AI boosts equipment demand, ASML's second-quarter performance exceeds expectations, with China sales flat from the previous quarter | Financial Report Watch

The artificial intelligence boom boosts demand for chip manufacturing equipment, with lithography giant ASML's second-quarter orders far exceeding expectations, maintaining its outlook for the 2024 fiscal year.

On Wednesday, July 17, ASML announced its second-quarter performance, with both profit and sales exceeding expectations. The report shows that ASML's net sales in the second quarter were 6.24 billion euros, higher than the expected 6.03 billion euros. ASML had previously forecasted net sales for the second quarter to be between 5.7 billion euros and 6.2 billion euros.

Net profit was 1.58 billion euros, higher than the expected 1.43 billion euros, a year-on-year decrease of 18.7%, but a narrower decline compared to the previous quarter.

Specifically:

The total order amount in the second quarter rose to 5.57 billion euros, an increase of over 24% year-on-year, higher than analysts' expectations of 4.41 billion euros, with 2.5 billion euros coming from extreme ultraviolet lithography (EUV) systems. The company stated that strong performance from some of its largest customers helped support demand for the company's equipment.

The gross margin for the second quarter was 51.5%, higher than the expected 50.6% and also higher than the first quarter's 51%.

It is worth noting that this financial report is the first report for ASML's new CEO, Fouquet, who took over from Peter Wennink in April when he retired. In a statement, Fouquet said:

"We are currently seeing strong development in artificial intelligence, driving recovery and growth in most industries, leading other niche markets."

Previously, ASML referred to 2024 as a "transition" year, expecting the semiconductor industry to start recovering after a challenging 2023. Last week, TSMC released its financial report, with the second-quarter sales growth rate being the fastest since 2022.

ASML maintains its outlook for the full year, expecting total net sales in 2024 to be similar to 2023, mainly benefiting from strong market performance in the second half of the year.

ASML's guidance for the third quarter is as follows:

Expected net sales for the third quarter are 6.7 billion euros to 7.3 billion euros, lower than the market's expectation of 7.46 billion euros.

Expected gross margin for the third quarter is 50% to 51%, lower than the market's expectation of 51.1%.

AI-Driven Increase in EUV Lithography Machine Orders

ASML believes that the development of AI is a major driving force for industry recovery and growth.

In ASML's new orders, EUV system orders are an important part, and in the second quarter, ASML also made significant updates to EUV technology. With the support of customers, ASML expects shipments to continue to increase in the second half of the year.

Currently, ASML is enhancing deep cooperation with customers to use EUV technology to assist in chip manufacturing related to AI.

ASML stated that the long-term growth momentum of the semiconductor end market remains very intact, with energy transformation, electrification, and AI continuing to drive demand. The increase in lithography technology at future technology nodes will also drive demand for advanced nodes and mature nodes.

Stable Demand in the Chinese Market

The demand in the Chinese market remains strong. In the second quarter, China was still a key "consumer player" for ASML's business, accounting for 49% of sales, unchanged from the previous quarter.

With semiconductor stocks rising across the board this year, ASML's stock price has also risen by 44%. Today, ASML's European stock opened down more than 7%.