer prepayments. The firm believes this indicates that ASML Holding NV ADR's revenue visibility over the next two years has significantly strengthened, especially as EUV equipment demand may remain strong. However, the above 2028 order coverage ratio is based on strong model assumptions, including that all backlog with delivery periods exceeding one year corresponds to 2028 EUV equipment, so uncertainty remains. Bernstein expects that as customers continue to expand advanced-node capacity and equipment purchases, ASML Holding NV ADR's backlog is likely to continue growing over the next few quarters, and the fourth quarter may set another record. Improved order visibility has further strengthened Bernstein's confidence in ASML Holding NV ADR's earnings growth over the next few years. The firm's latest financial model forecasts that ASML Holding NV ADR's 2026 revenue will reach EUR 45.008 billion, up 37.8% year over year; 2027 revenue will grow a further 27.5% to EUR 57.396 billion; and 2028 revenue is expected to reach EUR 75.602 billion, up 31.7% year over year. On profitability, Bernstein expects ASML Holding NV ADR's operating profit to be EUR 18.921 billion in 2026, rising to EUR 25.791 billion in 2027, and further reaching EUR 37.213 billion in 2028. As business scale expands and product mix improves, the firm expects ASML Holding NV ADR's operating margin to rise from 42.0% in 2026 to 44.9% in 2027 and reach 49.2% in 2028. On earnings per share, Bernstein expects ASML Holding NV ADR's diluted earnings per share in 2026, 2027, and 2028 to be EUR 43.23, EUR 57.18, and EUR 84.18, respectively. Among these, the 2028 EPS forecast is about 18% to 19% above the market consensus. Bernstein believes that as orders continue to increase, ASML Holding NV ADR is still likely to benefit from capacity expansion and equipment price increases in the future, and there is room for further upward revision to earnings forecasts. Based on strong underlying order demand and long-term growth prospects, Bernstein maintains its "Outperform" rating on ASML Holding NV ADR and maintains its target price of EUR 2,500 for the Amsterdam-listed shares. For the U.S.-listed ASML Holding NV ADR, the firm maintains a target price of USD 2,859. Bernstein's valuation methodology mainly uses a 30x P/E multiple on expected earnings per share for the fifth through eighth quarters ahead. The firm believes that the most important investment thesis for ASML Holding NV ADR currently is that demand for its equipment orders may be stronger than market expectations, and that this demand has gradually extended to 2028 and beyond. As EUV equipment capacity continues to be booked and DUV equipment demand remains resilient, the company is expected to continue benefiting from the semiconductor capital expenditure cycle over the next few years. However, Bernstein also noted that ASML Holding NV ADR still faces risks such as higher-than-expected EUV technology upgrade costs, weaker global wafer fabrication equipment demand, and slower-than-expected iteration of advanced-node technologies.