In the face of concerns over DeepSeek's impact, ASML's Q4 performance exploded, with orders doubling quarter-on-quarter, still optimistic about AI demand 丨 Earnings report insights

On Wednesday, January 29, Dutch lithography giant ASML released its fourth-quarter 2024 results and first-quarter 2025 guidance, both of which exceeded expectations. Key indicators measuring market demand, such as order volume, far surpassed expectations, highlighting the strong impact of the AI boom. Moreover, company executives remain optimistic about product demand prospects, alleviating investor concerns about the impact of Chinese AI startup DeepSeek's cost-effective chatbot services on demand.

1) Key Financial Data:

Sales: Fourth-quarter net sales were €9.26 billion, while analysts expected €9.07 billion;

Profit: Fourth-quarter net profit was €2.69 billion, while analysts expected €2.64 billion.

Orders: Fourth-quarter net order volume reached €7.09 billion, a quarter-on-quarter increase of 169%, nearly 78% higher than analysts' expectations of €3.99 billion. Among these, orders for extreme ultraviolet lithography (EUV) equipment reached €3 billion.

2) Performance Guidance

Sales: First-quarter 2025 sales are expected to be between €7.5 billion and €8 billion, while analysts expected €7.2 billion. The full-year guidance remains unchanged, still at €30 billion to €35 billion.

Michael Field, Chief Equity Strategist at Morningstar, stated that ASML's fourth-quarter performance proves that the company's valuation is not "overinflated."

After the earnings report was released, ASML's stock price surged. ASML's shares listed in the Netherlands rose by about 11.7% to nearly 12% in early trading, marking the largest intraday gain since March 2020, before gradually narrowing to about half of that gain, closing up approximately 5.6%.

Wall Street believes that ASML's latest performance has at least temporarily dispelled investor concerns.

Jefferies analyst Janardan Menon commented in a report that ASML's strong fourth-quarter orders will alleviate some pessimistic concerns about its performance in 2025, but worries about growth in 2026 may persist.

Other comments noted that ASML's performance shows that some customers still have strong demand for its cutting-edge chip manufacturing machines. However, weaknesses are also evident, as ASML's sales in the Chinese market are expected to slow in 2025, with clients like Samsung and Intel facing production challenges.

CEO Calls DeepSeek's Rise "Good News" That Will Increase Chip Demand, Not Decrease It

This past Monday, DeepSeek, which became a sensation overseas over the weekend and topped the free app rankings in China and the U.S., shook the market, causing ASML's shares to drop 7% that day. The main reason for the sharp decline in stock price was that DeepSeek's reasoning model R1 performed comparably to or even better than OpenAI in tests, but at a relatively low cost, which may impact the demand for ASML's EUV lithography machines used for producing the most advanced chips After the earnings report was released on Wednesday, ASML's CEO Christophe Fouquet emphasized the contribution of AI to the semiconductor industry and welcomed the rise of DeepSeek, considering it "good news" for the semiconductor industry. He expects that the emergence of low-cost AI models like DeepSeek will increase, rather than decrease, the demand for chips.

Fouquet stated in a statement: "Consistent with our views from last quarter, the growth of AI is the main driver of growth in our industry. It has brought about a shift in market dynamics, and not all customers benefit equally, which presents both opportunities and risks, as reflected in our revenue (guidance) range for 2025."

Although he did not directly comment on the R1 model, Fouquet expressed that he sees no signs of a slowdown in demand for AI-focused chips. He said:

"Any initiative to reduce costs is good news for ASML. Lower costs for AI could mean more applications. Over time, more applications mean more demand. We see this as an opportunity to increase chip demand."

ASML remains optimistic about the development of AI, expecting more participants to enter the market, and believes that making AI more accessible and energy-efficient will lead to the democratization of AI.

ASML's Chief Financial Officer (CFO) Roger Dassen stated, "If you make it cheaper, more accessible, and more energy-efficient, you can democratize AI in a necessary way, making it ubiquitous."