ASML reported a strong Q3 results
- ASML reported €7.5 billion in revenue for Q3, exceeding expectations of €7.2 billion.
But disappointing order intake…
- Order intake comes in at €2.6 billion, well below the expected €5 billion.
- Order intake for EUV systems used by NVIDIA, Apple, etc, was only €1.4 billion.
…and revised 2025 forecast
- at €30-35 billion, from previous expectations of €35 billion.
- Expected gross margins reduced to 51-53%, below the anticipated 54%.
Lead to a 20% plunge in share price
What the CEO Christophe Fouquet says
- Slower demand recovery led to “customer cautiousness and some push outs in their investments"
- AI-related chip demand remains strong, but other semiconductor segments i.e logic and memory chip markets are recovering more slowly.
Some analysts view this as a short-term correction rather than a long-term problem
- Growth is expected to stabilize once demand balances with supply.
- Suggest the issue isn’t weakening demand but overcapacity at chip factories that stocked up during the pandemic.
- Chip factory utilization is at 81%—manufacturers typically order more tools when utilization exceeds 90-95%.
- Factories became more efficient with ASML’s tools, producing more chips without needing additional machines. Samsung reduced reliance on ASML’s EUV machines, cutting the number of processing steps from five or six to just one or two, potentially leading to excess machine capacity.
While others think ASML’s report could be a “canary in the AI mine.”
- This could indicate slowing investment in advanced AI chip production or broader tech sector caution.
- Intel, TSMC, and Samsung have slowed orders from ASML, cautious about expanding further until demand catches up.
Other factors are also at play
- operations affected by new Dutch export restrictions, aligning with U.S. policies, which limit the sale of advanced chip-making machines to China.
Valuation
- Current price: €633.90
- P/E ratio: 33x
- EV/EBITDA: 26x
- EV/FCF: 86x
- Market cap: €249 billion
- Enterprise value: €269 billion
What are your thoughts - Buy, Sell or Wait?