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ASML Holding NV Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- FCF in Q4 was €8.839 billion, significantly higher than Q3.
- The company had a strong order intake in Q4.
- The company's product pipeline remains strong, supporting the road map requirements of customers and driving overall competitiveness.
- Order intake can be very lumpy.
- Geopolitics is a risk factor.
- The market looks at orders and sometimes the reactions, both in terms of positive and negative order intake, can be quite significant.
- The company is cautious based on some of the experiences it went through last year.
- The company has seen a shift in the market dynamics that is not benefiting all customers equally in the short term.
- Total net sales in Q1 are expected to be between €7.5 billion and €8 billion.
- Gross margin for Q1 is expected to be between 52% and 53%.
- The company expects the gross margin to be a little bit lower in H2 due to revenue recognition on High NA systems.
- The company expects to see a positive effect from no High NA revenue recognition in Q1, partly offset by lower immersion volume.
- The company's sales guidance is based on regular reviews with all customers as part of the planning cycle.
Q&A Highlights from ASML Holding NV Earnings Call Q4 2024
- Analyst asked about the possibility of hitting the high-end of the revenue guide if customers are able to build capacity for AI.
- Christophe D. Fouquet replied that the company will have more visibility on the final expectation as the year progresses, and that they are preparing for the upside opportunities.
- Christophe D. Fouquet replied that the company will have more visibility on the final expectation as the year progresses, and that they are preparing for the upside opportunities.
- Analyst asked about the potential for China order decline due to pulled-in orders.
- Roger J.M. Dassen explained that the company's view on China hasn't changed, and that the key dynamic is the significant backlog that has been built up over the years. He stated that the sales to China will be a more normalized percentage, around 20%, in 2025, and that the order intake from China in the fourth quarter was healthy but not dramatic or skewed.
- Roger J.M. Dassen explained that the company's view on China hasn't changed, and that the key dynamic is the significant backlog that has been built up over the years. He stated that the sales to China will be a more normalized percentage, around 20%, in 2025, and that the order intake from China in the fourth quarter was healthy but not dramatic or skewed.
- Analyst asked about the decision to provide a backlog view annually and how it will affect investor reactions.
- The company explained that the decision to provide an annual backlog view is based on their ongoing dialogues with customers and the review process they have in place. The company believes that providing a robust guidance at the beginning of the year is more meaningful than the swings in order intake, which can be lumpy due to the size of the orders. The company also noted that the market has a significant reaction to both positive and negative order intake, which led them to conclude that "less is more" and that providing an annual backlog view is the right decision for the company and its stakeholders.
- The company explained that the decision to provide an annual backlog view is based on their ongoing dialogues with customers and the review process they have in place. The company believes that providing a robust guidance at the beginning of the year is more meaningful than the swings in order intake, which can be lumpy due to the size of the orders. The company also noted that the market has a significant reaction to both positive and negative order intake, which led them to conclude that "less is more" and that providing an annual backlog view is the right decision for the company and its stakeholders.
- Analyst asked about the possibility of a front-loaded capacity build for the strong node, with 2025 being a big build to prepare for 2026.
- The company stated that they don't have the details of their customer ramp fully, but they don't see any strange pattern in the ramps. They shared that the ramp is definitely starting in 2025, will extend into 2026, and potentially into 2027 with a mix of 2-nanometer and some node. They also mentioned that there is an opportunity to ramp a bit faster if the demand remains strong, but they don't see any pattern that matches the description given by the analyst.
- The company stated that they don't have the details of their customer ramp fully, but they don't see any strange pattern in the ramps. They shared that the ramp is definitely starting in 2025, will extend into 2026, and potentially into 2027 with a mix of 2-nanometer and some node. They also mentioned that there is an opportunity to ramp a bit faster if the demand remains strong, but they don't see any pattern that matches the description given by the analyst.
- Analyst asked about the decline in China sales from 47% in September to 27% in December and whether it is due to digestion by Chinese customers.
- Roger J.M. Dassen explained that the decline in China sales is due to the normalization of demand, and export controls are a part of that, but not the main reason. He said that the company was already signaling in Q3 that this trend might happen, and that the main reason for the normalization of demand is the eating into the backlog that was built up all the way through 2022.
- Roger J.M. Dassen explained that the decline in China sales is due to the normalization of demand, and export controls are a part of that, but not the main reason. He said that the company was already signaling in Q3 that this trend might happen, and that the main reason for the normalization of demand is the eating into the backlog that was built up all the way through 2022.
- Analyst asked about the level of derisking embedded in the company's assumptions for customers where pushouts to 2026 have been seen, and whether there is sufficient clean room space at foundry and HBM customers to take tools by the Q4 timeframe.
- Christophe D. Fouquet explained that the company has derisked the large part of EUV, and the risk is just on some potential pushout. He also said that the company is looking at opportunity to get more clean room space and that if this is possible, they can put some of their tools there.
- Christophe D. Fouquet explained that the company has derisked the large part of EUV, and the risk is just on some potential pushout. He also said that the company is looking at opportunity to get more clean room space and that if this is possible, they can put some of their tools there.
- Analyst asked about ASML's prebuilding strategy and whether it has changed due to the shift in customer dynamics.
- Roger J.M. Dassen explained that the prebuilding strategy is used to ensure a level loading of the factory and to create flexibility. The strategy is reviewed based on the latest customer insights, and the company continues to use it to optimize the factory's loading.
- Roger J.M. Dassen explained that the prebuilding strategy is used to ensure a level loading of the factory and to create flexibility. The strategy is reviewed based on the latest customer insights, and the company continues to use it to optimize the factory's loading.
- Analyst asked about the company's capacity to bring lead times down and balance internal planning with customer commitments.
- Roger J.M. Dassen explained that the company is working to improve throughput and meet higher expectations with customers. The company is rolling out the NXE:3600's maximum throughput and working to improve the throughput of older tools. The company is also focusing on building capacity beyond 2025 by ensuring that long lead time items are in place to respond to higher demand.
- Roger J.M. Dassen explained that the company is working to improve throughput and meet higher expectations with customers. The company is rolling out the NXE:3600's maximum throughput and working to improve the throughput of older tools. The company is also focusing on building capacity beyond 2025 by ensuring that long lead time items are in place to respond to higher demand.
- Analyst asked about the backlog and how it relates to customer orders and production timelines.
- The company aims to offer a normal backlog to its customers, allowing them to respond to demand fluctuations and manage their business. The company has put in place infrastructure to be as flexible as possible and give customers a manageable order lead time.
- The company aims to offer a normal backlog to its customers, allowing them to respond to demand fluctuations and manage their business. The company has put in place infrastructure to be as flexible as possible and give customers a manageable order lead time.
- Analyst asked about the risk of customers not using tools in high-volume manufacturing, even if the company has already built them.
- The company has a backlog of tools that are not EXE:5000, which were intended for R&D. Customers have already ordered EXE:5200 tools, which are intended for high-volume manufacturing. The company looks at a few tools per customer to start with, and then larger insertions later. The customer's logic of inserting tools is to start with R&D and then move to high-volume manufacturing. The company is sticking to this logic and has been doing so for a few years.
- The company has a backlog of tools that are not EXE:5000, which were intended for R&D. Customers have already ordered EXE:5200 tools, which are intended for high-volume manufacturing. The company looks at a few tools per customer to start with, and then larger insertions later. The customer's logic of inserting tools is to start with R&D and then move to high-volume manufacturing. The company is sticking to this logic and has been doing so for a few years.
