ASML Q1 Earnings Preview: AI Tailwinds, Tariff Risks, and Booking Momentum in Focus

ASML is set to report first-quarter 2025 earnings on Wednesday morning, and given its singular dominance in chipmaking technology, the results could have broad implications for the semiconductor sector and AI infrastructure more broadly. The Dutch firm is the only company globally that produces extreme ultraviolet (EUV) lithography machines, each priced near $400 million, which are essential for manufacturing cutting-edge chips used in AI, data centers, and advanced computing. Its equipment is so central to Moore's Law and semiconductor scaling that analysts often treat asml as a global capex sentiment gauge.

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ASML’s report comes as the AI boom continues to drive surging demand for high-end semiconductors, offsetting soft patches in consumer electronics and legacy chips. Tariff threats from the Trump administration linger, but ASML is considered among the least at risk due to the absence of viable alternatives and its limited direct U.S. production exposure. Analysts from Bank of America and TD Cowen maintain bullish views, citing the company’s unmatched lithography portfolio, structural leadership in advanced memory scaling, and order visibility through 2026. TD Cowen even reiterated ASML as its top European idea for 2025.

Expectations for Q1 are high, but also tempered by geopolitical crosscurrents. Consensus forecasts call for revenue of €7.77 billion, compared to €5.29 billion a year ago, and comfortably within the company’s guidance range of €7.5 to €8.0 billion. Gross profit is expected at €4.09 billion (up from €2.7 billion YoY), with margins projected to hit 52.6%, up slightly from 51% in Q1 2024. Net income is seen landing near €2.28 billion, almost doubling from last year. ASML also carries a strong bookings backlog of €7.1 billion.

Q4 2024 results set the stage for these expectations. ASML beat estimates across the board, with revenue of €9.26 billion, bookings of €7.09 billion (vs. €3.53 billion est.), and net income of €2.69 billion. Gross margins hit 51.7%, supported by better cost performance and high-NA EUV system upgrades. Notably, system sales to China dropped to 27% from 47% sequentially, amid growing export restrictions. That said, Chinese chipmakers remain heavy buyers of ASML gear, particularly legacy and mid-tier lithography systems.

Regionally, ASML’s revenue remains well diversified. The U.S. accounted for just under 20% of sales in 2024, but that share is expected to rise with Intel and Micron ramping U.S.-based fabs. Taiwan (TSMC) and South Korea (Samsung) are major clients, while China remains a significant contributor despite policy pressure. Analysts are watching closely for any shift in geographical mix, especially in light of Trump’s tariffs and the emerging DeepSeek-led narrative that powerful AI may be achievable on lower-end chips.

Key metrics to watch in Q1:

• Bookings: Expected to reach €4.84 billion, up from €3.61 billion YoY but down from Q4's €7.09 billion; fluctuations are normal but still guide long-term demand.
• EUV systems: Orders for high-NA EUV tools should be scrutinized as a leading indicator of long-term AI-related capex.
• Gross margin: Guided at 52%-53%; any upward surprise would indicate better product mix and cost control.
• Free Cash Flow: Levered FCF margin stands near 24%, suggesting room for operating leverage and capital returns.
• Backlog Visibility: Analysts remain focused on 2026 revenue signals and backlog coverage.

Guidance is another critical watchpoint. ASML reaffirmed full-year revenue guidance of €30-€35 billion after Q4, representing 7-25% growth from 2024. While Q1 is expected to support that range, any commentary on demand softness outside AI (e.g., smartphones, autos) or adjustments due to tariffs could recalibrate investor sentiment. Jefferies expects more conservative tone this quarter, citing macro uncertainty and ambiguity around supply chain normalization.

On valuation, ASML remains compelling. Shares have risen 9% in the past week but remain down over 30% from 12-month highs. Analysts cite a forward P/E near 25, dropping to just 16 by FY2028, implying a strong EPS growth trajectory. Some DCF models peg fair value around $840/share, with upside toward Wall Street's $969 consensus target.

In sum, ASML enters Q1 earnings with momentum in bookings, expanding margin profile, and increasing AI exposure. It is relatively insulated from tariff risk, though geopolitical factors could still inject volatility into forward demand. Investors will be especially attuned to any signals about 2025 booking trends, regional demand shifts, and signs of slowing or reacceleration in non-AI verticals. Given its role as the linchpin of global chip scaling, ASML's tone and results could set the tone for semiconductor capex expectations heading into mid-year.

Ask Aime: What impact will ASML's Q1 2025 earnings report have on the semiconductor sector and AI infrastructure?