Shares of ASML Holding (NASDAQ: ASML) rallied after the company’s fourth-quarter earnings report showed soaring orders for the company’s devices that make semiconductors. The stock has been up and down over the past year, as it has been pressured over Chinese trade restrictions and, more recently, over what impact DeepSeek could have on chip demand.
Meanwhile, ASML has introduced a new technology called a high numerical aperture extreme ultraviolet lithography system, or High NA EUV, that it is trying to sell to its largest customers. All in all, the the stock is down about 15% during the past 12 months. With orders on the rise, let’s dig into ASML’s earnings to see if this is a good time to buy the stock.
ASML had long discussed 2024 being a transition year ahead of what would be a better 2025, and signs of that playing out were on display when the company reported a huge jump in orders, as reflected in its booking number. It recorded bookings of 7.1 billion euros ($7.4 billion), which was a 169% increase compared to Q3 and well ahead of the 4 billion euros ($4.2 billion) that analysts had expected, as compiled by Visible Alpha. It noted that 3 billion euros ($3.1 billion) of its backlog was for EUV (extreme ultraviolet lithography) equipment.
For 2025, the company expects to generate revenue of 30 billion to 35 billion euros ($31.1 billion to $36.3 billion), with a Q1 revenue of 7.5 billion to 8 billion euros ($7.8 billion to $8.3 billion). Gross margins are expected to be between 51% to 53% for the year and between 52% to 53% for the first quarter.
The company said that if AI chip demand remains strong and more manufacturing capacity is built to help meet that demand, revenue could be toward the upper end of that range. However, there are certainly geopolitical concerns that could take 2025 revenue to the lower end of the range.
After two years of outsized contributions from China, the company expects its Chinese business to return to more normal levels in 2025. China accounted for 41% of its revenue in 2024 and 29% in 2023, respectively, as Chinese companies rushed to get orders out of fear there would be additional trade restrictions. These are not sales of its EUV equipment, which it has been barred from selling into China. China represented 14% of its sales in 2022 and 16% in 2021.
Further out, ASML continues to see the opportunity for 2030 revenue of between 44 billion to 60 billion euros ($45.7 billion to $62.3 billion), with gross margins improving to between 56% to 60%. It sees this being driven by strong overall chip demand as well as strong AI demand creating a shift more toward advanced chips that need EUV technology.
