Photo Credit: Benjamin Wiens from Pixabay
 

According to a recent report, the global Extreme Ultraviolet Lithography (EUV lithography) market is estimated to be a $23.7 billion industry this year and is forecast to grow 9.5% annually to $37.3 billion by 2030. The increasing demand from AI, 5G, and high-performance computing is driving the growth in the industry. Netherlands-based ASML (Nasdaq: ASML), the only producer of the machines, announced second quarter results that outpaced market expectations. But a slower outlook has sent the stock tumbling 7% soon after the European markets opened for trading.
 

ASML’s Financials

For the second quarter, ASML’s revenues came in at €7.7 billion (~$8.9 billion) ahead of the Street’s forecast of €7.52 billion (~$8.7 billion) . Net income of €2.3 billion (~$2.6 billion) was also ahead of the €2.04 billion (~$2.3 billion) estimated by the market.

During the quarter, net bookings came in at €5.5 billion (~$6.3 billion), of which €2.3 billion (~$2.6 billion) was for its most advanced EUV photolithography machines. Analysts were looking for net bookings of €4.19 billion (~$4.8 billion).

For the third quarter, the company forecast revenues of €7.4-€7.9 billion (~$8.6-$9.2 billion), which was short of market expectations of €8.3 billion (~$9.6). The company expects to end the year with revenues of €30-€35 billion (~$34.8-$40.6 billion), translating to a 15% growth. The market was looking for a 26% growth in revenues for the year. ASML was also not so certain about its 2026 growth numbers due to macro-economic and geopolitical uncertainties.
 

ASML’s Growth

ASML is known for producing the machines that make the chips. Known as EUV photolithography machines, these machines use light to etch patterns into the silicon wafers used in chipmaking. While there are other companies that produce photolithography machines, ASML happens to be the only one with the EUV technology. Its customers include NVIDIA and TSMC. But the uncertainty surrounding tariffs are a big cause of concern for the company. Its lates EUV machine sells for $400 million. The recently proposed 30% tariff is going to hurt its sales. Besides the machines, the sale of parts will also be hurt by the rising tariffs.

In December 2024, the U.S. Department of Commerce updated its semiconductor export rules that expanded the scope of restricted technologies to include metrology tools and software and added several Chinese facilities to the restricted buyer list. The changes hurt ASML as China is a big buyer of its deep ultraviolet (DUV) lithography systems that are used for producing chips used in AI and high-performance computing. Last September, the Dutch government had also imposed its own export controls on DUV systems.

Analysts estimate that the trade restrictions will result in revenues from China to drop to 20% of total revenues for ASML compared with the 23% contribution they had in 2023. Overall, revenues from China are expected to fall 48% over the year. China is also accelerating the development of its own chip-making technology. Huawei and SMIC have been increasing their R&D efforts to compete with ASML. Recent news suggests that SMIC was able to build a 5nm-class chip without using the EUV machine. Prior to the announcement, the tech industry believed that it was not possible to go below the 7nm node without using EUV technology.

Earlier this month, NVIDIA and AMD announced that they would resume selling their chips to China after the US government eased restrictions on the sale. While that bodes well for the chip industry, it does not necessarily open the floodgates for ASML.

ASML’s stock is currently trading at $806.73 with a market capitalization of $323.6 billion. It has been falling from the year high of $1,077.05 that it was trading at a year ago. The stock has recovered from the low of $578.51 that it had fallen to in April.

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