ASML Financial Report Analysis: Order Decline, Will Tariffs Deal Another Blow?

ASML, the world's largest supplier of chip manufacturing equipment, released its latest financial report on Wednesday. After the release of the financial report, the stock price fell by 7% on the same day.

The company's performance was fairly average, but company executives said that tariffs have increased the uncertainty of its prospects for 2025 and 2026.
Let's take a look together.

 

First, let's talk about the financial report. ASML's net sales in the first quarter were 7.74 billion euros, slightly lower than the expected 7.8 billion euros. The net profit was 2.36 billion euros, which exceeded the expected 2.3 billion euros.

 

However, since the company itself has a strong performance certainty, it is relatively rare for the revenue to be lower than expected.

The company expects second-quarter sales to be between 7.2 billion and 7.7 billion euros, while analysts expect 7.73 billion euros.

But revenue is not the key. What really makes the market nervous is the order data. The number of new lithography machine sales was 73 units, and the number of second-hand lithography machines was 4 units. The backlog of orders was 3.936 billion euros, lower than the 4.89 billion euros generally expected by analysts surveyed by the research institution Visible Alpha.

It should be noted that these orders reflect the future investment plans of chip giants like TSMC and Intel. Since the orders did not meet the standard, market confidence was naturally frustrated, and ASML's stock price fell sharply as a result.

ASML's CEO said that the demand for AI is still booming, and the overall market outlook is still optimistic. But he also admitted, "Some customers are a bit hesitant now, which may make our revenue this year slide towards the lower end of the expected range."

ASML expects its full-year revenue in 2025 to be between 30 billion and 35 billion euros. This hesitation actually shows that ASML's customers are still on the sidelines. Before the Trump-era tariff policy becomes clear, they will not invest easily, and thus will not place orders with ASML easily.

It can be seen from this financial report that although the data for this quarter is okay, ASML's guidance for the next quarter is not satisfactory. The company expects second-quarter revenue to be between 7.2 billion and 7.7 billion euros and the gross profit margin to be between 50% and 53%, both of which are lower than those in the first quarter. And the first quarter is traditionally a seasonal low point for the company.

 

Christophe Fouquet, CEO of ASML, said in a statement that 2025 and 2026 will still be years of growth, but the recently announced tariff policies have increased the uncertainty of the macro environment.

Roger Dassen, CFO of ASML, divided the tariffs that may affect the company into four categories, including tariffs on exports to the United States, tariffs on imported parts and tools, tariffs on imported materials required for manufacturing operations in the United States, and tariffs on US export products imposed by other countries.

At the same time, ASML clearly stated that it will not transfer more production to the United States. The CFO emphasized, "Producing in the Netherlands is our plan. Here lies our core capabilities and supply chain."

He also said that if the tariffs are implemented, ASML plans to pass on a "considerable portion" of the costs to customers to ensure a "fair" cost-sharing. In other words, the tariffs may ultimately fall on TSMC and Intel, and then they will pass on this part of the cost to further downstream customers.

 

ASML's revenue in this quarter mainly came from South Korea, the Chinese mainland, Taiwan, China, and the United States, and the combined revenue of these four regions accounted for 99%. Among them, affected by the increase in demand for storage in South Korea and other factors, the revenue share of South Korea in this quarter reached 40%.

With the digestion of the backlog of orders from customers in the Chinese mainland region and the impact of export restrictions and other aspects, the revenue share of the Chinese mainland region in this quarter remained at 27%, the same as the previous quarter, but lower than the average level of 41% in 2024.

China has always been ASML's second-largest market. In 2019, the United States prohibited ASML from selling the most advanced EUV lithography machines to China. Later, under the pressure of the Biden administration, the Dutch government also restricted the export of ASML's second-most advanced DUV lithography machines.

Despite this, the demand for those older models of equipment in China is still strong. The CFO said, "The demand in China is still strong," and it is expected that China will account for more than 25% of the system sales throughout the year.

I think that currently, ASML is another chip company caught in the middle of the China-US game. (I don't need to say who the other one is, right? Ok, it's TSMC...)

At this time, as ASML's management, they must also consider how to deal with the strong pressure from the United States. Can they produce lithography machines without US components to avoid export threats?

In the future, the decoupling between China and the United States, especially in high-end technology products such as chips, will definitely become more and more serious, and the risk of policies to the performance will only get higher and higher.

When investing in ASML, this part of the consideration must be fully taken into account. Of course, in the long run, ASML's performance certainty is still very high. As long as this monopoly position is not threatened, the company still has strong long-term investment value.