ASML slides 7% on cautious outlook and potential export restrictions
1min read ASML, a leading manufacturer of advanced lithography equipment essential for semiconductor production, reported second-quarter earnings that surpassed analyst expectations on both the top and bottom lines. The company reported a net income of €1.6 billion ($1.74 billion), exceeding the expected €1.41 billion, despite a 19% year-over-year decline. Revenue for the quarter came in at €6.2 billion, down 9.5% from the previous year but still above the consensus estimate of €6.04 billion.
However, the stock fell 7% in premarket trading following news that the U.S. might impose unilateral restrictions on semiconductor equipment exports to China if allies do not comply.
ASML's Q2 earnings per share were €4.01, beating the consensus of €3.70. The company's gross margin stood at 51.5%, and it reported quarterly net bookings of €5.6 billion, with €2.5 billion from its extreme ultraviolet (EUV) lithography systems. Despite these strong results, ASML issued downside guidance for the third quarter, expecting revenues between €6.7 billion and €7.3 billion, below the consensus of €7.57 billion. The company reaffirmed its full-year 2024 guidance, anticipating revenues similar to 2023 at approximately €27.56 billion.
ASML's outlook highlighted several uncertainties, particularly those driven by the macroeconomic environment. CEO Christophe Fouquet noted that while semiconductor inventory levels and lithography tool utilization rates were improving, the market still faced significant challenges. ASML's guidance for Q3 includes a gross margin between 50% and 51%, with R&D and SG&A costs projected to be around €1.1 billion and €295 million, respectively. The company remains optimistic about industry recovery, driven by advancements in artificial intelligence, which are expected to lead market growth.
The company's stock reaction reflects market concerns over geopolitical tensions and their impact on future sales. ASML's strategic importance lies in its EUV lithography equipment, the only technology capable of producing the most advanced semiconductor chips. This unique position makes ASML a crucial player in the semiconductor industry, directly influencing global supply chains and technological advancements.
Despite the strong bookings and positive aspects of its earnings report, the anticipation for an upgrade in guidance did not materialize, contributing to the stock's decline. Analyst Sara Russo from Bernstein noted that the bookings exceeding expectations should offer some reassurance to investors. She maintained her outperform rating on ASML stock, with a price target of €1,052.
In summary, while ASML's Q2 performance exceeded expectations, the company's cautious outlook and external geopolitical factors have weighed heavily on its stock. The continued investment in capacity ramp and technology, coupled with the robust demand driven by AI developments, positions ASML well for future growth, despite the current headwinds. Investors will closely watch the company's ability to navigate these challenges and capitalize on its leading position in the semiconductor industry.