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16 Oct 2024
Stock price drops 16% as the lithography giant surprises financial markets.
Tens of billions of dollars have been wiped from the market valuation of ASML, after the Dutch provider of lithography systems surprised analysts with a lower sales outlook for 2025.
Reporting its latest financial results a day earlier than expected - reportedly due to a technical error - the Veldhoven-headquartered company’s management team said that although sales in the latest quarter were better than expected, there would be less of an uptick next year than previously thought.
ASML now expects to post sales of €28 billion for 2024 - similar to last year’s total - and for that figure to rise to somewhere between €30 billion and €35 billion next year.
Previously CEO Christophe Fouquet and his colleagues had been confident of a strong cyclical upturn across the semiconductor industry, with the potential to drive ASML’s 2025 sales towards €40 billion.
Customer caution
Speaking in an in-house interview prior to the firm’s quarterly investor call, CFO Roger Dassen said that although sales would likely rise to around €9 billion in the closing quarter of 2024, market dynamics had shifted in the past couple of months.
“Very clearly, the strong performance of AI [artificial intelligence] clearly continues and I think it continues to come with quite some upside,” he noted, adding:
“We will also see that in other market segments, it takes longer to recover. Recovery is there, but it's more gradual than what we anticipated before and it will continue in 2025. That does lead to some customer cautiousness.”
A combination of issues would mean a slower ramp of new semiconductor processing “nodes” for some customers who make logic devices, leading to push-outs at wafer fabrication facilities, and delayed installation of ASML’s laser-driven lithography tools.
The same customer caution will also see makers of memory chips delay planned capacity additions, even though anything related to the AI sector remains strong.
Margins hit
Overall, it means that ASML’s long-standing prediction that its 2025 revenues could be anywhere between €30 billion and €40 billion will now be in the lower half of that range.
“Our expectation now is that we're going to see net sales in 2025 between €30 billion and €35 billion,” Dassen said, clarifying that the down-shift would been driven primarily by a “significant reduction” in sales of its current generation of extreme ultraviolet (EUV) tools.
The CFO added that ASML now expected to ship fewer than 50 of those tools in 2025. That is barely half the number that ASML had indicated at its investor day event back in November 2022, something that will have a significant knock-on impact on the company’s profit margins, given that the EUV tools typically cost in the region of €180 million.
• Following the update ASML’s stock price immediately dropped in value by more than 16 per cent. In pre-market trading prior to the firm’s quarterly analyst call it dropped further, dipping below $700 on the Nasdaq for the first time in nearly 12 months.
Despite that fall, ASML’s position as the world's only provider of EUV lithography tools means it remains one of the most valuable technology companies in Europe, with a market capitalization still exceeding €300 billion.
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