Shares of critical chip firm ASML drop 5% as sales miss expectations with 22% fall

Shares of ASML on Wednesday fell as the company missed sales forecasts, but stuck to its full-year outlook.

ASML's stock was down around 4.5% in early European trade after the results.

Here's how ASML did versus LSEG consensus estimates:

Net sales fell 21.6% year-on-year while net income dropped 37.4%. ASML's net sales fell in the middle point of the company's guidance.

Net bookings for ASML's machinery, a closely watched booking, totaled 3.6 billion euros in the first quarter, down 4% year-on-year but plunging nearly two thirds versus the December quarter.

ASML is one of the most important semiconductor firms in the world, producing tools known as extreme ultraviolet lithography machines, which are required to manufacture the most advanced chips globally.

Last year, weak demand for consumer electronics such as smartphones and laptops hit chipmakers that produce semiconductors for those devices. That has in turn led to slightly weaker call for ASML's gear.

However, various semiconductor firms across the board, such as memory chipmaker Samsung, are seeing a rebound in demand.

"ASML's latest financial results were not the numbers many investors had been hoping for or expecting. After an excellent Q4 orders, Q1 orders were expected to shrink due to their lumpy nature, but the amount that they fell was worse than expectations and could potentially be an early warning sign for concern," Ben Barringer, technology analyst at Quilter Cheviot, said in a note on Wednesday.

"There a number of factors at play; the economic environment is still incredibly uncertain and thus customers are not ordering in the same quantities as they have done previously; there is a transition in product in 2025 so some may just be holding off and preserving any spend; it's still early in the year and things may turn around; and finally, China sales are good but difficult to gauge as to what will happen going forward."

ASML has previously said it expects net sales for 2024 to be similar to 2023 and reiterated this projection on Monday. ASML reported net sales of 27.6 billion euros in 2023.

"Our outlook for the full year 2024 is unchanged, with the second half of the year expected to be stronger than the first half, in line with the industry's continued recovery from the downturn," ASML CEO Peter Wennink said in a statement.

"We see 2024 as a transition year with continued investments in both capacity ramp and technology, to be ready for the turn in the cycle."

ASML's equipment is purchased by the world's biggest chip manufacturers, such as Taiwan Semiconductor Manufacturing Co., Samsung and Intel.

Part of ASML's bullishness comes from the fact that Samsung, TSMC and Intel are ramping up production capacity in America, with the support of funding from the U.S. CHIPS and Science Act.

"I think by 2025 you will see all three of those coming together. New fab openings, strong secular trends and the industry in the midst of its upturn," Roger Dassen, chief financial officer of ASML, said in a pre-recorded video interview.

ASML is yet to address any impact from export restrictions to China in the first quarter.

Following U.S. pressure, the Dutch government last year introduced curbs in June on the export of advanced semiconductor equipment — including ASML's machinery.

However, the company said in a document released alongside its results, that sales of its systems to China accounted for 49% of the total in the first quarter, up from 39% in the fourth quarter of 2023.

ASML previously said that export restrictions would impact 10% to 15% of China sales this year.