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PostsASML: Impressive Capabilities, But Also Subject to Market Cycles
1) Financial Report: ASML's Q2 revenue was 6.9 billion euros, up 27% YoY, approaching the upper limit of the company's guidance (6.5-7.0 billion euros); Q2 gross margin was 51.3%, up 2.2 percentage points YoY, slightly exceeding the company's guidance (50%-51%). Although EUV shipments slowed down this quarter, the performance benefited from strong demand for ArFi in mainland China.
2) Revenue Breakdown: In Q2, ASML's system sales revenue was 5.6 billion euros, up 35.4% YoY; service revenue was 1.296 billion euros, up 0.5% YoY. The company's focus is still on system sales, accounting for 81.2% of the revenue.
In system sales, EUV and ArFi together accounted for 86% of the total. ArFi's proportion increased significantly this quarter, mainly due to customer demand in mainland China.
3) Order Situation: ASML's lithography system orders in Q2 amounted to 4.5 billion euros, up 19.9% MoM, including 1.6 billion euros for EUV. As the semiconductor industry is still at the bottom of the cycle, many manufacturers have reduced capital expenditures. Although the company's lithography system orders still experienced a significant YoY decline, there are signs of improvement MoM.
4) Guidance for the next quarter: ASML expects Q3 revenue to be 6.5-7.0 billion euros, similar to the previous two quarters; gross margin around 50%, with a slight decline MoM.
Overall, ASML's Q2 financial report is slightly better than expected. There are two main reasons: ① Revenue and gross margin, benefiting from customer demand for ArFi products in mainland China, the company achieved guidance expectations despite the decline in EUV shipments; ② Lithography system orders, the sharp decline in orders at the end of Q1 did not continue, and there was a rebound this quarter. Although 4.5 billion euros is not a large amount, it still exceeds market expectations.
Although the overall financial report for this quarter is good, the company has provided a weak guidance for the next quarter. There is no significant growth in revenue MoM, and there is a risk of gross margin decline. For the next quarter or the second half of the year, the company's overall expectations remain cautious.Combining the capital expenditure of clients such as TSMC and Micron, conservative expectations have been given for the average of 2023. With the semiconductor industry in a bottoming phase, most wafer manufacturers have tightened their belts and slowed down the pace of expansion. ASML, as the most upstream semiconductor equipment manufacturer, will also be affected by the downstream impact.
For the current company and the U.S. semiconductor industry, if the performance fails to deliver strong and impressive results after the rise in stock prices driven by factors such as AI, it may face some downward pressure. However, for core companies with absolute strength in the semiconductor supply chain, the pullback will also bring better buying opportunities.
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