ASML Forecasts Higher Profit Margins, Says EUV Sales Advance

Updated on
  • Chip-equipment maker sees gross margins up to 48% of sales
  • Customers order three of its latest extreme ultraviolet gear

ASML Holding NV, Europe’s largest semiconductor-equipment maker, forecast fourth-quarter profitability above analysts’ estimates, and said customers had ordered three of its newest chip-imaging systems. The stock rose the most since March.

The gross margin, or what’s left of sales after production costs, will be as high as 48 percent in the fourth quarter, the Veldhoven, Netherlands-based company said in a statement Wednesday. That prediction compares with the average estimate of 43.6 percent. The company reported third-quarter sales that beat estimates, mostly with older products, as it brings on its newest line based on so-called extreme ultraviolet lithography technology.

ASML’s results and guidance “demonstrate a healthy mainstream business, while ASML continues to make progress on EUV,” Peter Olofsen, an analyst with Kepler Cheuvreux who rates the stock a buy, said in an e-mailed note. He expects ASML to confirm its 2020 targets when it meets investors on Oct. 31 in New York.

ASML is pushing chipmaker clients such as Intel Corp., Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. to upgrade to its newest machines, which can etch smaller circuits while increasing capacity and speed. The company said it took orders for three more of the extreme ultraviolet, or EUV, systems during the third quarter, and shipped one. Six customers, producing both memory and logic chips, have now ordered the systems.

“A mix of sales to both logic and memory customers keeps us on track to finish the year with record annual sales," Chief Executive Officer Peter Wennink said in the statement.

Revenue in the fourth quarter will be 1.7 billion euros ($1.87 billion) to 1.8 billion euros, ASML forecast. Analysts had predicted 1.76 billion euros on average.

ASML rose as much as 4.3 percent in Amsterdam, the steepest intraday gain since March 10. Shares gained 3.75 percent, to 96.30 euros, as of 9:21 a.m.

Third-quarter sales rose 17 percent to 1.82 billion euros, beating the average estimate of 1.73 billion euros. Net income rose 23 percent to 396 million euros, missing estimates after the company recognized partial revenue for a EUV system. That bolstered sales but also lowered the company’s gross margin by 1.4 percentage points in the quarter.

The company is entering the fourth quarter with a "strong" order backlog of 3.5 billion euros, Chief Financial Officer Wolfgang Nickl said in a video posted on ASML’s website. The company sees a “bit of a bounce back” for memory shipments that were “weak” last quarter, he said.

(Updates with analyst comment in third paragraph.)
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