ASML Investors: Orders in Focus After DeepSeek Fallout -- Earnings Preview
Tuesday, Jan 28, 2025 10:58 am ET
3min read As ASML Holding NV (ASML) prepares to report its fourth-quarter and full-year 2024 financial results on Wednesday, January 29, investors will be closely watching the company's order intake, particularly in light of the recent DeepSeek AI model developments. The Dutch semiconductor equipment maker's earnings come at a critical juncture, as the market grapples with the potential impact of the low-cost, high-performance AI model on demand for advanced AI chips.
The DeepSeek AI model, developed by a Chinese company, has raised concerns about the need for high-end AI chips, potentially reducing demand for ASML's advanced lithography systems. This uncertainty has led analysts to lower their expectations for ASML's order intake in the fourth quarter. According to Visible Alpha, analysts expect ASML to report orders of around €3.99 billion ($4.2 billion), down from the €9.19 billion reported in the same period a year earlier. Citi analysts, however, expect investor expectations on orders to be even weaker, with estimates as pessimistic as €2 billion.
ASML's guidance for the fourth quarter also reflects this uncertainty, with the company expecting total net sales between €8.8 billion and €9.2 billion, lower than the €9.2 billion reported in the same period a year earlier. The company expects a gross margin between 49% and 50%, which is within its previously guided range but still reflects the potential impact of the DeepSeek model on demand for its products.
Despite the near-term uncertainty, ASML remains optimistic about its long-term prospects. The company expects its 2025 total net sales to grow to a range between €30 billion and €35 billion, reflecting the potential for increased demand for its products driven by the growth in edge AI devices. ASML's CEO, Christophe Fouquet, has stated that the company expects the recovery in other market segments to be more gradual than previously expected, leading to customer cautiousness. However, the company remains confident in its ability to meet the growing demand for its products in the AI and other segments.
Investors will be looking for reassurance from ASML's management that the company's AI-dependent growth outlook for 2025 is secure, despite the DeepSeek-fueled decline in investor expectations for orders. They will also be interested in the company's guidance for 2026 growth prospects, as the market seeks to understand the potential long-term impact of the shift towards more numerous, but cheaper and more efficient AI devices at the edge.
In conclusion, ASML's upcoming earnings report will be closely watched by investors, who will be focusing on the company's order intake and guidance for the coming year. The DeepSeek AI model's impact on demand for advanced AI chips has created uncertainty in the market, but ASML remains optimistic about its long-term prospects. Investors will be looking for reassurance from the company's management that its AI-dependent growth outlook is secure, and that the shift towards edge AI devices presents a long-term opportunity for the company.
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