ASML rises 4% after hiking sales forecast for second time this year on strong AI chip demand

ASML on Wednesday raised its guidance for the second time this year and reported stronger-than-expected quarterly results as its customers continue to ramp up production of AI chips.

The Dutch semiconductor-equipment maker said it now expects full-year sales to come in between 43 billion euros ($49 billion) and 45 billion euros, and a gross margin of between 54 and 56%. It previously predicted annual net sales of between 36 billion and 40 billion euros, and a gross margin between 51% and 53%.

The stock jumped over 7% at the market open before slightly paring gains to last trade 4.4% higher. Shares have surged 115% this year.

Here's how ASML did versus LSEG consensus estimates for the second quarter:

ASML — Europe's most valuable company — is the only company in the world that makes extreme ultraviolet (EUV) lithography machines used to produce the most advanced semiconductors.

CEO Christophe Fouquet said order intake remained "extremely strong" in the first half of the year. That momentum means the company will target adding 30% to its 2026 low NA EUV capacity and 30% to its 2026 Deep Ultraviolet (DUV) immersion capacity, he said.

ASML shares this year.

ASML had already raised its guidance last quarter on the continued demand for its highest-end EUV machines. This is expected to remain high as chipmakers expand production capacity to meet the needs of the AI boom.

The company's customers continue to "accelerate their capacity expansion plans," CEO Fouquet said in a Wednesday statement. "This is translating into customer commitments across our product portfolio, providing ASML with increased visibility into longer-term demand."

"ASML is doing a great job in bringing that capacity in, and the firm has several levers to do that," Javier Correonero, senior equity analyst at Morningstar, told CNBC's Ritika Gupta. He said the company was increasing output by optimizing the "cleanroom" space they have in Veldhoven, where they produce the DUV and EUV machines, while also carrying out so-called "fast shipments."

Earlier this week, Taiwan Semiconductor Manufacturing Co (TSMC), one of ASML's largest customers, reported a 68% jump in June sales on the back of strong demand for its chips.

TSMC is planning to add two advanced chip packaging plants in the Chiayi Science Park in southern Taiwan, Reuters reported, citing remarks made by Taiwan's National Science and Technology Council Minister Wu Cheng-wen on Sunday.

UBS analysts said in a July 10 note that the buildout in semiconductor fabrication facilities, as well as AI-driven demand for leading-edge chip production, is expected to help ASML see a stronger second half of the year.

Despite robust demand, semiconductor stocks have come under pressure as investors question whether the huge AI-driven capital spending can be sustained. ASML also faces tightening restrictions on export controls of its advanced chip equipment.

The stock slumped 6% in April after a bipartisan group of U.S. lawmakers proposed a bill that would cut off ASML's sale of DUV machines to Chinese chip companies and impact its already shrinking sales there. That law still needs to work its way through the U.S. legislative process.

But restrictions can have a counterintuitive effect, Morningstar's Correonero said, and have previously led to a boom in demand as Chinese customers snapped up machines in anticipation of further restrictions. He noted that while ASML is a well-managed company, expectations are quite high.

"There's a lot priced in, and we see it slightly overvalued," the analyst said. "Just to give you an idea, ASML right now is trading roughly at a 50x forward PE, which is in line with the peaks that we saw during Covid times ... Our valuation for ASML implies more like a 35-40x forward PE, which we consider more recent."

ASML said Wednesday that it continues to expect China to make up around 20% of its total net sales for the year.

"The Chinese market is moving in sync with the overall behavior that we see globally," Chief Financial Officer Roger Dassen said in a transcript of a video interview.

The company said it will provide an update on its longer-term goals at a Capital Markets Day on June 10 next year.

— CNBC's Arjun Kharpal helped contribute to this story.