ASML Earnings Mixed; Strong Revenue Growth Offset by Concerns

ASML's Q1 2025 earnings report showed a 46% revenue increase and EPS surpassing estimates, yet the stock fell 7% due to a sharp decline in bookings. Analysts remain optimistic, with growth projections and buyback plans enhancing appeal despite the drop.

Date: 26-04-2025

AI Rating: 7

Earnings Performance
ASML's earnings report for Q1 2025 was mixed, despite a 46% year-over-year revenue increase, totaling approximately €7.7 billion. The earnings per share (EPS) came in at €6, exceeding estimates by around 5%. This performance indicates strong revenue growth, reflecting ASML's critical position in the semiconductor market, particularly with its EUV lithography machines.

Revenue Growth
The substantial revenue increase, which aligned with market expectations, positions ASML favorably for future growth. Additionally, the company reaffirmed its full-year revenue guidance of €30 to €35 billion, indicating confidence in its operational strength despite slight dissatisfaction with Q2 estimates. This growth narrative is vital for investors looking for long-term potential.

Net Bookings and Investor Sentiment
However, ASML faced challenges with a 44% drop in net bookings compared to Q4 2024, reporting €3.9 billion versus market expectations. This factor contributed significantly to the 7% decline in stock price post-earnings announcement. While net bookings are critical for predicting future revenue, ASML's CFO pointed out that fluctuations in this metric do not accurately reflect the company's business momentum. Investors are cautioned to view bookings with context since the high cost of EUV machines can cause significant quarterly discrepancies.

Key Metrics Observations
The company’s profit margins and free cash flow were not explicitly detailed in the report, but with indications of margin expansion through 2030 and improvement in product pricing, the profit metrics could see beneficial developments. ASML is also focusing on buybacks, aimed at returning a notable fraction of its capital to shareholders and enhancing overall returns.

Outlook
Long-term prospects appear strong, with ASML anticipating revenue growth of 50% to 105% compared to 2024 levels by 2030. This, combined with a robust plan for share buyback, places ASML in an advantageous position for investors looking beyond the immediate volatility tied to bookings fluctuations. Analysts from Wells Fargo and Susquehanna have also projected a potential upside of approximately 37%, further solidifying ASML's investment appeal.

Stocks: ASML