Published - July 19th, 2023 @ 2:30 PM (GMT+2)

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ASML (NASDAQ:ASML), a leading Dutch semiconductor equipment manufacturer, reported Q2 earnings that surpassed analysts' predictions, leading to an upgrade in its annual sales forecast. This positive adjustment, an increase from 25% to 30%, is primarily attributed to sustained high demand from Chinese customers. 

‍Despite broader macro-economic uncertainties leading to a more cautious approach among customers, ASML's robust backlog, valued around 38 billion euros ($42.6 billion), offers a solid foundation to navigate these temporary hurdles.

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Stock Reactions to ASML's Q2 Earnings

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Following the earnings release, ASML shares experienced a marginal 0.6% hike in Amsterdam, though U.S.-listed shares saw a slight drop of 1% in pre-market trading. With a year-on-year increase of 35%, the company's net profit was reported at 1.9 billion euros, outperforming average analyst predictions. 

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ASML Leads in Lithography; EUV Delivery Slows Down

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ASML's supremacy in the lithography systems market remains unchallenged. Their expansive production capabilities are being accelerated to keep pace with customer demand. However, the most advanced chip manufacturers using ASML's EUV (Extreme Ultraviolet) systems are reducing their equipment delivery rate. This shift is observed while major firms like TSMC, Samsung, and Intel are expanding their production globally, with their new fabrication plants not yet ready to receive EUV machines.

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China's Demand for ASML Holds Strong Amid Export Rules

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ASML's DUV (Deep Ultraviolet) product line, used for slightly older chips, still enjoys high demand, particularly from Chinese customers. While ASML has never sold EUV machines in China due to export control regulations, the market remains significant. Recent licensing requirements from the Dutch government following U.S pressure do not expect to impact ASML's 2023 or long-term financial predictions.

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Outlook for 2023

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ASML projects its net sales to fall between 6.5 billion euros and 7 billion euros in Q3 this year. The brighter outlook is credited to robust revenue from the DUV lithography machine, integral for memory chip manufacturing. These chips, found in devices like smartphones, laptops, and servers, have potential future use in artificial intelligence applications. ‍Despite positive adjustments, CEO Peter Wennink warned about continued macroeconomic uncertainties, and the unclear recovery trajectory. ‍ASML continues to monitor export control measures and does not foresee a significant impact on their 2023 or long-term outlook.

Conclusion

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Despite the macroeconomic uncertainties, ASML shows resilience with better-than-expected Q2 earnings. While maintaining a dominant market position, ASML raises its annual sales forecast backed by strong demand, particularly from China.

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