ASML Holding NV (NASDAQ:ASML), Europe’s biggest technology company by market value, stock rose 3.71% (As on January 25, 11:20:58 AM UTC-4, Source: Google Finance) after the company reported better-than-expected fourth-quarter sales and net profit, helped by booming chipmaking equipment sales to China. Net profit rose 9% to 2.0 billion euros ($2.17 billion) on sales of 7.2 billion euros, beating analyst expectations of a 1.87 billion euro net profit on revenue of 6.9 billion euros, according to LSEG data. The company registered strong orders of more than 9 billion euros in the fourth quarter – more than triple third-quarter levels – but kept its outlook for flat sales growth in 2024. This is from €2.6 billion in July to September, that compares with an average estimate of €3.6 billion by analysts surveyed by Bloomberg. Bookings of its most-advanced extreme ultraviolet lithography machines in the period was €5.6 billion.
ASML is the only company that produces equipment needed to make the most sophisticated semiconductors, and demand for its products are a bellwether for the industry’s health. Late last year, it started shipping major parts of the first of its newest chip-making machine to Intel. ASML also benefited from strong demand from China last year as chip makers there rushed to get lithography machines ahead of Dutch export rules meant to hobble Beijing’s semiconductor ambitions. The rise in Chinese demand helped offset the effects of a global chip industry slowdown on ASML, which is the only producer of the equipment needed to produce most advanced semiconductors. China accounted for 39 per cent of ASML’s sales in the fourth quarter, down from 46 per cent in the previous period. China accounted for only 8 per cent in January to March.
However, ASML has said sales to China, its third-largest market after Taiwan and South Korea, will be impacted in 2024 by new U.S. and Dutch export restrictions introduced in 2023, affecting up to 15% of the company’s sales there.
The company expects first-quarter net sales between €5.0 billion and €5.5 billion with a gross margin between 48% and 49%. ASML expects R&D costs of around €1,070 million and SG&A costs of around €300 million. The company maintains the conservative view for the total year and expect 2024 revenue to be similar to 2023. The company also expects 2024 to be an important year to prepare for significant growth that the company expects for 2025.