As a result, shares of semiconductor giant ASML were knocked down hard, plunging 7%. The drop came on the heels of a gloomy forecast for the company’s growth future. Yet the firm did identify macroeconomic and geopolitical uncertainties as significant hurdles that could befall the industry and preclude any growth occurring by 2026. This announcement largely drowned out the company’s otherwise positive earnings report. ASML beat earnings expectations, posting $2.77 per share, excluding special items.
ASML’s latest full year revenue guidance, which sparked the interest, was revised upwards. The trucking giant narrowed its outlook for the upcoming quarter. In the premarket, shares were down more than 6%. This decline came on the heels of the semiconductor equipment maker’s awful quarterly guidance, which was the opposite of their recent earnings beat. The market tanked at the sign of bad news. Investors are rightfully concerned about how fluctuating geopolitical landscapes and macroeconomic conditions will impact the semiconductor industry.
For the third quarter, ASML is forecasting sales to come in between 7.4 billion euros and 7.9 billion euros. That estimate comes in well below the FactSet consensus of 8.3 billion euros. As a result, analysts and investors were shocked by this projection. It indicates that satisfying market demands will increasingly be difficult in an increasingly competitive and volatile industry sector.
ASML’s struggles come against a backdrop of increased scrutiny related to U.S. tariffs, including former President Donald Trump’s tariffs. Tariffs such as these have had a stifling effect on business optimism in the markets. They are viewed as a risk to existing trade flows and could upend pricing patterns in the already-volatile semiconductor market.
“It is certainly interesting times — now, President Trump announced that he will impose 30% tariffs on Europe, and I have to say that is completely unacceptable, that is unjustified.” – Marie Bjerre
Concerns about how these tariffs may affect ASML are larger than ASML itself. A broad swath of semiconductor firms experience the contagion since they rely on a healthy global economic landscape to prosper. The uncertainty created by shifting trade policies has more broadly caused companies across multiple industries to feel exposed to overnight shocks to their market environment.
ASML’s quarterly earnings report has just reminded us all how important the guidance portion of any earnings report can be in moving stock prices. Companies are used to putting out guidance to let investors know what they expect to see in the coming months based on macroeconomic trends and internal leading indicators. At 4.6%, the lack of optimism in ASML’s guidance was enough to do the trick, with the stock price plummeting over 20% as a result.
He explained that the indirect effects of inflation through tariffs’ overall impact on business conditions and uncertainty are more dangerous and undermining.
“Inflation has started a slow climb as signs of tariff-induced inflation are now evident within durable and nondurable imports,” – Joe Brusuelas
The double whammy of inflation and tariffs is putting increased pressure on semiconductor equipment manufacturers such as ASML. And as they continue to sail through these stormy seas, restoring investor confidence is at an ever-growing premium.
Furthermore, market analysts point to the fragility of semiconductor companies based on a global economic downturn. Their reliance on international supply chains and unpredictable consumer demand puts them in an especially vulnerable position. A sudden deterioration in growth expectations can result in dramatic changes in stock valuations, as exemplified by ASML’s recent plunge from grace.