Shares of ASML (NASDAQ: ASML) were falling for the second day in a row today. After the chip equipment maker accidentally reported results yesterday, investors seemed to give a thumbs-down to itsearnings callthis morning that added some color to its downbeat guidance for 2025.
The chip stock was down 5.6% on the news as of 12:23 p.m. ET on Wednesday.
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ASML sees slowing demand
There weren't any groundbreaking revelations in today's earnings report, but it underscored the challenges the company is facing as it sees a slower demand recovery than expected.
Management said that sales from China, which made up 47% of its revenue in the quarter, would return to normal historical levels closer to around 20% in 2025, showing a slowdown in demand from that country. Pressure from the U.S. has also led to a ban on exporting its most advanced equipment to China.
Yesterday, the company said that it expected 2025 revenue of 30 billion to 35 billion euros ($32.7 billion to $38.1 billion), down from a forecast in 2022 of 30 billion to 40 billion euros. Wall Street seemed to focus on weakness at customers like Intel and Samsung, though ASML didn't get into specifics on which companies were scaling back orders. It expects some of that demand to be pushed out into 2026.
Can ASML bounce back?
In its comments yesterday, ASML said it still saw a lot of potential from AI, and this setback seems to be more of a delay, rather than the result of a structural flaw with the business or the industry.
Analysts are likely to slash their estimates on the news, but the stock looks reasonably priced after the two-day sell-off. Considering its wide economic moat in lithography equipment and the temporary nature of the slowdown, ASML still looks like a smart long-term buy.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
