ASML’s Cautious Outlook and Weak Orders Weigh on Shares Despite Margin Beat

ASML’s earnings report Wednesday was closely watched as the Dutch company remains a linchpin in the global semiconductor value chain. Its extreme ultraviolet (EUV) lithography machines are indispensable in the manufacturing of advanced chips, particularly those used in artificial intelligence (AI), making its results a critical barometer for both AI infrastructure demand and global trade frictions. With AI continuing to drive capital investment across major chipmakers, ASML’s outlook and commentary often ripple across the sector. However, the company's Q1 print and cautious forward view did little to calm investors navigating a complex backdrop of trade restrictions and slowing orders.

Earnings Review: Margins Beat, But Orders Disappoint

For the first quarter, ASML reported net sales of €7.74 billion, slightly below consensus estimates of €7.75 billion, but in line with the company’s own guidance. Gross margin came in stronger than expected at 54%, exceeding the Street’s forecast of 52.5% and up sharply from 51.7% in Q4. This beat was driven by a favorable EUV product mix and performance milestone-related bonuses. Net income reached €2.36 billion, ahead of the €2.24 billion consensus, and operating margin of 35.4% also topped expectations.

Despite the earnings beats, net bookings were a clear weak spot, coming in at €3.94 billion—down 44% quarter-over-quarter and well below expectations for €4.82 billion. Notably, EUV bookings totaled €1.2 billion. Total system sales came in at 77 units, with strength in EUV shipments (14 vs. est. 11.7) helping offset softness in ArFi, ArFdry, and KrF categories.

Guidance: Q2 Soft, Full-Year Maintained

Looking ahead to Q2, ASML guided revenue between €7.2 billion and €7.7 billion, with a midpoint of €7.45 billion coming in 4% below consensus expectations of €7.77 billion. Gross margin is projected between 50% and 53%, consistent with full-year expectations of 51% to 53%.

ASML reiterated its full-year 2025 revenue forecast of €30–35 billion. CEO Christophe Fouquet noted, “If customers stick to their plans, then we would be at the high-end of the range… if uncertainty reigns, then we’ll trend toward the low end.” Citi commented that “orders remain the primary focal point and disappointed,” but maintained its Buy rating, citing technical progress and a still-attractive valuation of 22x 2026 P/E.

Tariff Uncertainty Clouds Trade Outlook

Trade policy and tariff developments emerged as a key source of macro uncertainty. Fouquet acknowledged the growing risk environment, saying “recent tariff announcements have increased uncertainty… and the situation will remain dynamic for a while.” He added that AI remains the core driver of growth, but the knock-on effects of U.S. trade restrictions—particularly around semiconductor exports—pose risks to customer behavior and investment timelines.

TD Cowen’s Krish Sankar echoed the concern, noting “the direct and indirect effects of global tariffs are still being assessed by ASML,” but emphasized that the 2025 and 2026 growth narrative remains intact.

Meanwhile, Evercore ISI saw opportunity in the pullback, stating that shares—down about 5% post-earnings—had already priced in downside risk, following months of compression in valuation multiples. “We are buyers of the weakness,” the firm wrote, pointing to favorable long-term dynamics and technical progress, including High NA system deployments.

Conclusion: A Mixed Bag With Growing Macro Headwinds

ASML’s Q1 report underscores the ongoing tension between fundamental tech progress and a murkier geopolitical environment. While margins and shipments offer signs of operational strength, the disappointing order book and cautious Q2 outlook, combined with rising trade friction, have tempered investor enthusiasm. With shares off nearly 30% over the past year and another 5% on the day, ASML may look attractive to long-term investors betting on AI infrastructure—but the trade narrative remains a wild card.