7 Major Takeaways from ASML Q2 FY24 Earnings Report Analysis

Despite challenges, ASML’s net sales totaled €6.2 billion, a 10% decrease from €6.9 billion in Q2 FY23.

Introduction

ASML, a global leader in semiconductor lithography equipment, recently released its Q2 FY24 earnings report, showcasing its financial performance amidst industry challenges and outlining strategic directions.

Here’s an in-depth analysis, highlighting background context, comparative data, strategic insights, and the significance of ASML’s developments:

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Background:

ASML specializes in developing advanced photolithography systems used in semiconductor manufacturing, particularly its Extreme Ultraviolet (EUV) lithography technology.

EUV enables the production of smaller, more powerful chips essential for applications in AI, 5G, and autonomous vehicles.

ASML’s innovations play a crucial role in driving the technological capabilities of global chipmakers, enhancing performance while reducing manufacturing complexities.

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Previous Report Recap (Q2 FY23):

In Q2 FY23, ASML reported robust financial performance:

  • Net Bookings: €4.1 billion, indicating strong demand across its product portfolio.
  • Net Sales: €6.9 billion, reflecting substantial revenue growth driven by increasing semiconductor manufacturing needs.
  • Margins: Gross margin of 51% and operating margin of 32%, demonstrating efficient operations and profitability.

1. Q2 FY24 Financial Performance:

Strong Financial Performance

ASML reported total net sales of €6.2 billion for Q2 2024, surpassing market expectations. This remarkable revenue was accompanied by a gross margin of 51.5%, reflecting the company’s efficient operations and strong market position. Net income for the quarter reached an impressive €1.6 billion, underscoring ASML’s profitability and solid financial health.

Key Financial Highlights:

  • Total Net Sales: €6.2 billion
  • Gross Margin: 51.5%
  • Net Income: €1.6 billion

These numbers not only highlight ASML’s strong financial foundation but also its capability to consistently deliver value to its shareholders and stakeholders.

Net Bookings and Sales:

  • Net Bookings: ASML reported €5.6 billion in net bookings for Q2 FY24, up significantly from €4.1 billion in Q2 FY23. Notably, €2.5 billion came from EUV technology, highlighting continued strong demand.
  • Net Sales: Despite challenges, ASML’s net sales totaled €6.2 billion, a 10% decrease from €6.9 billion in Q2 FY23. This decline reflects market fluctuations and economic uncertainties impacting semiconductor demand.

Margins:

  • Gross Margin: ASML maintained a stable gross margin of 51% in Q2 FY24, consistent with Q2 FY23.
  • Operating Margin: The operating margin was 29% in Q2 FY24, down from 32% in Q2 FY23, possibly due to increased investments in future technologies or operational adjustments.

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2. Bookings and EUV Technology

ASML’s quarterly net bookings in Q2 amounted to €5.6 billion, with a significant €2.5 billion coming from Extreme Ultraviolet (EUV) lithography systems. EUV technology, a cutting-edge innovation, continues to be a significant growth driver for ASML. Its ability to produce smaller and more efficient chips is essential for the advancement of modern electronics and computing technologies.

EUV Technology Highlights:

  • Quarterly Net Bookings: €5.6 billion
  • EUV Lithography Systems Contribution: €2.5 billion

The sustained demand for EUV technology underscores its critical role in the semiconductor industry’s evolution, especially as companies strive to keep up with the increasing complexity of chip designs.

3. Outlook for Q3 2024

ASML’s outlook for Q3 2024 remains optimistic, with expected total net sales ranging between €6.7 billion and €7.3 billion. The gross margin for the upcoming quarter is projected to be between 50% and 51%. These projections reflect ASML’s confidence in its continued growth and ability to meet market demands.

Q3 2024 Projections:

  • Total Net Sales: €6.7 billion to €7.3 billion
  • Gross Margin: 50% to 51%

4. Comparative Analysis:

Net Bookings Comparison: The significant increase in Q2 FY24 net bookings from Q2 FY23 reflects robust demand for advanced semiconductor manufacturing solutions, particularly EUV lithography.

Sales Decline Context: The 10% year-over-year decline in net sales underscores broader economic and industry-specific challenges impacting semiconductor demand globally.

5. Industry Recovery and AI Trends

The semiconductor industry is showing signs of recovery, with inventory levels improving and lithography tool utilization rising among both Logic and Memory customers. Additionally, AI developments are becoming a significant growth driver, increasing the demand for advanced semiconductor technologies.

Industry Insights:

  • Improving Semiconductor Inventory Levels
  • Rising Lithography Tool Utilization
  • AI as a Growth Driver

The resurgence in demand and the rise of AI applications are creating new opportunities for ASML and its cutting-edge technologies.

6. Future Outlook:

  • FY24 Revenue Outlook: ASML expects FY24 revenue to remain flat compared to FY23, reflecting cautious optimism amidst economic uncertainties and supply chain dynamics.
  • FY25 Growth Expectations: Anticipating strong market demand and technological advancements, ASML forecasts significant revenue growth for FY25, driven by continued adoption of EUV technology and expanded market opportunities.

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7. Dividend and Share Buyback Program

ASML has announced an interim dividend of €1.52 per ordinary share, which will be paid on August 7, 2024. Furthermore, the company purchased €96 million worth of shares in Q2 under its current share buyback program. These measures reflect ASML’s commitment to returning value to its shareholders and maintaining investor confidence.

Shareholder Returns:

  • Interim Dividend: €1.52 per ordinary share
  • Share Buyback: €96 million worth of shares purchased in Q2

Conclusion:

ASML’s Q2 FY24 earnings report highlights resilient performance amidst market volatility, supported by strong EUV technology adoption and strategic investments.

ASML has a cautious outlook for FY24 amid economic uncertainties. However, the company holds optimistic growth expectations for FY25.

ASML is well-positioned to capitalize on evolving semiconductor industry trends. Its leadership in technological advancements reinforces its competitive edge.

Kumar Priyadarshi
Kumar Priyadarshi

Kumar Joined IISER Pune after qualifying IIT-JEE in 2012. In his 5th year, he travelled to Singapore for his master’s thesis which yielded a Research Paper in ACS Nano. Kumar Joined Global Foundries as a process Engineer in Singapore working at 40 nm Process node. Working as a scientist at IIT Bombay as Senior Scientist, Kumar Led the team which built India’s 1st Memory Chip with Semiconductor Lab (SCL).

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