ASML's Blowout Quarter Is Great News for Micron Stock
💡 Key Takeaway
ASML's strong Q3 results and raised guidance confirm that AI-driven semiconductor demand will remain supply-constrained for years, directly benefiting Micron as a key customer.
ASML Reports Strong Q3 and Raises Full-Year Outlook
ASML reported third-quarter earnings on Wednesday, delivering results that should ease investor concerns about a potential slowdown in the AI boom. Revenue climbed 55% year over year to 11.66 billion euros, just shy of the 11.72 billion euro consensus. Earnings per share surged to 12.93 euros from 5.48 euros a year earlier, easily beating the 10.76 euro estimate.
The company's profitability also improved significantly. Gross margin expanded to 57.5% from 51.6%, and with operating expenses nearly flat, the operating margin jumped to 44.4% from 32.8%. This demonstrates strong operating leverage as demand for ASML's advanced lithography machines accelerates.
Management raised its full-year revenue guidance from a range of 43-45 billion euros to 44-45 billion euros. For the fourth quarter, ASML expects revenue of 14.2-15.2 billion euros, indicating even stronger momentum ahead.
CEO Christophe Fouquet noted that customers are increasing their short- and medium-term equipment demand forecasts, driven by their views on the size and duration of AI-related investments. Some customers are even expressing interest in placing orders for 2029 and 2030, highlighting unprecedented demand visibility.
The stock fell 4% on Wednesday, but that decline was in line with a broader tech sell-off triggered by a hotter-than-expected CPI reading, not a reflection of the company's performance.
Why ASML's News Is a Bullish Signal for Micron
ASML's results matter because they provide critical insight into the health of the entire semiconductor supply chain. ASML is the sole maker of extreme ultraviolet (EUV) lithography machines, which are essential for producing the most advanced chips. Its order book and guidance serve as a leading indicator for chip demand across the industry.
The company stated that its supply will not meet demand in 2027 and 2028, and it is aiming to expand capacity beyond its previously forecast 30% increase. This confirms that the semiconductor industry will remain supply-constrained for at least the next few years, which is a powerful tailwind for memory chip makers like Micron.
Micron is a key customer of ASML, and the memory industry is transitioning to newer generations of high-bandwidth memory (HBM) like HBM4, which are manufactured exclusively on EUV. Tight supply of ASML machines will likely delay memory chip expansion, keeping prices elevated and benefiting Micron's profitability.
While chip stocks have been volatile due to rising interest rates and concerns about funding the AI build-out, ASML's top customers are well-funded and view AI investment as existential. They will continue to purchase ASML's machines regardless of macroeconomic headwinds, ensuring sustained demand for Micron's memory products.
The biggest question for Micron is the shape of the cycle. ASML's data points suggest that AI-driven demand will keep the sector supply-constrained for years, supporting both higher prices and volumes for memory chips.
Source: The Motley Fool
Analysis generated by Bobby AI quantitative model, reviewed and edited by our research team. This is not financial advice. Always do your own research before making investment decisions.
Bobby Insight
ASML's blowout quarter confirms the AI boom is far from over, making Micron a compelling buy on any weakness.
ASML's raised guidance and comments about supply shortages through 2028 provide strong evidence that demand for advanced chips will remain robust. Micron, as a leading memory chip maker, is poised to benefit from elevated prices and growing HBM demand. While near-term volatility is likely, the long-term growth trajectory is intact.
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