ASML Reports Strong Q4 Results Amid AI Chip Demand Surge and DeepSeek Concerns

ASML Sees Orders Soar. Is It Time to Buy the Stock?

Shares of ASML Holding (ASML 0.73%) rallied after the company's fourth-quarter earnings report showed soaring orders for the company's devices that make semiconductors. The stock has been up and down over the past year, as it has been pressured over Chinese trade restrictions and, more recently, over what impact DeepSeek could have on chip demand. Meanwhile, ASML has introduced a new technology called a high numerical aperture extreme ultraviolet lithography system, or High NA EUV, that it is trying to sell to its largest customers. All in all, the the stock is down about 15% during the past 12 months. With orders on the rise, let's dig into ASML's earnings to see if this is a good time to buy the stock. Orders surge ASML had long discussed 2024 being a transition year ahead of what would be a better 2025, and signs of that playing out were on display when the company reported a huge jump in orders, as reflected in its booking number. It recorded bookings of 7.1 billion euros ($7.4 billion), which was a 169% increase compared to Q3 and well ahead of the 4 billion euros ($4.2 billion) that analysts had expected, as compiled by Visible Alpha. It noted that 3 billion euros ($3.1 billion) of its backlog was for EUV (extreme ultraviolet lithography) equipment. For 2025, the company expects to generate revenue of 30 billion to 35 billion euros ($31.1 billion to $36.3 billion), with a Q1 revenue of 7.5 billion to 8 billion euros ($7.8 billion to $8.3 billion). Gross margins are expected to be between 51% to 53% for the year and between 52% to 53% for the first quarter. The company said that if AI chip demand remains strong and more manufacturing capacity is built to help meet that demand, revenue could be toward the upper end of that range. However, there are certainly geopolitical concerns that could take 2025 revenue to the lower end of the range. After two years of outsized contributions from China, the company expects its Chinese business to return to more normal levels in 2025. China accounted for 41% of its revenue in 2024 and 29% in 2023, respectively, as Chinese companies rushed to get orders out of fear there would be additional trade restrictions. These are not sales of its EUV equipment, which it has been barred from selling into China. China represented 14% of its sales in 2022 and 16% in 2021. Further out, ASML continues to see the opportunity for 2030 revenue of between 44 billion to 60 billion euros ($45.7 billion to $62.3 billion), with gross margins improving to between 56% to 60%. It sees this being driven by strong overall chip demand as well as strong AI demand creating a shift more toward advanced chips that need EUV technology. As for the quarter itself, ASML's revenue jumped 29% year over year to 9.3 billion euros ($9.7 billion) and came above the company's guidance range of 8.8 billion to 9.2 billion euros ($9.1 billion to $9.6 billion). Its equipment sales rose nearly 25% year over year to 7.1 billion euros ($7.4 billion), while its service revenue surged 39% to 2.2 billion euros ($2.3 billion). ASML sold 119 new lithography systems and 13 used systems in Q4 compared to 113 new and 11 used systems a year ago. In Q3, it sold 106 new lithography systems and 10 used systems. It recognized revenue from two of its new high NA EUV machines in the quarter, as customer accepted the orders and it finished installing one system. Is ASML stock a buy? While its results can be a bit lumpy as a semiconductor equipment manufacturer selling very expensive machines, ASML is well-positioned over the long term with a virtual monopoly in the EUV technology needed to make advanced chips used for AI and other applications. As long as AI chip demand continues to expand, the company should continue to sell more of its EUV machines. Meanwhile, its new high NA EUV technology has the opportunity to be a big growth driver in the coming years. While leading chip manufacturer Taiwan Semiconductor Manufacturing has balked at the price, it has also been an early adopter of ASML's EUV technology, which has helped get it to where it is today . I don't think the company will want to risk potentially falling behind technologically, especially with Intel looking to embrace the technology. As such, I think this could be more a negotiating ploy at this point. From a valuation standpoint, ASML trades at a forward price-to-earnings multiple of about 30 based on 2025 estimates. Given its monopoly on the EUV machines needed to make high-end semiconductors, I think that is a fair valuation. ASML PE Ratio (Forward) data by YCharts While I would expect the stock to be volatile given the lumpy nature of its business, I think ASML should be a solid long-term winner given its integral part in the semiconductor value chain.

ASML Shares Surge After Orders Beat Forecasts as AI Chip Demand Remains Strong -- 2nd Update

