Despite a downbeat earnings result in the third quarter, ASML may see an acceleration in its sales growth in 2025 due to the continuous recovery in the semiconductor sector.
ASML experienced a turbulent year in 2024 due to slower-than-expected demand in the semiconductor industry and ongoing geopolitical tensions. At the time of writing, its share price remains flat year-to-date, compared to a 9% gain in the Euro Stoxx 600 technology index.
The Dutch computer chip equipment maker lost its position as the largest tech firm in Europe to SAP following disappointing third-quarter earnings. However, there are signs that ASML may experience an acceleration in sales growth in 2025, driven by increasing semiconductor spending and its dominant position within the industry.
A Potential Acceleration in Growth
The company downgraded its guidance for 2025 amid weaker-than-expected third-quarter earnings. CEO Christophe Fouquet noted that demands were softer than previously projected due to a slower recovery in the semiconductor industry, with this trend likely to extend into 2025. ASML cut its annual growth expectation to a mid-ten percentage from the previously projected 45%.
Despite this, it forecast revenue of €28bn in 2024, or a 1.4% annual growth from 2023. For 2025, net sales are expected to range between €30bn and €35bn, indicating an acceleration in growth of between 7% and 25%.
Additionally, the guidance downgrade may provide opportunities for earnings surprises in 2025. ASML continues to receive bookings from major industry players. As the producer of the world’s most advanced semiconductor-making equipment, particularly its extreme ultraviolet lithography (EUV) machines, ASML holds a leading position in the market. Its customers include prominent chipmakers such as Taiwan Semiconductor Manufacturing Company (TSMC), Samsung, and Intel.
The semiconductor industry experienced doldrums in 2022 and 2023, followed by a slow recovery in 2024, despite the artificial intelligence (AI) boom. However, some analysts expect sales of semiconductor equipment to accelerate and increase to $121bn (€116.2bn) in 2025, a 7% increase from a projected $113bn (€108.49bn) in 2024. The spending may continue to grow to $139bn (€133.5bn) in 2026.
Fouquet expressed optimism about the company’s long-term prospects: “When it comes to 2030, we are still very, very bullish.” ASML expects revenue of between €44bn and €60bn by 2030, with gross margins of between 56% and 60%, up from the current 51%. The median revenue projection suggests a nearly double growth rate in the next six years. The profit margin is also much higher than the sector’s average of just above 20%.
Limited impact of US-China trade tensions
In December, the US imposed additional chip export restrictions on China. However, ASML was exempted from these measures and maintained its outlook for 2025, while reducing China’s contribution to its business to around 20%, down from nearly half. “We do not expect any direct material impact on our business”, the company stated in response to the new US rules.
ASML’s shares have risen 3% since the announcement on 3 December and have rebounded more than 12%, climbing to €688 as of the market close on 24 December from a one-year low of €613 in November.
However, it is important to note that ASML’s price-to-earnings ratio stands at 39, above the industry average of 29. This valuation suggests that the company’s shares may not be undervalued in the short term, despite its positive long-term outlook.
