ASML’s Early Earnings Release Shocks Market: Orders Halved and 2025 Outlook Gloomy

On October 15, Bloomberg reported that ASML, the world's leading advanced chip manufacturing equipment company, mistakenly released its third-quarter earnings a day earlier than scheduled. The report, initially intended for release on Wednesday (October 16), was posted briefly on Tuesday (October 15) before being taken down, only to be re-released 30 minutes later. ASML attributed this to a "technical error" in a separate statement.

A Possible Planned Move?

According to the Financial Times, the disappointing earnings report was originally scheduled for Wednesday but was briefly posted on Tuesday before being deleted and then reposted. ASML blamed the early release on a "technical error." However, some analysts believe this might have been a calculated move.

C.J. Muse, an analyst at Cantor Fitzgerald, said in an email statement, “Many are debating whether this release was accidental or planned, but regardless, the result is disappointing.” He added, "The weak performance of Intel and Samsung is clearly making the 2025 outlook worse than we anticipated."

Market Impact

This "erroneous" release not only shook ASML but also the market. Following the earnings release, ASML’s stock saw its largest drop since June 12, 1998. How bad is it? According to the newly released report, ASML’s third-quarter net sales stood at €7.5 billion, with a net profit of €2.1 billion. However, the company’s order intake for the third quarter was only €2.6 billion—well below the €5.39 billion average expectation from analysts, falling short by over half.

ASML's market performance dragged down the Nasdaq index as well. By the close of trading on October 15, the Nasdaq index had dropped by 1.01%, and the Philadelphia Semiconductor Index widened its losses to 5%. ASML shares fell more than 16%, Nvidia dropped 4.69%, Applied Materials fell over 10%, and AMD fell more than 5%. Taiwan Semiconductor Manufacturing Company (TSMC) shares listed in the U.S. also declined by 2.64%.

In China’s A-shares market, the semiconductor equipment sector opened with a sharp drop of 3.62% on October 16, topping the decliners list among secondary industries tracked by Tonghuashun. Major players such as Naura Technology Group opened down by 4.23%, Advanced Micro-Fabrication Equipment dropped by 5.97%, and Kingsemi Technology opened with a 6.63% decline. At the time of this report, Naura was still down more than 4%, and Advanced Micro-Fabrication Equipment was down over 3%.

Meanwhile, South Korean semiconductor stocks, including SK Hynix and Samsung Electronics, also tumbled. As of this report, SK Hynix dropped 4.7%, and Samsung Electronics fell by 2.7%.

2025 Outlook: Worse Than Expected

ASML also slashed its 2025 net sales forecast to between €30 billion and €35 billion, down from a previous estimate of €40 billion. CEO Peter Wennink remarked in the earnings release that the company now expects 2025 gross margins to range from 51% to 53%, compared to a previous outlook of 54% to 56%.

"It now appears that the economic recovery is slower than previously expected, and we expect this to persist through 2025," said ASML CEO Peter Wennink.

Further details will be discussed in a conference call with investors scheduled for Wednesday. Meanwhile, inquiries to ASML by Yinshi Finance remain unanswered.

Industrial Sector Cutting Orders

On Tuesday, ASML CFO Roger Dassen said in a pre-recorded interview that "specific competitive issues in the foundry business are slowing down the chip market recovery, which has not benefited from the booming demand for AI computing infrastructure." He added, "The strong performance in AI clearly continues."

According to Bloomberg, the chip industry is currently in a strange phase. While companies like Nvidia are seeing chips in high demand, with production struggling to keep up, sectors such as automotive and other industrial areas are facing order reductions due to overstocked inventories. After Intel reported disappointing earnings in August, the company has been cutting costs through layoffs and delaying investments in new facilities. Intel has also postponed plans to build factories in Germany and Poland. In October, amid a sluggish memory market, Samsung acknowledged that it is lagging behind in AI chip manufacturing and is facing a "crisis."

Bernstein analyst Stacy Rasgon commented, "While booking volumes can fluctuate, given the downward revision in guidance, we have to acknowledge that the delay in cyclical recovery and specific customer challenges are seriously impacting ASML’s 2025 order expectations."

From 47% to 20%

Since July, ASML’s stock has fallen by a third from its all-time highs. According to Bloomberg, the drop is largely due to tighter U.S. restrictions on its business in China.

China remains ASML’s largest market, accounting for 47% of the company’s third-quarter sales. Sales to China grew nearly 20% from the previous quarter, reaching €2.79 billion. However, CFO Roger Dassen mentioned that ASML expects sales to China to drop from nearly half of its revenue in Q3 to "around 20%" next year.

For the past year, the Dutch and U.S. governments have been enforcing bans to restrict ASML from exporting its most advanced lithography machines to China. Industry insiders have noted that with China making up 47% of ASML's sales, the company is heavily dependent on exports to the country, and the upcoming restrictions from the Dutch and U.S. governments are expected to have a significant impact.

In July 2024, ASML CEO Peter Wennink and former CEO Martin van den Brink expressed opposition to U.S. restrictions on ASML’s exports to China in interviews with European media. Wennink said that such actions would hurt Western interests more than they would help, as critical chips are being produced in China. "It is irrational to stop others from producing what you need," he said. Van den Brink argued that the U.S. export restrictions were ideologically driven, rather than based on facts or data, and stated that ASML would continue lobbying to prevent severe export limits to China.

ASML is dropping 5% now!!!