According to tradition, the Dutch lithography equipment supplier ASML opened the quarterly reporting season, but did so a day ahead of schedule. Investors were disappointed by two developments: a lower revenue forecast for next year and a potential decline in the Chinese market’s share of ASML’s revenue in the same period.
Image Source: ASML
In the first case, as CNBC explains, the company’s revenue forecast for the entire next year fell within the range of 30 to 35 billion euros, which was lower than ASML’s previous expectations – at 40 billion euros at the upper end of the range. In the third quarter of this year, the company had a portfolio of orders worth 2.6 billion euros, which is more than double the expectations of investors who pledged 5.6 billion euros in this area. Even the exceeding of the forecasted value by actual revenue of 7.5 billion euros could not compensate for the disappointment of investors. Next year, according to ASML, the company’s profit margin will range from 51 to 53%, down from previous levels of 54 to 56%. This decrease is largely due to the delay in supplies of equipment for working with EUV lithography.
«Although we are seeing active development and growth in potential in the artificial intelligence segment, other areas require more time to recover. As it turns out, this recovery will be smoother than previously expected,” said ASML CEO Christophe Fouquet. Tellingly, the early publication of quarterly reports occurred by mistake.
The second important factor had to do with the impact of the Chinese market on the company’s business. According to the head of ASML, China will gradually return to its historical market share in the company’s revenue. By the end of next year, for example, it will be around 20%. For comparison, in the second quarter of this year, ASML’s Chinese revenue reached 49% of the total, and in the third quarter it not only remained at 47%, but also increased in sequential comparison by 20% to 2.79 billion euros. Negative dynamics in the Chinese direction are caused by tightening sanctions on the supply of lithographic equipment to this country.
The fall in the market value of ASML shares as a result of the publication of financial statements for the third quarter was the strongest in 26 years. Some analysts explained that all the negative factors identified in ASML’s quarterly reports do not cancel the high demand for equipment for the production of components of artificial intelligence systems. Shares of other suppliers of such equipment also sank in price, and Nvidia stock quotes fell by 4.5%.