ASML Holding posted orders above analysts’ expectations as chip makers rush to get their hands on key production equipment to meet booming demand for artificial intelligence.
The Dutch group, which supplies semiconductor-making machinery to chip makers, booked 5.57 billion euros ($6.07 billion) in orders in the three months to the end of June, up from EUR4.50 billion a year earlier. Analysts had forecast nearly EUR5.04 billion in orders, according to consensus estimates by Visible Alpha.
ASML is riding an AI wave as chip makers are on the hunt for highly complex machines they need to produce increasingly sophisticated semiconductors to power artificial-intelligence features in smartphones, laptops, electric vehicles and data centers.
The company counts Taiwan Semiconductor Manufacturing Co. and Samsung Electronics among its customers, who are in turn facing pressure to put out more capable chips. Nvidia relies on TSMC and Samsung to manufacture the expensive AI chips that Microsoft and Google owner Alphabet are buying in huge quantities to upgrade their data centers.
ASML said that EUR2.5 billion in orders were for its high-end extreme ultraviolet tools that are used to print the most intricate layers on chips found in the latest gaming consoles, smart watches and smartphones.
The better-than-expected bookings mark a turning point for ASML, whose orders undershot expectations in the first quarter when chip makers shied away from its machinery in anticipation of a rebound in semiconductor demand.
While demand for AI chips has been booming, the wider semiconductor industry is still facing an inventory glut: Major chip makers delayed spending on production equipment as they grappled with lackluster demand for semiconductors since manufacturers of consumer devices, cars and industrial equipment held off ordering more chips that they had stockpiled in recent years.
“We currently see strong developments in AI, driving most of the industry recovery and growth, ahead of other market segments,” said Chief Executive Christophe Fouquet. While there are uncertainties in the market, Fouquet said he expects the industry recovery to continue in the second half of 2024, which he called a transition year.
This year, ASML is expecting sales to be similar to the EUR27.56 billion that it reported for 2023.
ASML stock climbed more than 35% over the last 12 months. However, shares slumped more than 5% Wednesday despite the better-than-expected results after company’s guidance for the current quarter disappointed investors.
The group expects sales between EUR6.7 billion and EUR7.3 billion in the third quarter and a gross margin between 50% and 51%, both below consensus of EUR7.53 billion for sales and 51.4% for the margin, Jefferies analysts wrote in a note to clients.
Shares were also harmed by fears that the U.S. could further restrict technology exports to China, a key market that accounted for 49% of ASML’s net system sales in the second quarter.
In the second quarter, overall sales declined to EUR6.24 billion from EUR6.90 billion, but they still beat analysts’ forecasts and company guidance.
Net profit slipped to EUR1.58 billion from EUR1.94 billion, beating analysts’ forecasts.
Gross profit–a closely watched metric for companies operating in the semiconductor industry–came in at EUR3.21 billion, generating a 51.5% margin that beat consensus and company guidance.
ASML is forecasting sales of up to EUR40 billion next year and up to EUR60 billion at the end of the decade.