ASML Holding NV's poor third-quarter financial report was prematurely released on Tuesday due to a technical glitch, causing a significant drop in the company's stock and a host of semiconductor stocks. ASML CEO Christophe Fouquet stated during the earnings call on Wednesday that, due to the disappointing third-quarter performance, the slow recovery of the chip market is expected to "last throughout 2025."

Key points from ASML's analyst call summary:

1. ASML Holding's CEO apologized for the "technical glitch that led to the premature disclosure of the third-quarter performance report a day early during European trading hours," especially given the "important key messages" the company wished to convey to the outside world.

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2. Now, ASML plans to slow down short-term investments to adapt to the reality of a weaker market.

3. Due to the cautious attitude of customers, the company anticipates a gradual recovery in the (chip market).

4. ASML still believes that artificial intelligence (AI) is a key driver of the (semiconductor) industry's recovery.

5. Market reaction: ASML Holding's stock price in Amsterdam, the Netherlands, fell by about 5% at the end of European trading, closing at €634.90, following a 15.64% drop on October 15th, closing at €668.10.

On Tuesday, ASML downgraded its outlook for 2025, causing its stock price to plummet by 16% in Amsterdam, marking the largest drop since June 12, 1998. On Wednesday, its stock price fell another 5.8%, losing its position as Europe's most valuable technology company, replaced by software company SAP SE. Since the unexpected early release of the earnings report on Tuesday, ASML's market value has evaporated by over €60 billion ($65 billion). Since Fouquet took office in April this year, the company's market value has fallen by nearly a quarter.

ASML is a bellwether for the global chip industry, and its performance has raised concerns that the AI boom has failed to address the broader low demand for chips. Fouquet stated that the slow recovery in demand has led to "customers being more cautious, with some investment plans being postponed." Although he indicated that the AI boom, energy transition, and electrification still offer strong upward potential, the company still lowered its earnings expectations. He mentioned that the demand recovery in the automotive, mobile device, and personal computer markets has been particularly slow and stated that ASML will slow down short-term investment plans to adapt to market demand."Although we continue to view AI as a key driver for industry recovery, with potential upside, we see a slower recovery in other areas than expected."

"If there were no AI, today's market would be very bleak, and the recovery is not as everyone wishes."

Postponing Orders

ASML's Chief Financial Officer, Roger Dassen, stated in a conference call that some orders originally scheduled for 2025 have now been postponed to 2026.

When an analyst inquired about the postponement of demand by "two customers," Dassen responded that it was not just two customers, but more clients have postponed their orders.

However, Dassen indicated that the demand for the company's extreme ultraviolet lithography (EUV) machines is not a significant issue. He said that EUV capacity is fully booked, with the number of orders sufficient to reach the lower end of the forecast, but an additional $2 billion or so in orders is expected to reach the median of the expected orders.

Analysts believe that ASML faces pressure from multiple directions. While the demand for chips used in AI data centers remains strong, important customers, including Intel and Samsung, are facing difficulties.

Intel postponed plans to open new factories in Germany and Poland last month due to declining sales and increasing losses. Samsung apologized to investors this month for delaying shipments, which allowed competitors to take the lead in the market for high-bandwidth memory chips used in AI.Additionally, ASML has indicated that the recovery in the mobile and PC markets has been weaker than anticipated, leading to media speculation that this could be an estimate in response to weak demand for Apple's new iPhone models. Apple's stock price fell by 1.5% on Wednesday. Analysts have stated that preliminary data regarding pre-orders and delivery times for the iPhone 16 suggest a lackluster demand.

Furthermore, companies that produce automotive and industrial chips, which typically utilize older ASML machinery, are also mired in a prolonged slump due to their customers having excess inventory.

Analysts are particularly concerned about the anticipated weakness for ASML in the coming year. They point out that bookings may be unstable—ASML's machines are worth hundreds of millions of dollars, making delays of several months significant for financial outcomes—but they are worried that next year's forecasts might imply a future demand slump. "We are puzzled by the level of order weakness," said Jefferies analyst Janardan Menon.

In the meantime, UBS remains optimistic about the entire industry. UBS has stated that ASML's weak financial report will not undermine the growth narrative of AI.