ASML beats Q2 estimates and raises guidance twice as AI chip demand surges across semiconductor industry

ASML tops Q2 estimates on AI chip demand

July 15 (Reuters) - ASML (ASML.AS), opens new tab, the world's biggest supplier of equipment used to manufacture computer chips, on Wednesday reported better-than-expected second-quarter revenue and profit, as demand from makers ⁠of artificial intelligence chips offset uncertainty over sales to China. Revenue for the three months ended June 30 was 9.33 billion euros ($10.90 billion), compared with ⁠the 8.80 billion euros expected by analysts, according to LSEG median estimates. ⁠Net income was 2.92 billion euros, compared with the ⁠2.62 billion euros expected, according to LSEG ⁠data. Reporting by Toby Sterling in Amsterdam, Nathan Vifflin in Gdansk, editing by Our Standards: The Thomson Reuters Trust Principles., opens new tab

ASML hikes sales forecast for second time this year on strong AI chip demand

It previously predicted annual net sales of between 36 billion and 40 billion euros, and a gross margin between 51% and 53%. ASML on Wednesday raised its guidance for the second time this year as its customers continue to ramp up production capacity of AI chips. The Dutch semiconductor-equipment maker said it now expects full-year sales to come in between 43 billion euros ($49 billion) and 45 billion euros, and a gross margin of between 54 and 56%. It previously predicted annual net sales of between 36 billion and 40 billion euros, and a gross margin between 51% and 53%. ASML had already raised its guidance last quarter on continued demand for its highest-end EUV machines -- the only tools in the world capable of the lithography needed to make the most advanced chips used for AI. That demand is expected to remain high as chipmakers expand production capacity to meet the needs of the AI boom. Earlier this week, Taiwan Semiconductor Manufacturing Co (TSMC), one of ASML's largest customers, reported a 68% jump in June sales on the back of strong demand for its chips. TSMC is planning to add two advanced chip packaging plants in the Chiayi Science Park in southern Taiwan, Reuters reported, citing remarks made by Taiwan's National Science and Technology Council Minister Wu Cheng-wen on Sunday. UBS analysts said in a July 10 note that the buildout in semiconductor fabrication facilities, as well as AI-driven demand for leading-edge chip production, is expected to help ASML see a stronger second half of the year. Despite robust demand, semiconductor stocks have come under pressure as investors question whether the huge AI-driven capital spending can be sustained. ASML also faces tightening restrictions on export controls of its advanced chip equipment.

Chip toolmaker ASML expected to shine light on capacity and China challenges

AMSTERDAM, July 14 (Reuters) - ASML (ASML.AS), opens new tab, the biggest supplier of equipment used to manufacture AI chips, reports quarterly earnings on Wednesday looking to justify its chunky valuation and demonstrate how it will contend with U.S. moves to block exports to China. The Netherlands-based business is Europe's most valuable listed company with a market capitalisation of €610 billion ($696 billion) after the AI boom helped to lift its share price by nearly 70% this year as memory chip makers such as SK Hynix (000660.KS), opens new tab, Samsung (005930.KS), opens new tab and Micron (MU.O), opens new tab rush to add capacity. Biggest customer TSMC (2330.TW), opens new tab, which makes Nvidia's (NVDA.O), opens new tab chips, is also expanding while Intel's (INTC.O), opens new tab recovery and Elon Musk's TeraFab plans could add further demand. EXPORT CONTROLS CLOUDING OUTLOOK Clouding the outlook, however, is a proposed U.S. law requiring U.S. allies to align with export controls to curb China's ability to make advanced chips, with ASML named in the legislation. The company has denied selling ⁠its most advanced EUV tools to China, which is forecast to account for up to 20% of ASML's sales this year through legal purchases of less-advanced DUV tools to make chips for automotive, industrial and electronic products. ASML is forecast to report an 8.8% rise in second-quarter net profit to €2.61 billion on revenue up 14% at €8.8 billion, according to LSEG estimates, with analysts looking for an increase to the company's full-year revenue forecast of between €36 billion and €40 billion. "We expect ASML to have a beat-and-raise earnings report," said Mehdi Hosseini, analyst at broker Susquehanna, adding that all of ASML's capacity to the end of 2027 may already be booked. Morningstar's Javier Correonero said that ASML's 2030 sales target of at least €44 billion now looks overly conservative. "It's very reasonable to assume this guidance is outdated," he said. "I forecast €60 billion in 2030 sales." 'CREATIVE WAYS' TO MEET CUSTOMER DEMAND ASML is the only maker of EUV lithography systems, the huge $300 million machines needed to produce the tiny circuitry on ⁠cutting-edge chips. Each takes about a year to build, one of the factors that limit how quickly AI infrastructure can expand. Chief Executive Christophe Fouquet said in April that ASML was doing everything possible to avoid becoming an industry bottleneck, as happened during the COVID-19 pandemic. ASML, which aims to ship 60 EUV tools this year and 80 next year, has said it could theoretically ship up to 90 without adding physical capacity, though JPMorgan analysts have said they believe it could make as many as 110. "Beyond the 90 we ⁠are looking at creative ways to help customers," ASML said in a statement to Reuters. Options include upgrades to older tools, faster machine assembly and quicker installation. ASML says it has also secured extra supplies of parts that take a long time to produce, including lenses and mirrors from German supplier Zeiss and high-power lasers from Germany's Trumpf. "We are fully prepared ⁠to meet ASML's EUV demand over the next three years," said Trumpf spokesperson Manuel Thoma. Zeiss declined to comment on capacity, though the company has been expanding DUV and EUV optics operations. MORE VALUATION UPSIDE OR HITTING A CEILING? Some analysts cautioned that ASML's valuation looks stretched, with the stock trading at 49 times estimated ⁠2027 earnings. "We believe much of the upside is reflected in the current price and therefore maintain our 'hold' recommendation," said KBC analyst Thomas Couvreur. Others said there is still room for a positive surprise because ASML has underperformed the benchmark Philadelphia Semiconductor Index so far this year. "Strong results combined with further capacity expansion could support a catch-up," said ING analyst Marc Hesselink. ($1 = 0.8769 euros) Reporting by Toby Sterling and Nathan Vifflin Editing by Adam Jourdan and David Goodman Our Standards: The Thomson Reuters Trust Principles., opens new tab

