ASML Holding NV

NASDAQ:ASML

Earnings Call Analysis

Strong Q2 Results with Optimistic Future Outlook

In Q2 2024, the company delivered strong results with sales exceeding EUR 6.2 billion and a net income of EUR 1.6 billion, driven by immersion system sales. The backlog stands at EUR 39 billion, indicating robust future demand. For Q3, expected net sales are between EUR 6.7 billion and EUR 7.3 billion with a gross margin between 50% and 51%. The company anticipates that the latter half of 2024 will outperform the first half. Long-term, the outlook is positive, with burgeoning demand in sectors like artificial intelligence and planned new fabs fueling growth through 2025 and beyond.

Q2 2024: A Strong Performance

In Q2 2024, the company reported solid results with sales reaching just over EUR 6.2 billion, right at the high end of their guidance. This commendable performance was mainly driven by increased sales of immersion systems. The Installed Base Management recorded revenue of EUR 1.48 billion, slightly higher than anticipated due to increased service revenue.

Margin and Net Income

The gross margin for Q2 was 51.5%, surpassing the guidance, thanks to a favorable product mix. The net income for the quarter stood at EUR 1.6 billion.

Bookings and Backlog

Net bookings for Q2 were EUR 5.6 billion, with EUR 2.5 billion from EUV systems. The company ended Q2 with a robust backlog of around EUR 39 billion, indicating strong future demand.

Q3 2024 Guidance

Looking ahead to Q3 2024, the company expects net sales between EUR 6.7 billion and EUR 7.3 billion. Installed Base Management revenue is forecasted to be around EUR 1.4 billion for the third quarter, with a gross margin anticipated between 50% and 51%.

Full Year 2024 Outlook

For the full year 2024, the revenue is expected to be similar to last year. However, the company anticipates the second half of the year to be significantly stronger than the first half, reflecting the industry's recovery from the downturn. Revenue from the Logic segment is expected to be slightly lower in 2024 compared to 2023, while Memory segment revenue is projected to grow, driven by the transition to advanced Memory technologies such as DDR5 and High Bandwidth Memory.

Technology and Investment

The company continues to make investments in capacity and technology in preparation for the expected demand surge in 2025. This includes shipping additional NXE:3800E systems and increasing efforts in High NA (0.55 NA) systems, which have achieved remarkable technological milestones, such as an 8-nanometer resolution.

Long-term Outlook: 2025 and Beyond

Looking further ahead, the company expects the semiconductor industry to continue its recovery in the latter half of 2024, driven by the upsurge in artificial intelligence. For 2025, they foresee strong growth, bolstered by the secular demand in the semiconductor market, electrification, energy transition, and AI advancements. They are preparing for several new fabs being built globally, with annual revenue projections for 2025 between EUR 30 billion and EUR 40 billion, and potential annual revenue for 2030 between EUR 44 billion and EUR 60 billion.

Earnings Call Transcript 2024-Q2

[Christophe Fouquet, executive]

Hello, everyone. We published our Q2 results today, and I would like to take the opportunity to discuss this with you in more detail.

Q2 2024 was a good quarter. Our second quarter sales are just over EUR 6.2 billion. That's at the high end of our guidance, primarily driven by more immersion system sales. Our Installed Base Management came in at EUR 1.48 billion. This is slightly higher than guided, driven by increased service revenue. Our gross margin for Q2 is 51.5%, above our guidance. This is primarily driven by the product mix, more immersion systems. Net income for the quarter was EUR 1.6 billion. Our net bookings came in at EUR 5.6 billion, of which EUR 2.5 billion in EUV system. At the end of Q2, ASML had a backlog of around EUR 39 billion. Now I will talk about the outlook for the third quarter and the full year, and I will give you our guidance for Q3. In Q3, we expect total net sales to be between EUR 6.7 billion and EUR 7.3 billion. We expect our Q3 Installed Base Management revenue to be around EUR 1.4 billion. For the third quarter, we expect a gross margin between 50% and 51%.

Our outlook for the full year 2024 has not changed. We expect revenue similar to last year. As indicated before, and based on our current guidance, the second half of the year is expected to be significantly higher than the first half. This is in line with the industry's continued recovery from the downturn.

Our guidance on market segment is similar to what we have stated in previous quarters. We expect Logic revenue to be slightly lower in 2024 compared to 2023, as customers digest the capacity added in 2023. For Memory, we currently see revenue growth in 2024 compared to 2023. This is primarily driven by DRAM technology node transition in support of advanced Memory such as DDR5 and High Bandwidth Memory.

Our Installed Base business is expected to be flat relative to 2023. As we have said before, 2024 is a transition year. We continue to make investments both in capacity ramp and technology to be ready for the expected strong demand in 2025. Based on the different levers discussed in the past 2 quarters and the net impact on margin, we still expect a slightly lower gross margin in 2024 compared to 2023.

Now I also want to share with you some important update about our EUV technology. First of all, 0.33 NA systems. We have shipped additional NXE:3800E system this quarter, and we are continuing to ramp as planned. As customers transition to the 3800E this year, we expect the majority of shipments in the second half of the year to be 3800E.

Regarding High NA or our 0.55 NA system, we have shipped the second system this quarter and our first system is running qualification wafer at a customer. The second system is also now under installation, and this is progressing well.

Our customer interest for High NA is high. They are using already our system in the joint ASML-imec High NA in Veldhoven for initial wafer exposures and developments. We have now achieved images with a resolution of 8-nanometer, which is a new world record. We are, with High NA, enabling an almost 3x increase in transistor density relative to 0.33 NA system. Our system in Veldhoven has exposed the first wafers for multiple Logic and Memory customers.

So all in all, good momentum on High NA, high interest, and we are progressing well against our customer expectations.

Let's switch now to our longer-term outlook. When it comes to demand and our business beyond 2024, we expect, as we discussed in previous quarters that the overall semiconductor inventory levels, we continue to improve. We also see today further improvement in litho tool utilization levels at both Logic and Memory customers. While there are still uncertainties in the market, primarily driven by the macro environment, we expect a continued industry recovery in the second half of 2024.

We currently see strong development in artificial intelligence driving most of the industry recovery and growth ahead of other market segments. Based on discussion with our customers and supported by our strong backlog, we currently expect 2025 to be a strong year, driven by a number of factors, as mentioned last quarter. The secular growth driver in the semiconductor end market are still very much intact. The energy transition, electrification and artificial intelligence will continue to drive demand. We also see an expanding application space along with increasing lithography on future technology nodes. This will also drive demand for both advanced and mature nodes.

The industry expects to be in a cyclical upturn in 2025. As a result, we need to prepare for a number of new fabs that are being built today across the globe. Those fabs will be spread geographically and are strategic for all our customers. They all scheduled to take our system. It's essential that we keep our focus on the future and build capacity in preparation for further long-term growth. We have discussed this long-term growth in our Investor Day in November '22. There, our annual revenue forecast for 2025 was between EUR 30 billion and EUR 40 billion. Our opportunity for 2030 annual revenue was between EUR 44 billion and EUR 60 billion. We plan to update our view during our Investor Day this year on November 14, 2024.

In summary, although there are still near-term uncertainties, primarily driven by the macro environment, we remain confident in our long-term growth opportunity.

Thank you very much for joining me today.