ASML Recoups DeepSeek Losses After Solid Orders Ease Demand Woes

ASML shares surged as much as 12% in European trading, the biggest intraday gain since 2020, after the chip equipment maker posted quarterly bookings that topped Bloomberg Consensus estimates. Despite concerns over weaker demand from key clients Intel and Samsung, JPMorgan analysts believe that strong orders came from Taiwan Semiconductor Manufacturing Co. and other high-end chip producers.

ASML’s bookings for the fourth quarter were 7.09 billion, beating the 3.53 billion euro estimate by analysts surveyed by Bloomberg. 

Here’s a snapshot of 4Q24 earnings (courtesy of Bloomberg): 

Bookings EU7.09 billion vs. EU2.63 billion q/q, estimate EU3.53 billion (Bloomberg Consensus)

Net sales EU9.26 billion, +24% q/q, estimate EU9.02 billion

• Net system sales EU7.12 billion, estimate EU7.16 billion
• Net service & field operation sales EU2.15 billion, estimate EU1.86 billion 

Gross margin 51.7% vs. 50.8% q/q, estimate 49.6%

R&D expenses EU1.12 billion, estimate EU1.1 billion

Operating income EU3.36 billion, estimate EU3.09 billion

Operating margin 36.2%, estimate 34.1%

Net income EU2.69 billion, +30% q/q, estimate EU2.62 billion

Cash and other EU12.74 billion vs. EU4.99 billion q/q, estimate EU6.17 billion

Total lithography systems sold 132 units, estimate 121.14

Net system sales China share 27% vs. 47% q/q

Goldman analysts Alexander Duval, James Saunders, and Anant Jakhar delivered a first take on ASML’s quarterly beat and solid FY25 guidance and reiterated a “Buy” rating for clients: 

ASML’s 4Q24 revenue and EBIT were above the midpoint of its guidance and Visible Alpha Consensus Data, driven by more Installed Base Management and higher High NA sales (with 2 tools recognised in the quarter), and higher GMs (due to more upgrades and lower High NA costs). The company’s bookings figure in 4Q was €7.1bn, (up qoq from €2.6bn and above Visible Alpha Consensus Data of c.€4.0bn), including €3.0bn of EUV orders (ahead cons of €2.4bn).

ASML noted that while there continue to be very strong developments in AI, it has created a shift in market dynamics that is not benefiting all of its customers equally (reflected in a wide reiterated 2025 guidance range). The company introduced its 1Q25 net sales guidance of around €7.5-8.0bn and expects 1Q25 gross margins to be around 52-53% (implying revenue/gross profit/EBIT that is 9%/11%/21% ahead of cons).

Further, ASML reiterated its 2025 guidance and expects sales of €30-35bn prior (with the latest backlog now at €36bn), with gross margins of 51-53% (which implies midpoint revenue/gross profit that is 1%/1% ahead of current 2025 consensus).

Within this, ASML expects a strong Logic market, with continued strength in advanced Memory.

That said, we note commentary that if AI demand stays strong, the company sees opportunities to be towards the higher end of the range (albeit uncertainty at some customers also justifies including the lower end of the range). Further, we note that ASML expects its 2025 China business to go back to a more normalised sales ratio (e.g. akin to pre 2023), with export controls fully reflected in the guidance. We expect investors to seek more colour on 2026 dynamics, expectations for order intake from Foundry customers and the latest demand trends in Logic/Memory space. Reiterate Buy.

The analysts are “Buy-rated” on ASML with a 12-month price target of 1,010 euros…

ASML’s most advanced extreme ultraviolet lithography machines are set to continue benefiting from massive Capex spending by MAG7 companies to expand AI capabilities.

Last week, Meta raised its 2025 Capex forecast to $60-65 billion, nearly double the $38-40 billion it spent in 2024. Meanwhile, OpenAI, SoftBank Group Corp., and Oracle Corp.’s Stargate AI project, which plans to invest hundreds of billions in US data centers, has further fueled AI Capex spending estimates for the year.

“AI is the clear driver,” ASML CEO Christophe Fouquet told investors, adding, “We truly believe that AI is going to bring even more opportunity to this semiconductor industry.”

Here are other analyst reactions to ASML’s earnings (courtesy of Bloomberg): 

JPMorgan (overweight)

• 4Q orders, maintained 2025 guidance and the 1Q outlook were all strong, going against the bear case on ASML, says analyst Sandeep Deshpande
• Mid-point of 2025 guidance is now covered by bookings received, and the firm is now starting to build backlogs for FY26
• Strength in EUV orders is likely coming from TSMC and producers of high bandwidth memory; firm probably received no high-NA EUV orders in the quarter, and these bookings will likely be more loaded to 2H, pending customer evaluations

Morgan Stanley (equal-weight)

• Large bookings infer high demand for ASML’s DUV, and that should help de-risk DUV estimates for FY25, says analyst Lee Simpson
• 1Q guidance points to a higher gross margin as there will be no high-NA EUV sales, a tool with typically lower margins

Citi (buy)

• Logic customers drove 61% of ASML orders in 4Q, “which we presume was TSMC returning with material orders after a relatively quiet” period of bookings, says analyst Andrew Gardiner
• Firm will stop reporting orders after 2025, a move probably won’t be taken too negatively, as management has been foreshadowing such change in disclosure
• The result will provide significant relief to the market given the sentiment had been very bearish ahead of the event

Jefferies (buy)

• The strong 4Q booking and a €36b backlog will dispel some of the bearish concerns regarding 2025, though worries on 2026 growth are likely to persist, says analyst Janardan Menon
• AI demand remains strong, but demand at other customers remains uncertain, thus the outlook range is broad

In a separate note, Goldman’s Matthew Kaplan and others said ASML earnings were helping to lift the broader semi/tech stocks: 

“ASML in EU (+9%) helping lift semi/tech sentiment after strong 4Q bookings/better 1Q guide driven by AI along with Japanese semi manufacture Advantest (6857 JT // +4% // NVDA partner) raising FY forecast by almost 40%.” 

ASML shares in Europe recovered much of the DeepSeek AI turmoil earlier in the week. 

While AI Capex estimates by Meta and other MAG7 companies were likely formulated before DeepSeek’s development earlier this week, we provide readers with this view: the new Chinese AI model, allegedly “40-50x more efficient than other large language models,” raises the question of whether such massive data center capacity and chip investment is actually required. This could dent AI Capex spending estimates for MAG7, reduce sales for chip companies, and ultimately lead to lower demand for ASML’s chipmaking machines. 

However… ASML CEO Fouquet said the DeepSeek Development “is great news” for his company because “lower cost means AI can be used in more applications, more applications mean more chips.” 

How about MAG7’s ROI on the hundreds of billions of dollars already spent on AI infrastructure?? 

Oops.