ASML Q2 Results Strong But Q3 Guidance Slightly Soft; Reports Of Targeted Trade Restrictions

A2[P]/NR/A+ EUR Spreads muted

• Results mixed though the size of the Q2 results beat looks larger than the Q3 guidance softness though the pre-market equity move headline seems to indicate that the reports of US trade restrictions (https://blinks.bloomberg.com/news/stories/SGR1TJT0G1KW) may have the attention of equity investors.
  
  
• Q2 net sales -10% YoY at EUR 6.2bn (+4% vs. BBG consensus, at higher end of EUR 5.7-6.2bn guidance), net bookings +24% (+26% vs. consensus), gross margin 51.5% (vs. 50.6% consensus and 50-51% guidance). DPS of EUR 1.52 declared.
• FCF of EUR 386mn up from EUR -161mn in Q223 and EUR -676 in Q124 though Cash and ST Investments fell by roughly EUR 0.4bn to EUR 5bn.
• Results look strong with 100 lithography systems sold in the quarter (consensus had been expecting 96); EUV revenues look soft though were offset by ArF revenues.
• Q3 guidance is for net sales of EUR 6.7-7.3bn with gross margin of 50-51% which looks soft - BBG consensus for EUR 7.5bn in net sales with a 51.2% gross margin.
• FY24/FY25 guidance unchanged; BBG headline indicates ASML will update MT views on 14 Nov investor day.
• Also flagging the BBG news report that the US considering severe trade restrictions on Tokyo Electron, ASML if they keep supplying advanced tech to China, leveraging the foreign direct product rule, which is likely the cause of the pre-market equity headlines.