Chip toolmaker ASML expected to shine light on capacity and China challenges

The Netherlands-based business is Europe's most valuable listed company with a market capitalisation of €610 billion ($696 billion) after the AI boom helped to lift its share price by nearly 70% this year as memory chip makers such as SK Hynix, Samsung and Micron rush to add capacity. ASML, the biggest supplier of equipment used to manufacture AI chips, reports quarterly earnings on Wednesday looking to justify its chunky valuation and demonstrate how it will contend with U.S. moves to block exports to China. The Netherlands-based business is Europe's most valuable listed company with a market capitalisation of €610 billion ($696 billion) after the AI boom helped to lift its share price by nearly 70% this year as memory chip makers such as SK Hynix, Samsung and Micron rush to add capacity. Biggest customer TSMC, which makes Nvidia's chips, is also expanding while Intel's recovery and Elon Musk's TeraFab plans ⁠could add ⁠further demand. Export controls clouding outlook Clouding the outlook, however, is a proposed U.S. law requiring U.S. allies to align with export controls to curb China's ability to make advanced chips, with ASML named in the legislation. The company has denied selling its most advanced EUV tools to China, which is forecast to account for up to 20% of ASML's sales this year through legal purchases of less-advanced DUV tools to make chips for automotive, industrial and electronic products. ASML is forecast to report an 8.8% rise in second-quarter net profit to €2.61 billion on revenue up 14% at €8.8 billion, according to LSEG estimates, with analysts looking for an increase to the company's full-year revenue forecast of between €36 billion ⁠and €40 billion. "We expect ASML to have a beat-and-raise earnings report," said Mehdi Hosseini, analyst at broker Susquehanna, adding that all of ASML's capacity to the end of 2027 may already be booked. Morningstar's Javier Correonero said that ASML's 2030 sales target of ⁠at least €44 billion now looks overly conservative. "It's very reasonable to assume this guidance is outdated," he said. "I forecast €60 billion in 2030 sales." 'Creative ways' to meet customer demand ASML is the only maker of EUV lithography systems, the huge $300 million machines needed to produce the tiny circuitry on cutting-edge chips. Each takes about a year to build, one of the factors that limit how quickly AI infrastructure can expand. Chief Executive Christophe Fouquet said in April that ASML was doing everything possible to avoid becoming an industry bottleneck, as happened during the COVID-19 pandemic. ASML, which aims to ship 60 EUV tools this year and 80 next year, has said it could theoretically ship up to 90 without adding physical capacity, though JPMorgan analysts have said they believe it could make as many as 110. "Beyond the 90 we are looking at creative ways to help customers," ASML said in a statement to Reuters. Options include upgrades to older tools, faster machine assembly and quicker installation. ASML says it has also secured extra supplies ⁠of parts that take a long time to produce, including lenses and mirrors from German supplier Zeiss and high-power lasers from Germany's Trumpf. "We are fully prepared to meet ASML's EUV demand over the next three years," said Trumpf spokesperson Manuel Thoma. Zeiss declined to comment on capacity, though the company has been expanding DUV and EUV optics operations. More valuation upside or hitting a ceiling? Some analysts cautioned that ASML's valuation looks stretched, with the stock trading at 49 times estimated 2027 earnings. "We believe much of the upside is reflected in the current price and therefore maintain our 'hold' recommendation," said KBC analyst Thomas Couvreur. Others said there is still room for a positive surprise because ASML has underperformed the benchmark Philadelphia Semiconductor Index so far this year. "Strong results combined with further capacity expansion could support a catch-up," said ING analyst Marc Hesselink.

