Chip Equipment Maker ASML Reported Earnings. Here’s What to Know.

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Courtesy Bart van Overbeeke/ASML

The Dutch maker of the most advanced chip manufacturing equipment,

ASML Holding,

gave investors reason to cheer when it reported earnings before the opening bell Wednesday. The company gave a bullish forecast and told investors it was launching a new stock-buyback program worth billions.

U.S.-listed shares of ASML (ticker: ASML) rallied 5.1%, to $718.86, in recent trading, while the

PHLX Semiconductor index

was up 2.5%.

ASML reported second-quarter profit above expectations and revenue slightly below consensus estimates. It disclosed net income of €1 billion ($1.2 billion), which amounts to €1.79 a share, compared with €751, or €2.52 a share, in the year-ago period. Revenue rose 21% to €4 billion.

Analysts had forecast earnings of €2.47 a share on revenue of €$4.1 billion.

ASML executives said the company expects third-quarter revenue of €5.2 billion to €$5.4 billion, well above the €$4.7 billion forecast by analysts. The company said it has €17.5 billion worth of orders on the books. CEO
Peter Wennink
said the company was raising its full-year revenue growth guidance to 35% from 30% earlier this year.

The company also launched a €9 billion stock-buyback program.

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Wennick said roughly €300 million of revenue shifted to the third quarter due to testing requirements, but that massive demand for chips across a few markets has benefited the company. “[Demand for leading-edge chips is] driven by everything that we see around us,” he said, citing artificial intelligence and high-power computing.

Amid the global chip shortage, Wennink said ASML is selling more software upgrades for its equipment as its customers look to squeeze more production out of existing machines. Its software can have a higher margin than its equipment.

ASML’s strength in the chip industry is derived from its current monopoly for machines used by

Taiwan Semiconductor Manufacturing

(TSM) and

Samsung Electronics

(005930.Korea) to make the world’s most advanced chips. The manufacturers use extreme-ultraviolet-lithography equipment to make chips more powerful with atomic-level precision.

ASML also makes machines that use deep ultraviolet technology, which in some cases is less lucrative, but it has competitors for that technology.

“As we think about the company’s monopolistic position and greatest visibility across the entire Semiconductor landscape, it is clear to us why ASML trades atthe multiple it does and why shares should continue to outperform,” Evercore ISI analyst C.J. Muse said.

ASML currently trades at 52 times earnings. In a recent story, Barron’s called the stock expensive compared with other chip equipment suppliers that make more widely used machines.

Write to Max A. Cherney at