Key points:
- Near-term looks solid: ASML’s long production lead times and EUR 35bn order backlog offer stability in 2025—barring a major recession.
- Tariff risks still loom: Temporary tariff relief is helpful, but ASML remains exposed to potential sector-specific duties that could hurt 2026 demand.
- Watch the signals: Investors should focus on bookings, backlog growth, and management’s tone on 2026 to gauge resilience in a volatile macro and geopolitical environment.
In financial markets, uncertainty often hits harder than bad news. As ASML, the global powerhouse behind critical chip-making machines, prepares to release its first-quarter earnings this week, uncertainty has never been more palpable.
Investors are nervously eyeing a volatile tariff environment, freshly stoked by former President Trump’s sudden pivot in policy from blanket tariff warfare to more surgical, sector-based measures. This erratic approach leaves ASML caught in what feels like an economic tornado: temporarily safe at the centre, but wary of shifting winds that could quickly turn disastrous.
Dancing with tariffs: temporary calm or eye of the storm?
Trump’s recent weekend of tariff chaos brought temporary relief for electronics and semiconductors. Smartphones and laptops narrowly escaped punishing duties, providing breathing room for major chip-equipment suppliers like ASML. Yet Trump’s announcement to reassess tariffs under a sector-specific, national security-focused clause known as Section 232 hints that ASML’s respite could soon end.
Investors should remain particularly vigilant about ASML’s geopolitical exposure. China has been a crucial revenue driver, but recent export restrictions are challenging that. With political tensions continuing to escalate, further export restrictions could pressure future growth—something investors should monitor carefully.
ASML doesn't just report earnings—it offers investors a barometer for the overall health of the semiconductor sector. The lithography machines ASML makes are essential for manufacturing advanced chips, making its quarterly performance a vital indicator for the entire chip ecosystem.
Earnings preview: reading between the numbers
Consensus estimates put ASML’s Q1 2025 revenue around EUR 7.75 billion—an impressive 47% jump from last year. But sequentially, it’s a dip from the extraordinary numbers of Q4. ASML has guided between EUR 7.5 to EUR 8 billion in revenue, placing consensus comfortably within company expectations. Earnings per share (EPS) expectations hover around EUR 5.7, again reflecting strong annual growth but a moderation from recent highs.
These headline numbers matter, but smart investors should dive deeper:
- Order intake: Expected at approximately EUR 4.8 billion, down from last quarter's highs. A weaker number here could signal customer caution around future chip demand amid tariff uncertainty.
- Gross margins: Anticipated around 52.5%, better than last quarter’s 51.7%. If tariffs hit ASML’s US-bound equipment later this year, margins could be squeezed.
- Customer guidance: ASML’s key customers, such as TSMC and Intel, must maintain strong spending commitments. Any hesitance could ripple across ASML’s future order book.
One reassuring sign amid the storm is ASML’s robust EUR 35 billion order backlog. This impressive backlog provides valuable short-term revenue visibility—watch closely to see if this backlog grows or shrinks, as it'll offer important clues about future demand and customer confidence.
Management commentary: seeking confidence amid turmoil
Perhaps more critical than the numbers will be ASML’s guidance. Management has consistently painted a confident long-term picture, anchored in AI-driven demand, high-tech applications, and ongoing investments in next-generation EUV machines.
But will they remain as confident with storm clouds of potential tariffs and uncertain macroeconomic conditions gathering on the horizon?
Another layer of short-term stability lies in ASML’s long production cycles. The company’s advanced EUV systems require more than a year from order to delivery, while its more common DUV machines still take around 6 months to ship. This time lag acts like a built-in buffer—barring a global recession, ASML’s 2025 revenue guidance is likely to hold. But investors should be aware: the real test may come in 2026. Current inventory levels in the semiconductor industry remain elevated compared to pre-COVID norms. If demand softens, chipmakers may delay or cancel orders, setting ASML up for a tougher road ahead.
While immediate Q1 bookings results—expected around EUR 4–5 billion—are important, this quarter, the market’s spotlight will shine brightest on ASML’s forward-looking guidance, given heightened tariff uncertainty. ASML faces a potential and significant tariff hit on equipment shipped to the US, a significant challenge given that around 16% of its sales went to US sites in 2024.
Strategic tailwinds vs sectoral headwinds
Long-term, ASML benefits strongly from global reshoring trends, including the US CHIPS Act and the EU’s push for semiconductor self-sufficiency. Ironically, Trump’s chaotic tariffs could accelerate investment in local chip manufacturing, inadvertently boosting ASML’s prospects.
But short-term, a new sectoral tariff specifically targeting semiconductor equipment could be a powerful headwind. ASML’s resilience will be thoroughly tested: Is it agile enough to navigate between short-term storms and long-term opportunities?
Practical investor takeaways
For retail investors, the practical lessons from this earnings preview boil down to three straightforward strategies:
- Stay calm, but stay alert: Tariff policy will remain unpredictable. Keep your radar tuned for news on sector-specific tariffs that could meaningfully impact ASML.
- Read the signals: Watch closely for guidance on orders, margins, and customer confidence in ASML’s report. These details will provide critical clues about how the company may weather potential future tariff impacts.
- Think long-term, act cautiously: If you hold ASML or similar stocks, ask yourself whether your investments align with long-term semiconductor reshoring trends or if you might be overly exposed to sudden sector-specific tariffs.
In times like these, investors need patience and perspective more than ever. With ASML’s earnings this week, we’ll see clearly whether management retains firm control amid the current tariff turmoil or whether the storm’s unpredictability has begun to erode their confidence. Investors should brace for a volatile ride—but volatility also brings opportunity, provided we stay informed and ready to act.
