Zinger Key Points
- US is now ASML's largest market, overtaking China in Q4.
- CEO says that company's has cleared the backlog of orders placed by China.
Dutch chip equipment maker ASML Holding NV ASML beat the fourth quarter earnings estimates and posted record net sales on an annual and sequential basis, on Wednesday. The company also reduced its Chinese market share in Q4.
What Happened: Apart from reporting a strong set of earnings, ASML's market share data showed that the U.S. was the top market for the company's supplies in the fourth quarter.
The Bloomberg graphic shared by Oliver, the founder of MMMT Wealth, in an X post, showed that the U.S. has overtaken China as ASML's top market, followed by China, South Korea, and Taiwan.
According to the president and CEO of ASML, Christophe Fouquet, the company's revenue from China was "extremely high" in 2023-2024 because of the backlog created in 2022. He attributed the backlog to the company's lower capacity to fulfill the market demand.
"2025 will be a year where we see China going back to a more normal ratio in our business. So I think we’re going to see again numbers people used to see before 2023," he said in the company's earnings call transcript.
Why It Matters: U.S.-based Nvidia Corporation NVDA sources essential lithography equipment from ASML. This equipment is essential for manufacturing Nvidia's most advanced Graphics Processing Unit chips used to power artificial intelligence.
The emergence of Chinese AI startup DeepSeek, which rattled Nvidia's stock on Monday, reportedly saw the company utilizing Jensen Huang-led Nvidia chips to develop AI solutions at significantly lower costs.
Q4 Earnings: ASML exceeded expectations in the fourth quarter of 2024, posting record revenue of $9.71 billion, significantly higher than the predicted $9.02 billion. Earnings per share also surpassed forecasts, reaching $7.15 compared to an estimated $6.71.
Looking ahead, ASML projects strong growth, driven by the increasing demand for artificial intelligence technology. The company anticipates total net sales between $31.32 billion and $36.54 billion by 2025. CEO Fouquet highlighted the transformative impact of AI on the industry, noting that while it presents opportunities, it also creates some risks, reflected in the wide range of their 2025 revenue forecast.
Price Action: ASML was up 5.64% at 721.91% in premarket trade on Wednesday, whereas Invesco QQQ Trust, Series 1 QQQ, tracking Nasdaq 100 was up 0.34% at $523.59. According to Benzinga, ASML has a consensus price target of $880 per share based on the ratings of 13 analysts.
The average price target of $814 apiece between Wells Fargo, Bernstein, and Bernstein implies a 12.58% upside.
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