ASML sees bookings triple, setting the tone for solid 2024 and 2025

ASML, the chip equipment maker, reported impressive fourth-quarter results, exceeding expectations and hinting at promising prospects in the future. The company's net profit rose by 9% to 2.0 billion euros ($2.2 billion), surpassing estimates of 1.87 billion euros. Sales grew to 7.2 billion euros, eclipsing the anticipated revenue of 6.9 billion euros. Additionally, ASML recorded orders of more than 9 billion euros in the quarter, more than triple the previous quarter's levels. ASML's quarterly net bookings stood at 9.2 billion euros, with 5.6 billion euros attributed to extreme ultraviolet (EUV) technology. 

The semiconductor industry has been striving to navigate its way through a challenging period, yet positive signs have started to emerge. End-market inventory levels and litho tool utilization levels have shown improvements, instilling confidence in ASML's customers. The strong order intake in the fourth quarter solidifies the belief in future demand for ASML's cutting-edge products.

ASML's President and CEO, Peter Wennink, noted that despite the uncertainty surrounding the semiconductor market recovery, the company remains cautiously optimistic. ASML's guidance for the first quarter of 2024 predicts net sales ranging between 5.0 billion euros and 5.5 billion euros, with a gross margin between 48% and 49%. R&D costs are estimated at around 1,070 million euros, while SG&A costs are expected to be around 300 million euros. 

ASML, widely regarded as the most dominant player in EUV lithography machines, expects its 2024 net sales to remain similar to that of 2023. The company expects net sales between 5 and 5.5 billion euros for the first quarter of 2024, with a gross margin ranging from 48% to 49%. ASML also forecasted R&D costs around 1.07 billion euros and SG&A costs at approximately 300 million euros. There is excitement building around the potential for significant growth in 2025. The company views 2024 as a pivotal year to prepare for the anticipated surge in demand in 2025.

ASML plans to declare a total dividend of €6.10 per ordinary share for the year 2023, representing a 5.2% increase from the previous year. An interim dividend of €1.45 per ordinary share will be payable on February 14, 2024, followed by a final dividend proposal of €1.75 per ordinary share to be presented at the General Meeting. However, no shares were repurchased under the current share buyback program during the fourth quarter.

Following the release of its fourth-quarter results, ASML's stock surged by 5.1% in U.S. premarket trading, reflecting the positive earnings beat and optimistic guidance for the future. ASML's dominant position as a critical supplier of extreme ultraviolet (EUV) lithography machines to top chip manufacturers such as Intel, TSMC, and Samsung Electronics further emphasizes its importance in the industry.

ASML's President and Chief Executive Officer, Peter Wennink, acknowledged that while the semiconductor industry continues to navigate through the bottom of the cycle, there are promising signs of recovery. He highlighted the improvement in industry end-market inventory levels and litho tool utilization rates. Moreover, Wennink emphasized the strong order intake in the fourth quarter as a testament to future demand. 

The company's customers include major players such as Intel, Taiwan Semiconductor Manufacturing (TSMC), and Samsung Electronics. Both TSMC and ASML's recent results suggest that chip manufacturers might have passed the worst of the cyclical trough, with better times on the horizon.

ASML's share price rose in premarket trading on Tuesday following the impressive earnings beat and optimistic guidance for 2025.  ASML's strong performance, along with positive signals from TSMC's results, bodes well for the broader semiconductor industry. Although uncertainties persist, ASML's remarkable order intake and positive outlook signal a potential upturn in the coming years, particularly in 2025. As the company continues to navigate the cyclicality of the industry, it remains poised for significant growth and maintains its position as a key player in the global chip equipment market.