ASML (NASDAQ:ASML) reported third-quarter earnings Wednesday morning, and the news should reassure investors worried that the AI boom might be slowing down.
Revenue jumped 55% to 11.66 billion euros, which was slightly below estimates at 11.72 billion euros. The stock also fell 4% on Wednesday, in line with a broader sell-off in the tech sector on a hotter-than-expected Consumer Price Index (CPI) reading. On the bottom line, its earnings per share surged from 5.48 euros to 12.93 euros, well ahead of the consensus of 10.76 euros, a bullish sign.
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Gross margin in the quarter expanded by 51.6% to 57.5%, and with operating expenses nearly flat, the operating margin expanded from 32.8% to 44.4%.
ASML also raised its full-year guidance from 43 billion-45 billion euros to 44 billion-45 billion euros, and it expected even stronger results for the fourth quarter, with revenue of 14.2 billion-15.2 billion euros.
Image source: The Motley Fool.
The growth story is heating up
ASML and other semiconductor capital equipment stocks have been slow to capitalize on AI demand because ASML’s lithography machines, used to manufacture semiconductors, are downstream of chip demand.
ASML’s machines are big-ticket items, and the companies that buy them want to ensure there is sufficient demand to justify the purchase. On that front, ASML’s backlog is strong and getting stronger as CEO Christophe Fouquet said, “Our customers increase their short-and medium-term equipment demand forecasts with us, driven primarily by their views on the size and duration of AI-related investment. In light of their demand visibility, some customers are expressing an interest in placing orders with us for 2029 and 2030.”
The company also said that its supply won’t meet demand in 2027 and 2028, and it’s aiming to expand its capacity beyond the 30% expansion it already forecast.
Why it’s good news for Micron
ASML’s comments are further evidence that the bottleneck across the semiconductor industry will last for at least a few more years, as the lithography machines it sells are crucial to expanding chip manufacturing capacity.
ASML is the world’s only maker of extreme ultraviolet (EUV) lithography machines, which are used to make the most advanced chips. The memory chip shortage has lifted Micron (NASDAQ:MU) and peers like SK Hynix, Samsung, and Sandisk.
