ASML, a key equipment supplier of semiconductor manufacturing lithography, saw its stock fall sharply when its third-quarter earnings report was leaked and released earlier than expected. While many had expected its top line to be €7.82 billion, LSE posted €7.47 billion ($8.14 billion) of revenues in Q3 2024; hence the stock declined as investors fret over the company’s 2025 prospects.
ASML, the world’s largest supplier of photolithography systems used to etch circuits on silicon chips, posted a 277 percent increase in Q3 operating profit and increased its sales of lithography systems to 106 in the period from 89 in the previous three months as signs point to an upturn in demand for semiconductors after a slower start to the year. Net profit margins also rose to €214 million from €160 million, or as a percentage of sales to 3.2%, from 2.3% of the second quarter, while return on investment more than doubled to €167 million, from €68 million or 36% from 15% respectively.
However, the market was pulled back when CEO Christophe Fouquet revised the company’s revenue target for 2025 to between €30 billion and €35 billion from the prior range of between €36.3 billion. Fouquet explained the downgrade was due to weaker recovery rates across major markets apart from artificial intelligence; thereby, impacting customers and notably Intel and Samsung. Although, the company appears to have sustained high growth in its AI-associated markets, what remains a worry is the conservative spending by its chief customers.
The market was expecting more dynamic growth, particularly so given that ASML is the world’s sole supplier of extreme ultraviolet (EUV) lithography technology which is vital for manufacturing advanced semiconductors. For this reason, although ASML appears well positioned in its industry, the more measured growth outlook implies a lower level of demand for the company’s offerings over the coming years.
This may be a moment of confusion for investors, yet it may also be a moment of opportunity. Since ASML has a rather strong market position and occupies one of the key positions in the development of new technologies necessary for the production of new generations of chips, some analysts believe that a decline in its shares is a signal to repurchase with the subsequent investment during the expected phase of the recovery of ASML’s values.
It also shows that the stock market remains vulnerable to semiconductor-related investments, courtesy of supply chain disruptions and demand fluctuations throughout the world especially in the electronics and automotive industries.
This decline applies to ASML as the general challenges for the tech and semiconductor sectors are: indeed, many companies within the technology area suffer from similar seasonal losses due to shifting market trends.
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