Key Points
- ASML is anticipated to report a significant influx of new orders driven by booming AI chip demand.
- Continued heavy purchasing by Chinese firms of older chip-making equipment remains a key focus.
- Analysts predict ASML may upgrade its guidance due to increased equipment purchases by major chipmakers like TSMC.
- ASML’s dominance in EUV lithography systems is crucial for producing advanced chips used in smartphones and AI applications.
ASML (ASML.AS), the leading equipment supplier to computer chip manufacturers, is expected to report a significant influx of new orders when it announces its second-quarter results on Wednesday. The surge in demand is driven by customers expanding capacity to meet the booming market for AI chips. It will be the first earnings report under the leadership of the new CEO, Christophe Fouquet.
Another key focus for the market will be whether Chinese firms have continued to purchase equipment used to produce older generations of chips, such as those used in electric vehicles. Western policymakers, who have imposed restrictions on the sale of more advanced technology to China, are concerned about this.
Analysts predict that ASML may upgrade its guidance as major chipmakers, including Taiwan’s TSMC (2330.TW), which manufactures chips for Nvidia (NVDA.O) and Apple (AAPL.O), may increase and accelerate their equipment purchases. TSMC, which reports its earnings on Thursday, relies on ASML’s lithography systems, particularly the extreme ultraviolet (EUV) tools essential for making the most advanced chips used in smartphones and AI applications.
Kevin Wang, an analyst at Mihuzo, expects ASML’s order value to reach close to 5 billion euros in the second quarter, surpassing consensus estimates. This growth is anticipated to be driven by strong orders from TSMC for ASML’s EUV product line.
ASML, valued at approximately 400 billion euros ($437 billion), has indicated that 2024 will be a “transition” year with flat business performance before a strong rebound in 2025, fueled by demand for its most advanced tools. The company dominates the market for lithography systems, which are critical for creating the intricate circuitry in computer chips. It is also the only manufacturer of EUV lithography systems, which are indispensable for producing cutting-edge chips.
The company’s shares have surged 45% this year and are trading near record highs above 1,000 euros each, reflecting a valuation about 40 times the forecasted 12-month forward earnings. It is significantly higher than the STOXX Europe 600 tech index.
Analysts expect ASML to report a second-quarter net income of 1.41 billion euros on revenue of 6.04 billion euros, according to a mean estimate from 16 analysts based on LSEG data. It compares with net income of 1.94 billion euros on revenue of 6.90 billion euros in the same period a year ago. A growing order book would reassure investors that demand for the company’s most advanced products is recovering following a weak first half of 2024, which saw heavy reliance on orders of older equipment from China.
