Head of Equity Strategy
ASML, the world's largest semiconductor equipment maker for advanced computer chips, is done 4% as the Q1 results showed a significant miss on orders at €3.6bn vs est. €4.6bn. The company also guided Q2 revenue of €5.7-6.2bn vs est. €6.5bn. Management was quick to reaffirm its mid-term goals presented on the Investor Day 2022 in which ASML predicts 9% annualised revenue growth for the global semiconductor industry until 2030. In the presentation, ASML says the energy transition, AI, and AR/VR headsets are some of the biggest expected drivers of growth.
In its Q1 results, the company was also quick to point out that it sees a stronger second half than first half this year. Given ASML’s track record many investors have trust in the company and reiterating the expectations presented on the Investor Day 2022, means that investors are likely downplaying today’s result. The share price has also recovered more than half of the initial decline on the opening price.
How nervous should investors be about ASML’s Q1 result today? ASML has had a history of many ups and downs as the annual revenue figures since 1997 show. But it is also clear that the cyclicality of ASML’s business has declined over the years and especially since 2013 the increasing adoption of semiconductors across many applications has stabilised the growth trajectory. The red bars highlights analysts’ expectations for revenue until 2028.
In 2023 revenue hit €27.6bn and this year will only see a small increase before growth picks up again in 2025 with revenue expected at €36.2bn. Our message to investors after today’s Q1 result is to focus on the long-term. Semiconductors are getting integrated in more and more physical applications as the world gets more connected and will need more local computing power. AI and the energy transition will become key technological objectives for many countries and the increased geopolitical fragmentation will mean more localized chip production. As a result a huge capital expenditures wave is under way.
ASML is not the only way to capture the growth of semiconductors. Please check our semiconductor theme basket for more inspiration.
The success of ASML and the future returns for shareholders will rely on ASML's ability to sustain its competitive edge in the industry. Below we list ASML's five key competitive edges:
While ASML possesses some strong competitive advantages it is important for investors to recognize the risk factors that can negatively impact the business of ASML. Some of these risk factors are:
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