Earnings Report Preview | ASML Q3 Revenue Expected to Resume Growth, Analysts Firmly Optimistic about Long-term AI Opportunities

According to the Wisdom Finance APP, ASML.US will announce its third-quarter performance on October 16th (Wednesday). The market expects the company's Q3 revenue to increase by 7% year-on-year, reaching 7.1 billion euros.

The company produces lithography machines crucial for semiconductor chip production, making it a key driver of the artificial intelligence (AI) boom.

ASML's stock price has risen by 11% so far this year, despite a recent pullback.

Derren Nathan, stock research director at Hargreaves Lansdown, stated that ASML's revenue so far this year has been lagging behind the level of 2023.

In July, ASML announced second-quarter revenue of 6.24 billion euros, lower than the 6.9 billion euros in the same period of 2023, with net profit dropping from 1.94 billion euros last year to 1.58 billion euros.

Nathan said, "The company is hoping for a phased change in sales of microchip manufacturing systems in the last two quarters of this year to maintain overall revenue flat in 2024."

Analysts expect revenue in the fourth quarter to increase by over 24% quarter-on-quarter, reaching 8.8 billion euros.

He added, "ASML's technological leadership enables it to benefit from long-term trends such as artificial intelligence. However, some of the company's key customers also face their own challenges, so investors will also be watching for any signs of next year's prospects. Currently, ASML's growth is expected to further accelerate."

International rating agency Morningstar is also optimistic about ASML's long-term prospects. Analyst Javier Correonero stated that in terms of orders, ASML does not have a high threshold to reach the midpoint of the guidance range for the 2025 fiscal year. Correonero expects ASML's revenue in the 2025 fiscal year to reach 36.7 billion euros, with the guidance being 30-40 billion euros.

Morningstar expects ASML's orders and revenue in the Chinese market to return to normal, but it is currently difficult to determine when exactly this will happen.

It is worth noting that investors and analysts will also try to understand the impact of Intel's production setbacks on ASML. Intel is likely ASML's third-largest customer, and the company recently postponed its plans to open a wafer fab in Germany. In the long run, Morningstar is not too concerned because if Intel encounters more problems and delays or cancels the wafer fab, others will eventually seize this opportunity.

Overall, Morningstar believes that ASML's long-term prospects remain strong, and the recent drop in its stock price provides a good buying opportunity. Morningstar believes the fair value of the stock is 900 euros