Why did ASML "burst the bubble"? Wall Street: Blame it all on Intel!

ASML's financial report unexpectedly exploded overnight, shaking the entire chip industry, with the core reason behind it possibly being the difficulty of AI chip demand growth such as HBM to offset the slowdown in the logic chip sector.

Although ASML's third-quarter revenue exceeded expectations, the orders were only half of the market's expectations. The total order amount in the third quarter was 2.6 billion euros, far below the market's general expectation of 5.6 billion euros. At the same time, they lowered their 2025 sales guidance, with profits in 2025 expected to be about 19% lower than consensus.

Analyses from Goldman Sachs, Morgan Stanley, and others believe that the explosion was due to: Intel, a key customer of ASML, may be a key factor in the demand slowdown. The delay of new nodes also affected capacity expansion. Although spending on HBM and DDR5 continues, these cannot offset the weakness in the logic chip sector as they do not rely on EUV as much as logic chip demand does.

Furthermore, with the expected slowdown in sales in 2025, the market's focus has shifted to the outlook for 2026. Morgan Stanley believes that, despite some downward adjustments, ASML's earnings growth in 2025 is very close to 30%, and with plans to add new factories and expand existing capacity in 2026, accelerated growth should be seen in 2026.

Slowdown in Logic Chip Demand is Key

ASML's total order amount in the third quarter was 2.6 billion euros, a decrease from the previous quarter's 5.6 billion euros and below market expectations. Of this, EUV orders were 1.4 billion euros, lower than the expected 2.8 billion euros.

ASML's sales guidance for 2025 is 30-35 billion euros, with the upper limit lowered from the previous 30-40 billion euros. The CFO stated:

The softness in the 2025 guidance is due to the softness seen this summer in foundry, logic, and new memory capacity launches. It is now expected that only 50 EUV tools may be sold in 2025, which will also have a negative impact on profit margins.

Morgan Stanley's latest report analysis points out:

The significantly lower than expected order volume indicates weak market demand, especially the delay in orders from logic chip customers, although HBM (High Bandwidth Memory) orders are a bright spot.

Intel may be the key to the slowdown in EUV demand. ASML mentioned the competitive dynamics in the logic field, with the growth of new nodes slowing down, leading to delays in factory capacity.

At the same time, the company also reminds us that although spending related to HBM/DDR5 continues, it is lower in strength compared to EUV in logic, so this demand cannot offset the weakness seen in logic.

In third-quarter sales, logic chips contributed 64% of total sales, while memory contributed the remaining 36%. Goldman Sachs also stated:

While the AI market is developing strongly, the recovery in other markets is slower, and this situation is expected to continue until 2025, leading to customer caution. In the logic chip sector, competition has caused some customers' new node development to slow down, affecting the timing of EUV demand. In the storage sector, although HBM and DDR5 are performing well, the increase in new capacity is limited due to customer caution.

Will 2026 See a Recovery?

One question for the future is - will 2026 be better than 2025?

JP Morgan believes that despite some adjustments, ASML's revenue growth in 2025 is very close to 30%. With plans to add new factories and expand existing capacity in 2026, accelerated growth should be seen in that year.

Goldman Sachs stated that the delivery of some projects or orders has been postponed to 2026, which will contribute to sales growth that year. The industry is also in a stage where cyclical recovery is easier to achieve. Assuming ASML can achieve higher sales growth in 2026 than consensus expectations, such as a 15% increase, and achieve a 54% gross margin, ASML's price-to-earnings ratio (P/E) in 2026 will be 22 times, lower than the industry average