ASML (ASML) stock rallied Wednesday after the world's largest supplier to the semiconductor industry beat top- and bottom-line expectations for its fourth quarter and issued a strong outlook for its first quarter.
Investors are paying close attention to semiconductor stocks, including chipmakers Nvidia (NVDA) and Broadcom (AVGO) as well as equipment suppliers such as ASML, following the arrival of DeepSeek, an open-source AI chatbot created by a Chinese technology company, and Alibaba's (BABA) announcement that a new version of its AI model is even better than DeepSeek's.
In the three months ending December 31, the Dutch semiconductor company's revenue increased 27.8% year over year to 9.3 billion euros. Earnings per share (EPS) rose 31.5% from the year-ago period to 6.85 euros per share.
"Our fourth quarter was a record in terms of revenue, with total net sales coming in at 9.3 billion euros, and a gross margin of 51.7%, both above our guidance," said ASML CEO Christophe Fouquet in a statement. "This was primarily driven by additional upgrades. We also recognized revenue on two High NA EUV systems. We shipped a third High NA EUV system to a customer in the fourth quarter."
The results topped analysts' expectations. Wall Street was anticipating revenue of 9 billion euros and earnings of 6.68 euros per share, according to Yahoo Finance.
For the first quarter of its new fiscal year, ASML said it expects revenue in the range of 7.5 billion euros to 8 billion euros, which also came in ahead of analysts' expectations of 7.2 billion euros.
"Consistent with our view from the last quarter, the growth in artificial intelligence is the key driver for growth in our industry," Fouquet said. "It has created a shift in the market dynamics that is not benefiting all of our customers equally, which creates both opportunities and risks as reflected in our 2025 revenue range."
Is ASML stock a buy, sell or hold?
ASML has lagged the broader market over the trailing 12 months, generating a negative total return in excess of 20%. Yet Wall Street remains bullish on the tech stock.
According to S&P Global Market Intelligence, the consensus analyst target price for ASML stock is $920.52, representing implied upside of more than 27% from current levels. And the consensus recommendation is Strong Buy.
Financial services firm Bernstein has an Outperform rating (equivalent to a Buy) and an $887 price target on ASML stock.
"While overall a solid set of results, and that strong bookings number should give investors some reassurance on 2025, we believe there is still a lot to play out in AI-demand as DeepSeek impact is better understood," says Bernstein analyst Sara Russo in a note this morning. "Longer-term we remain bullish on the opportunity for ASML, but caution may prevail until we understand the more near-term implications."
