On April 17, ASML will release its 24Q1 earnings report before the market opens. This article provides a preview of the earnings.

23Q4 Earnings Review

On January 24, 2023, ASML released its 23Q4 earnings report.
 

<1>Revenue of 7.24 billion: above expectations of 6.93 billion

<2>Gross margin of 51.4%: above expectations of 50-51%

<3>New order bookings totaled 9.2 billion euros, including 5.6 billion euros for EUV lithography machines: above expectations

<4> ASML expects 2024 net sales to be roughly flat compared to 2023, with Q1 2024 net sales projected at 5.0 to 5.5 billion euros and a gross margin of 48% to 49%. Guidance is weak but management had already set expectations

<5>Export controls will impact 10%-15% of sales in China (based on 2023 sales in China)

On January 24, after the earnings release, the stock surged 9.06%, primarily driven by new order bookings of 9.2 billion euros. 

24Q1 Key Highlights

<1>24Q1 performance: Revenue down 19.98% YoY, EPS down 44.49% YoY, with expectations already set very low

<2>24Q2 and full-year guidance

Last quarter's guidance projected flat revenue for the year—watch for any upward revisions. Also, whether 24Q1 will mark the lowest point.    

<3>New order bookings

--The U.S. recently confirmed $39 billion in CHIPs Act subsidies, which will accelerate capital expenditures by chip companies, making ASML one of the biggest beneficiaries.

--Major suppliers like Samsung, SK Hynix, and Micron plan to increase their HBM production capacity.       

<4> Capacity expansion

By the end of 2023, ASML had accumulated backlog orders of 39 billion euros. Based on 23Q4 non-secondhand sales of 5.7 billion euros, the order delivery cycle is around 2 years. 

The company plans to increase annual production capacity to 90 EUV and 600 deep ultraviolet systems (2025-2026), while raising high-NA EUV capacity to 20 systems (2027-2028). Monitor progress in this area.         

<5>China

According to the company's forecast, export controls will impact 10%-15% of sales in China (based on 2023 sales in China), equivalent to 4-6% of 23Q4 sales.

China accounted for 39% of 23Q4 sales and 29.3% of full-year sales. Watch for any changes here

Historical Earnings Day Performance    

<1>Past earnings consistency
 

From 2021 to 2023, EPS exceeded expectations in 11 out of 12 quarters, with 1 quarter meeting expectations.

Revenue exceeded expectations in 8 quarters and fell short in 4 quarters.

<2>Earnings day performance: Over the last 12 earnings releases, the stock rose 7 times and fell 5 times, but there were opportunities for gains on each earnings day.

Earnings Trends and Valuation

 <1>Quarterly EPS: 24Q1 is expected to mark the inflection point for YoY growth

<2>1Y EPS growth: 1Y EPS growth is still accelerating upward.

<3>Valuation: Forward P/E for 2024-2026 is 47.17x, 30.96x, and 26.4x, respectively.

For comparison, TSMC's forward P/E for 2024-2026 is 22.22x, 17.79x, and 15.54x, respectively.

For NVIDIA, forward P/E for 2024-2026 is 34.55x, 28.32x, and 23.83x, respectively.

Valuation is not cheap  

<4>Analyst price targets

Summary

<1>24Q1 earnings expectations are very low, and historically, the probability of exceeding expectations is high. However, beating expectations does not guarantee a stock price increase—performance depends on guidance.
 

<2>From a growth trend perspective, 24Q1 marks the inflection point for quarterly EPS growth, while 1Y EPS growth is still accelerating. 2025 will be a big year for ASML as capacity expansion concludes. The 39 billion euro order backlog could see accelerated delivery.    

<3>Valuation is not cheap. As the only global producer of EUV, there’s a reason for the premium.

Full Historical Data Appendix

$ASML(ASML.US)