Chip toolmaker ASML expected to shine light on capacity and China challenges

AMSTERDAM, July 14 (Reuters) - ASML, the biggest supplier of equipment used to manufacture AI chips, reports quarterly earnings on Wednesday looking to justify its chunky valuation and demonstrate how it will contend with U.S. moves to block exports to China. The Netherlands-based business is Europe's most valuable listed company with a market capitalisation of EUR610 billion ($696 billion) after the AI boom helped to lift its share price by nearly 70% this year as memory chip makers such as SK Hynix, Samsung and Micron rush to add capacity. Biggest customer TSMC, which makes Nvidia's chips, is also expanding while Intel's recovery and Elon Musk's TeraFab plans could add further demand. EXPORT CONTROLS CLOUDING OUTLOOK Clouding the outlook, however, is a proposed U.S. law requiring U.S. allies to align with export controls to curb China's ability to make advanced chips, with ASML named in the legislation. The company has denied selling its most advanced EUV tools to China, which is forecast to account for up to 20% of ASML's sales this year through legal purchases of less-advanced DUV tools to make chips for automotive, industrial and electronic products. ASML is forecast to report an 8.8% rise in second-quarter net profit to EUR2.61 billion on revenue up 14% at EUR8.8 billion, according to LSEG estimates, with analysts looking for an increase to the company's full-year revenue forecast of between EUR36 billion and EUR40 billion. "We expect ASML to have a beat-and-raise earnings report," said Mehdi Hosseini, analyst at broker Susquehanna, adding that all of ASML's capacity to the end of 2027 may already be booked. Morningstar's Javier Correonero said that ASML's 2030 sales target of at least EUR44 billion now looks overly conservative. "It's very reasonable to assume this guidance is outdated," he said. "I forecast EUR60 billion in 2030 sales." 'CREATIVE WAYS' TO MEET CUSTOMER DEMAND ASML is the only maker of EUV lithography systems, the huge $300 million machines needed to produce the tiny circuitry on cutting-edge chips. Each takes about a year to build, one of the factors that limit how quickly AI infrastructure can expand. Chief Executive Christophe Fouquet said in April that ASML was doing everything possible to avoid becoming an industry bottleneck, as happened during the COVID-19 pandemic. ASML, which aims to ship 60 EUV tools this year and 80 next year, has said it could theoretically ship up to 90 without adding physical capacity, though JPMorgan analysts have said they believe it could make as many as 110. "Beyond the 90 we are looking at creative ways to help customers," ASML said in a statement to Reuters. Options include upgrades to older tools, faster machine assembly and quicker installation. ASML says it has also secured extra supplies of parts that take a long time to produce, including lenses and mirrors from German supplier Zeiss and high-power lasers from Germany's Trumpf. "We are fully prepared to meet ASML's EUV demand over the next three years," said Trumpf spokesperson Manuel Thoma. Zeiss declined to comment on capacity, though the company has been expanding DUV and EUV optics operations. MORE VALUATION UPSIDE OR HITTING A CEILING? Some analysts cautioned that ASML's valuation looks stretched, with the stock trading at 49 times estimated 2027 earnings. "We believe much of the upside is reflected in the current price and therefore maintain our 'hold' recommendation," said KBC analyst Thomas Couvreur. Others said there is still room for a positive surprise because ASML has underperformed the benchmark Philadelphia Semiconductor Index so far this year. "Strong results combined with further capacity expansion could support a catch-up," said ING analyst Marc Hesselink. ($1 = 0.8769 euros) (Reporting by Toby Sterling and Nathan VifflinEditing by Adam Jourdan and David Goodman) By Toby Sterling and Nathan Vifflin