ASML Stock Falls After Earnings Report and Sales Outlook Revision

Dutch semiconductor equipment maker ASML Holdings N.V. experienced a significant decline in its stock price, dropping more than 16% on Tuesday. This steep drop followed the unexpected early release of its third-quarter earnings report, which clearly alarmed investors.

The situation worsened when ASML announced a decrease in its sales forecast for 2025, which considerably lowered market growth expectations. This news led to a swift selloff as traders assessed the impacts of reduced demand in critical markets.

In addition to the initial drop, ASML’s shares continued to decline on Wednesday, falling by an additional 5% around 10 a.m. in New York.

Market Reaction to Revised Sales Guidance

ASML's latest earnings report revealed that the company now expects net sales in 2025 to be between 30 billion euros and 35 billion euros (approximately $32.7 billion to $38.2 billion). This marks a significant reduction from their previous forecast, which estimated sales between 30 billion euros and 40 billion euros.

The adjustment is primarily due to weaker-than-expected demand for ASML's Extreme Ultraviolet (EUV) lithography machines, which are critical for the production of advanced chips.

Analysts Weigh In on ASML’s Challenges

Goldman Sachs analyst Alexander Duval provided insights on the matter, explaining that while ASML's third-quarter revenues exceeded the midpoint of earlier guidance, the updated 2025 sales figure indicates ongoing challenges within the semiconductor industry. He mentioned that the lower forecast suggests a slower recovery across several essential sectors.

Furthermore, ASML now anticipates shipping fewer than 50 low Numerical Aperture (NA) EUV systems in 2025, a clear indication of diminished demand. Duval went on to note, "We expect investors to seek more information regarding 2026 trends due to delays pushing into 2025." He estimates that the new forecast includes a possible 10% reduction in revenue projections and a 20% decrease in earnings before interest and taxes (EBIT) compared to previous consensus estimates for 2025.

Factors Affecting ASML’s Position

According to Bank of America's Vivek Arya, several significant factors contribute to ASML’s downward revision. Firstly, global efforts to shift manufacturing back to domestic locations (reshoring) and delays in Intel's expansion plans have negatively impacted demand. Arya remarked, "The recent cuts in capital expenditures and delays at Intel indicate that reshoring may not be as effective as initially anticipated."

Secondly, Arya pointed out that China likely rushed to purchase equipment over the past two years, anticipating heightened geopolitical tensions and possible export restrictions. This rush has created a demand shortfall that could persist into 2025.

Lastly, Arya noted a growing disparity between demand for AI-related semiconductors in areas like computing and high-bandwidth memory (HBM) versus weaker non-AI semiconductor markets, including PCs, smartphones, and automotive applications.

Even with the revised 2025 sales forecast, Arya stated that Bank of America maintains a strong preference for AI-related semiconductor companies, naming firms such as NVIDIA Corp, Broadcom Inc, and Marvell Technology Inc as their top picks due to their robust growth outlooks, which remain largely unimpacted by recent developments.

Photo courtesy of ASML.

Stock, Earnings, Outlook