Goldman Sachs: ASML 2Q Earnings

ASML’s Q2 2024 EBIT exceeded Visible Alpha’s consensus, driven primarily by strong Immersion sales. The company’s Q2 bookings figure was €5.6 billion (up €3.6 billion QoQ and above Visible Alpha’s consensus of approximately €5.0 billion), including €2.5 billion in EUV orders (above consensus of €2.2 billion). This implies that approximately 12-13 EUV tools were ordered this quarter (i.e. an acceleration from the approximately 3-4 tools in the previous quarter), and the overall bookings level appears to be in line with the rate needed to achieve 2025 sales above the guidance midpoint.

ASML notes that semiconductor inventory levels are improving, with utilization levels in Logic and Memory increasing, driving the company's expectation of an industry recovery in the second half of 2024. As such, ASML reiterated its 2024 sales guidance, projecting flat sales year-over-year (in anticipation of what it believes will be significant growth in 2025, supported by new fab openings, strong secular trends such as AI, government initiatives such as the US Chip Act, and an industry recovery), and kept its 2024 gross margin guidance unchanged. We note that consensus is currently in line on revenue, but 1% above gross profit implied by the reiterated 2024 guidance.

ASML introduced its Q3 2024 net sales guidance, estimating €6.7-7.3 billion (7% below consensus at the midpoint) and expects Q3 gross margins of around 50-51% (implying gross profit/EBIT that is 9%/13% below consensus), with the second half of the year significantly higher than the first half (in line with the broader industry recovery). Furthermore, we note that customer interest in High NA is strong (with the second customer tool being shipped), with customers already using the tools at the joint ASML-IMEC High NA lab in Veldhoven, where they have been able to establish a transistor density that is almost 3x higher than Low NA EUV tools. The company stated that it will revise its 2025 and 2030 targets at its November CMD, given the need to prepare to supply new customer fabs around the world. We believe investors will look for more details on the call about what types of customers are ordering EUV tools and what order flow can be expected later in the year. We reiterate the buy recommendation (at CL).

2Q24 Results: ASML's Q2 2024 EBIT beat Visible Alpha consensus, driven primarily by strong Immersion sales.

Reservations and Progress on EUV Orders:

The company’s second-quarter bookings figure was €5.6 billion (up €3.6 billion quarter-over-quarter and above Visible Alpha’s consensus of ~€5.0 billion), including €2.5 billion in EUV orders (above consensus of €2.2 billion). This implies that approximately 12-13 EUV tools were ordered this quarter (i.e., an acceleration from the ~3-4 tools in the prior quarter), which appears to be in line with the rate needed to achieve 2025 sales above the midpoint of guidance.

Guide:

ASML introduced its Q3 2024 net sales guidance, estimating €6.7-7.3 billion (7% below consensus at the midpoint) and expects Q3 gross margins of around 50-51% (implying gross profit/EBIT that is 9%/13% below consensus), with the second half of the year significantly higher than the first half (in line with the broader industry recovery). ASML reiterated its 2024 sales guidance, projecting flat sales year-over-year (in anticipation of what it believes will be significant growth in 2025, supported by new factory openings, strong secular trends such as AI, government initiatives such as the US Chip Act, and an industry recovery), and kept its 2024 gross margin guidance unchanged.

Analysis

We expect a positive initial reaction in the stock, in view of a low consensus percentage beat in quarterly order intake (including EUV systems), as well as further progress in High NA tool shipments, although buyside expectations have been higher than sellside consensus. The stock has outperformed the European technology sector by 4% over the past 3 months, but its performance has been in line over the past month. We think investors will look for more details on the call on what types of customers are ordering EUV tools and what order flow can be expected later in the year (call at 2pm UK time).

Valuation and Key Risks

We maintain a Buy rating on ASML (in CL) with a 12-month target price of €1,185, based on a FY25 P/E multiple of 37x. Key risks to our view and target price include delays in EUV, capex cyclicality and unfavorable changes in market share.