The global semiconductor industry's bellwether, Dutch lithography giant ASML, is set to announce its Q2 FY2025 earnings on July 16. In the complex environment of booming demand for AI chips and geopolitical risks, this earnings report is not only about the company's performance but also an important window into the health of the global semiconductor supply chain.
Market Expectations: Steady Growth but Slower Pace
According to consensus estimates by Bloomberg analysts, ASML's revenue for this quarter is expected to reach €7.5 billion, up 20% year-over-year, falling in the midrange of the company's guidance of €7.2-7.7 billion. Adjusted net profit is expected to be €2.04 billion, corresponding to earnings per share of €5.23. It is notable that the gross margin is expected to be between 50% and 53%, slightly down from 54% in the previous quarter, mainly reflecting increased R&D investment and rising supply chain costs.
Q1 Review: Strong Performance from a High Base
Looking back at the first quarter, ASML delivered an impressive report card: revenue of €7.74 billion, up 46% year-over-year; net profit of €2.355 billion, up 92% year-over-year; adjusted earnings per share of €6, doubling from the same period last year.
This stellar performance was mainly driven by the strong shipments of EUV lithography machines, especially to top wafer fabs like TSMC and Samsung. The company's management highlighted the optimization of R&D progress and delivery processes in the quarterly report, significantly enhancing the operational efficiency of the high-end lithography business.
Three Focuses This Quarter: Technology, Orders, and Geopolitical Chess Game
With the semiconductor industry undergoing cyclical adjustments, ASML's upcoming Q2 earnings report will address three core market concerns. These answers will not only affect short-term performance but also shape the industry's future trajectory.
1. Technology Iteration: New Challenges for the Leader
With Moore's Law approaching its physical limits, ASML's High-NA EUV technology is seen as key to continuing semiconductor advancement. This revolutionary equipment, with a numerical aperture boosted to 0.55, has a single-unit price of over €300 million and has already been adopted by three top clients. The market is closely watching:
Acceptance Progress: When will the yield data for the first batch of mass-production units be released? Is the client's actual production schedule on track?
Capacity Balance: Is the utilization rate of existing EUV systems being squeezed by High-NA R&D resources?
R&D Efficiency: Will the annual R&D expenditure of over €4 billion be converted into mass-producible technological breakthroughs as expected?
Industry observers note, "Every quarter of delay in the commercialization of High-NA could leave a window for competitors to catch up."
2. Order Fluctuations: Signal Lights at Cycle's Bottom
Last quarter's order volume unexpectedly dropped to €3.94 billion, the lowest in two years. This quarter's order book will reveal the true industry demand:
Total Rebound: €4.5 billion is seen as a dividing line for prosperity, especially in terms of the proportion of EUV orders
Structural Differentiation: Can the AI-driven demand from logic chip giants like TSMC offset the capital expenditure contraction of memory chip manufacturers?
Regional Layout: Trends in equipment procurement demand from major global semiconductor manufacturing bases
It is noteworthy that some analysts believe that weak orders reflect customer inventory adjustments rather than demand disappearance. Q2 data will verify this judgment.
3. Geopolitics: Mandatory Course for Global Enterprises
In the changing global trade environment, ASML faces multiple challenges:
Cost Pressure: Potential tariff policies could directly affect the gross margin by 1-2 percentage points
Supply Chain Security: Progress in localization alternatives for key components, especially the autonomy of optical modules
Compliance Challenges: Assessing the impact of constantly changing export control policies on business layout
CEO Peter Wennink recently admitted, "We are reconstructing a global supply chain model that has been in place for thirty years, a process that is both painful and necessary."
The interaction of these three dimensions will determine ASML's future trajectory. Can technological advantages translate into commercial returns? Do short-term order fluctuations signal long-term demand changes? How should the global operating model adapt to the new environment? The answers may not fully appear in a single quarterly report, but investors can better grasp the trend of the semiconductor equipment industry through these key issues.
Business Highlights: Service Revenue Builds Moat
In addition to hardware sales, ASML's technical service business is becoming a new growth engine:
Equipment maintenance and process optimization services provide stable cash flow
The gross margin of service business is usually higher than that of equipment sales
Helps smooth performance fluctuations across semiconductor cycles
Management expects that the proportion of service revenue may increase from the current 26%, enhancing the company's resilience to market volatility.
Analyst Views
Despite ASML's undisputed leading position in high-end lithography equipment, Wall Street analysts are increasingly divided on its future performance.
An optimistic view focuses on its technical barriers in extreme ultraviolet (EUV) lithography systems, an area that constitutes a virtual monopoly globally. This position places the company at the core of AI chips, high-performance computing, and advanced process transitions. These analysts believe ASML's leading position can last for at least 3 to 5 years, translating its technological advantages into sustained performance growth as the industry advances towards the 2nm node and beyond.
However, there are also cautious voices in the market. They point out that current valuations largely reflect future growth expectations, and any slight miss might trigger a stock price adjustment. A Morgan Stanley research report mentioned that although ASML has long-term competitive advantages, its stock might be more sensitive to any negative news in the current market environment.
According to Bloomberg's consolidated data, the consensus price target still suggests about a 10% upside potential for ASML, indicating an overall positive sentiment, though significantly less optimistic than in previous quarters.
Investment Advice: Long-term Optimism, Short-term Caution
For investors, the upcoming earnings release will be a critical point to verify if ASML's "technology premium" can continue to be realized.
Firstly, order quality is one of the most-closely watched metrics. As the last quarter's new orders fell short of market expectations, investors generally hope to see an improvement in the order structure this quarter, especially regarding progress in high-end EUV and High-NA systems. Secondly, gross margin performance is also crucial. Maintaining it at the upper end of the company's guidance range will effectively alleviate market concerns about rising costs.
Another focus is the capitalization progress of R&D investments. ASML's technology upgrades require continuous substantial investment, but the key is whether these investments can quickly translate into products and revenue, measuring its R&D efficiency and payback period. Furthermore, geopolitical risks remain a variable affecting the company's future stability, particularly under the backdrop of U.S. restrictions on exports of advanced equipment to China. How ASML adjusts its regional strategy and capacity allocation will be closely watched in this earnings report.
Despite short-term volatility and external challenges, most institutions still regard ASML as one of the most certain investment targets in the semiconductor equipment sector. Its technical barriers and customer stickiness build a solid moat, providing relatively strong resistance to cyclical pressures.
As global chip manufacturers accelerate their transition to more advanced processes, ASML's strategic value is expected to continue to rise. This earnings report may become an important window to observe whether this lithography giant can find a balance between continuous innovation and financial returns. For investors focusing on long-term tech sectors, ASML remains a key holding, but maintaining moderate caution and patience in the face of short-term valuation fluctuations is necessary.