ASML Stock Jumps as Chip Supplier’s Earnings Beat Expectations

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ASML
,
a critical supplier of manufacturing equipment to the semiconductor industry, posted better-than-expected fourth-quarter earnings Wednesday as demand for chipmaking equipment continues to outstrip supply.

U.S.-listed shares of ASML (ticker: ASML) rose 2.4% in U.S. premarket trading, while the shares trading in Amsterdam (ASML.Netherlands) rose 1.3%. The stock has fallen more than 10% so far this year, in line with a broad decline in the technology sector.

The group reported fourth-quarter net income of €1.8 billion ($2 billion) on sales of €5 billion, delivering earnings per share of €4.39. Analysts had expected income of €1.6 billion — and per-share profit of €3.71 — from sales of €5.1 billion. 

Income rose 29% from €1.4 billion a year earlier, while sales increased 16% from €4.3 billion.

“We experienced higher demand for our systems than our production capacity can accommodate. Very strong demand in end markets puts pressure on our customers for more wafer output,” said Peter Wennink, the company’s president and CEO.

Billing itself as “the most important tech company you’ve never heard of,” ASML builds equipment for manufacturing semiconductors, supplying major chip makers including

Intel

(INTC),

Taiwan Semiconductor Manufacturing

(TSM), and

Samsung Electronics

(005930.Korea). The global shortage of chips has highlighted the company’s niche business and the important role it plays in the global supply chain.

Its core product is lithography systems — ASML holds a near-monopoly — which are a critical part of the chip-making process. ASML is also a pioneer in extreme-ultraviolet (EUV) lithography, which is the much-anticipated next generation of the technology.

“In order to support our customers, we are providing them with high-productivity upgrade solutions for their installed base, and we are reducing cycle time in our factory to ship more systems,” Wennink added.

ASML expects net sales in 2022 to grow around 20% from 2021, even accounting for the impact of a fire at its Berlin site earlier this month.

“ASML remains core to the miniaturization of semiconductors as leading customers like TSMC and Samsung continue to invest heavily in leading edge nodes,” said Dan Thomas, an analyst at investment research consultancy Third Bridge.

“Any reshoring of semiconductor supply chains probably bodes well for overall demand for lithography tools, of which ASML would be a key beneficiary,” Thomas added.

Write to Jack Denton at [email protected]