ASML Holding shares jumped after orders surpassed analysts' expectations for the fourth quarter as chip makers scrambled to get their hands on machinery to produce increasingly sophisticated semiconductors amid booming demand for artificial intelligence. The Dutch supplier of semiconductor-making equipment booked 7.09 billion euros ($7.40 billion) in orders for the quarter, down from 9.19 billion euros a year earlier, but above analysts' forecast of 3.99 billion euros, according to consensus estimates by Visible Alpha. The company said that 3 billion euros in orders were for its high-end extreme ultraviolet lithography systems that are used to print the most intricate layers on chips. Orders for ASML's machines can vary greatly between quarters since they hinge on how much chip makers are willing to spend depending on the demand trends they see. Higher-than-expected bookings show that chip makers continue to bet on ASML's highly complex equipment in the race to build more advanced semiconductors to power the data centers behind the AI boom. The beat follows a market selloff sparked by Chinese AI company DeepSeek earlier this week after it developed AI models that it said nearly matched American rivals despite using inferior chips, raising questions about the need to spend huge sums on advanced gear provided by Nvidia and other tech giants. ASML shares closed 7% lower on Monday, wiping out more than $15 billion in market value, as investors digested what impact cheaper AI models could have on semiconductor demand and, ultimately, on suppliers of chip-making equipment like ASML. However, shares in Amsterdam opened 10% higher on Wednesday, paring back Monday's losses. ASML supplies semiconductor-making machinery to Taiwan Semiconductor Manufacturing Co., Samsung Electronics and other chip-making clients who face pressure from their own customers to churn out more capable chips. "Consistent with our view from the last quarter, the growth in artificial intelligence is the key driver for growth in our industry," Chief Executive Christophe Fouquet said. "It has created a shift in the market dynamics that is not benefiting all of our customers equally, which creates both opportunities and risks." While AI chips are in the midst of a spending bonanza, demand for legacy semiconductors found in cars, smartphones, laptops and other devices has been bumpy in recent months. Car makers, suppliers as well as manufacturers of consumer electronics and industrial machinery cut spending on chips because they stockpiled the semiconductors they needed years ago. ASML in October trimmed its sales forecasts for 2025, saying some areas of the semiconductor industry aside from AI were taking longer than expected to recover. The company is forecasting between 30 billion and 35 billion euros in sales this year, down from previous guidance of up to 40 billion euros. However, it said the long-term outlook for the chip industry remains promising as it believes AI creates a significant opportunity that should help push global semiconductor sales to more than $1 trillion by the end of the decade. ASML reported sales 9.26 billion euros for the fourth quarter, up from 7.24 billion euros a year earlier and beating both analysts' forecasts and company guidance. Net profit climbed to 2.69 billion euros from 2.05 billion euros, beating analysts' forecasts. ASML said it would declare a total dividend of 6.40 euros per ordinary share for 2024, up 4.9% on year. Gross profit--a closely watched metric for companies operating in the semiconductor industry--came in at 4.79 billion euros, generating a 51.7% margin that beat both consensus and company guidance. For the current quarter, the company said it expects sales between 7.5 billion and 8 billion euros, with a gross margin between 52% and 53%.

ASML reports boost in full-year sales as it shares outlook for 2025

ASML's robust results come at a time when the semiconductor and artificial intelligence (AI) market is reeling under the shock of new entrant DeepSeek, a new arrival from China. Dutch semiconductor giant ASML has reported its fourth quarter results, along with full year earnings for 2024. The company's total net sales came up to €28.3 billion for the full year 2024, a rise from 2023's €27.6bn. This was mainly driven by the rapid and recent advancements in AI, which in turn has led to an increase in semiconductor demand. Net bookings jumped to €7.1bn in the fourth quarter 2024, a marked surge from the €2.6bn seen in the previous quarter, mainly because of strong demand from TSMC. Out of the fourth quarter bookings, extreme ultraviolet lithography (EUV) bookings accounted for €3bn. EUV is a technology that makes use of light to print microchips and is critical to making more powerful and smaller chips. At the moment, ASML is the only company to sell and produce EUV systems for semiconductor production. However, net bookings for the full year 2024 fell to €18.9bn, a decrease from the €20bn seen in 2023. The company expects its total net sales in the first quarter of 2025 to be between €7.5bn and €8bn. Gross margin for the quarter is likely to be between 52% and 53%. For the full year 2025, total net sales is expected to be between €30bn and €35bn, with gross margin estimated to be between 51% and 53%. Christophe Fouquet, president and chief executive officer (CEO) at ASML, said in a press release on the company's website: "Consistent with our view from the last quarter, the growth in artificial intelligence is the key driver for growth in our industry. "It has created a shift in the market dynamics that is not benefiting all of our customers equally, which creates both opportunities and risks as reflected in our 2025 revenue range." 'Impressive' results Ben Barringer, technology analyst at investment management company Quilter Cheviot, said in an email note: "ASML has delivered an impressive set of results, comfortably beating expectations across the board and offering reassurance to the market following the turmoil due to concerns around DeepSeek. "Revenue came in 2.5% ahead of consensus, with profits exceeding forecasts by 8%. The guidance was also strong, coming in 9% ahead of expectations, with a profit contribution that reinforces confidence. "Looking ahead, ASML is forecasting 15% growth in 2025, which underlines its confidence in future demand. There are lingering concerns around China, with sales in the region falling from 47% to 27% on a quarterly basis, but this is in line with expectations and has been more than offset by a strong rebound in memory demand from South Korea and the US. ASML results raise hope despite DeepSeek's arrival The arrival of DeepSeek, a Chinese AI-powered chatbot, has caused turmoil in the semiconductor and artificial intelligence markets, following its latest version being released on 20 January. The app is currently the most downloaded free app on the US Apple Store, surpassing OpenAI. The company has claimed that its latest AI models are as good or even better than US rivals, such as OpenAI, especially when it comes to tasks such as coding and mathematics, but are far cheaper and use fewer advanced chips. DeepSeek also uses less memory than other competitors which further slashes its costs. This has led to rising fears about the future of leading industry giants such as Nvidia, which experienced the largest one-day loss in US history, with nearly $600bn (€576.67bn) wiped off in terms of market value on Monday. DeepSeek also exacerbated concerns of the US not doing enough to curb China's AI advancements. ASML's results could be seen as going some way towards abating these worries, especially given the company's robust order book in the fourth quarter of 2024. A time to wait and see Russ Mould, investment director at AJ Bell, said in an email note: "ASML is one of the picks and shovels plays on the AI theme shaken by the emergence of Chinese AI innovation DeepSeek, so better-than-expected fourth-quarter earnings will be a relief to investors. "However, while the company is positive on the outlook and this makes sense for 2025, for which much of its customers' spending is likely already allocated, it will take time to understand if the demand profile will change thanks to DeepSeek for 2026 and beyond. "Chief executive Christophe Fouquet is clear that AI is the key driver of growth for the industry so if developing generative AI becomes less complex and cheaper, it could be bad news for ASML and other names in the semiconductor industry given sluggish demand for chips for smartphones, tablets and personal computers."