Chip firm ASML shares plunge 15% after warning of weaker China sales in early release

Business
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October 15, 2024
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An icon of ASML is displayed on a smartphone, with an ASML chip visible in the background.

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Shares in semiconductor equipment maker ASML fell 15.6% on Tuesday after the Dutch company published disappointing sales forecasts in results a day early.

The move pulled other chip stocks lower, with Nvidia, Advanced Micro Devices and Broadcom all falling at least 4% after the news.

ASML said it expects net sales for 2025 to come in between 30 billion euros and 35 billion euros ($32.7 billion and $38.1 billion), at the lower half of the range it had previously provided.

Net bookings for the September quarter were 2.6 billion euros ($2.83 billion), the company said — well below the 5.6 billion euro LSEG consensus estimate. Net sales, however, beat expectations coming in at 7.5 billion euros.

“While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover. It now appears the recovery is more gradual than previously expected,” company CEO Christophe Fouquet said in the earnings release.

AMSL

ASML said that the early publication of its results was due to a technical error which saw it erroneously publish the report on a part of its website.

In the lead-up to the earnings, Wall Street analysts had turned more cautious on the chip firm, which is a critical supplier to the broader semiconductor industry.

China concerns

The firm is facing a tougher business outlook in China due to U.S. and Dutch export restrictions on shipments to the country.

Last month, the U.S. government rolled out new export controls on critical technologies to China, including advanced chipmaking tools. Separately, the Dutch government announced plans to take over control of exports of ASML‘s machines to the country.

ASML’s extreme ultraviolet lithography machines are used by many of the world’s largest chipmakers — from Nvidia to Taiwan Semiconductor Manufacturing Co. — to produce advanced chips.

The company’s chief financial officer, Roger Dassen, said Tuesday that he expects the firm’s China business to show a “more normalized percentage in our order book and also in our business.”

“We do see China trending towards more historically normal percentages in our business,” Dassen said, according to a transcript of a video, also released a day early.

“So we expect China to come in at around 20% of our total revenue for next year. Which would also be in line with its representation in our backlog.”

In its June-quarter earnings presentation, the Dutch company said that 49% of its sales come from China.

‘Clearly disappointing’

In a note released following ASML’s results Tuesday, analysts at Bernstein said the firm’s weaker-than-expected order book and a disappointing 2025 outlook were “likely to overshadow decent Q3 results.”

The analysts added that ASML’s lowered guidance indicates that “the delayed cyclical recovery and specific customer challenges are weighing heavily” on 2025 expectations.

Analysts at Cantor, meanwhile, said the downbeat outlook for ASML was “clearly disappointing” and will weigh on semiconductor stocks. However, they added that, “in no way shape or form does the company’s updated outlook indicate any change in the AI growth story.”