To The Moon

$ASML Holding NV(ASML)$ is expecting to release its fiscal Q1 2025 earnings results on 16 April 2025 before the market open.

The consensus estimate for the revenues for the Q1 2025 quarter is expected to come in at $8.08 billion which would indicate a year-over-year change of +40.7%.

For the earnings per share, the consensus estimate is expected at $5.99 per share which would represent a change of +81.1% from the year-ago quarter.

ASML Holding (ASML) Last Positive Earnings Call Saw Share Price Decline By 1.35%

ASML last positive earnings call on 29 Jan 2025 saw its share price decline by 1.35% since.

The earnings call presented a strong financial performance for Q4 2024, with revenue and gross margin exceeding expectations. The company highlighted significant progress in High NA EUV systems and a positive outlook for AI-driven demand in 2025. However, challenges such as a decline in Logic and EUV sales, and potential geopolitical risks were noted. Overall, the highlights outweigh the lowlights, suggesting a positive sentiment.

ASML Holding (ASML) Guidance

During ASML's Q4 2024 financial results call, the company provided guidance for Q1 2025 and beyond, highlighting key metrics and expectations. For Q1 2025, ASML anticipates total net sales between €7.5 billion and €8 billion, with an installed base management sales projection of approximately €2.1 billion. The gross margin is expected to range from 52% to 53%, driven by the absence of High NA revenue recognition and tempered by lower immersion volume. R&D expenses are forecasted at around €1.14 billion, while SG&A is expected to be approximately €290 million. For the full year 2025, ASML projects revenue between €30 billion and €35 billion, with a gross margin between 51% and 53%.

The company emphasized the role of artificial intelligence as a significant growth driver and noted potential geopolitical risks and customer dynamics that could influence results. ASML also announced a total dividend for 2024 of €6.4 per ordinary share, with a final dividend proposal of €1.84 per share.

Key Drivers for ASML Holding (ASML) Q1 2025 Earnings

Returned €3 billion to shareholders in 2024 through dividends and share buybacks.

Semiconductor Industry Demand

AI and HPC Boom: Persistent demand for advanced chips (e.g., AI accelerators, 3nm/2nm nodes) drives orders for ASML’s extreme ultraviolet (EUV) lithography systems.

Logic system revenue decreased by 17% compared to 2023, totaling €13.2 billion for 2024. EUV system sales for 2024 were €8.3 billion, a 9% decrease compared to 2023.

Memory Recovery: Cyclical rebound in DRAM/NAND demand (e.g., for data centers and consumer electronics) could boost deep ultraviolet (DUV) system sales.

Geopolitical Tailwinds: U.S./EU subsidies for domestic chip manufacturing (e.g., CHIPS Act) support fab expansions by TSMC, Intel, and Samsung, key ASML customers.

ASML-Specific Catalysts

High-NA EUV Adoption: Progress in shipments of next-gen High-NA EUV systems (e.g., Twinscan EXE:5000), which enable sub-2nm chip production, could drive ASP (average selling price) growth.

Backlog Utilization: ASML’s record €39B backlog (as of Q4 2024) likely converts to revenue as supply chain bottlenecks ease.

Successfully completed installation and customer acceptance of two High NA EUV systems, with positive feedback from customers.

Service Revenue Growth: Higher installed base of EUV/DUV systems boosts recurring service revenue (margin-rich segment).

Q4 2024 free cash flow reached €8.839 billion, significantly higher than the previous quarter.

Margins and Costs

Gross Margin Pressure: Rising R&D costs for High-NA EUV and inflationary pressures on components (e.g., mirrors, lasers) may offset pricing gains.

Gross margin for Q4 2024 was 51.7%, surpassing guidance due to lower than planned costs for new product introductions.

Operating Leverage: Higher system shipments and service revenue could improve operating margins if scale offsets fixed costs.

Fourth quarter 2024 net sales were €9.3 billion, above the high end of guidance, driven by installed base revenue and High NA EUV system sales.

Segment Performance Outlook

EUV Systems

Volume: 25–30 EUV units shipped (€150–180M each).

Catalyst: Intel’s 18A node and TSMC’s N2 ramp-up require High-NA EUV pilots.

DUV Systems

Demand Recovery: Legacy node demand (e.g., automotive, IoT) stabilizes post-inventory correction.

Services

ASML expects 2025 revenue between €30 billion and €35 billion, driven by strong AI demand and potential growth in Logic and Memory segments.

Risks to Monitor

Supply Chain Constraints: Critical components (e.g., Carl Zeiss optics) delays could push out shipments.

Export Controls: Stricter EU/US restrictions on advanced tool sales to China (20–25% of ASML’s 2023 revenue). Expectations for China business to normalize in 2025 after relatively high sales in 2023 and 2024 due to backlog fulfillment.

Macroeconomic Weakness: Chip inventory glut or reduced capex from memory makers (e.g., SK Hynix, Micron). Potential risks affecting 2025 outlook include customer dynamics and geopolitical factors that could impact sales.

Currency Volatility: Weaker USD/EUR exchange rate (40% of sales in USD) could dent euro-denominated revenue.

ASML Holding (ASML) Price Target

Based on 7 Wall Street analysts offering 12 month price targets for ASML Holding in the last 3 months. The average price target is $942.78 with a high forecast of $1,100.00 and a low forecast of $819.77. The average price target represents a 40.11% change from the last price of $672.87.

If we want to look whether ASML could continue its share price uptrend, we need to consider if ASML can continue its monopoly power as ASML’s EUV monopoly (100% market share) provides pricing power and visibility.

ASML competitive advantage on the long-term contract is another area investors could monitor, as they have multi-year agreements with TSMC, Intel, and Samsung ensure revenue durability.

On top of that, ASML R&D leadership which they have spend estimated €3.5B+ annual R&D spend secures dominance in next-gen technologies (e.g., Hyper-NA EUV).

Technical Analysis - Exponential Moving Average (EMA)

We are seeing a nice recovery from ASML in terms of RSI, as there is an improvement on the momentum as it moves away from the oversold region.

This has helped ASML to be trading near the 26-EMA level, and I believe that if ASML could post an earnings surprise, we could see ASML trading above the 50-day period.

I think we need to consider the valuation for ASML as ASML trades at ~35x forward P/E (2025), a premium justified by its irreplaceable role in semiconductor manufacturing.

I would consider to add ASML as there is a potential dividend hike (2024 payout: €5.40/share) supported by strong free cash flow (€6–7B annually).

Another strong point would be the ESG Alignment which is critical to enabling energy-efficient chips, aligning with EU sustainability goals.

Summary

ASML is poised for steady Q1 2025 earnings growth, driven by EUV system shipments and service revenue. However, risks like geopolitical tensions and component shortages could temper upside.

The tariffs on semiconductor could hamper ASML growth but considering their R&D leadership, as investors we might want to focus on the following points.

1. High-NA EUV Adoption: Progress in customer acceptance and volume production.

2. China Exposure: Updates on export control negotiations.

3. Margin Trajectory: Ability to offset cost inflation with pricing and scale.

ASML remains a cornerstone of long-term semiconductor portfolios, but near-term volatility from macro and geopolitical noise is likely.

Appreciate if you could share your thoughts in the comment section whether you think ASML could surprise with a much better earnings and guidance on how they plan to navigate the tariff would be watched as well.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.