Chipmaker suppliers ASML Holding and Lam Research reported today, offering an important read on the tech sector. 🕵️
Both struggled throughout the pandemic to keep up with demand from chipmakers like Samsung and AMD, which poured billions into expansion to keep up with customer appetite. Now with supply chains settling down, investors are watching closely to see what their outlooks mean for the volatile semiconductor industry. 🏭
ASML Holding’s net profit nearly tripled YoY to 1.96 billion euros, while revenues rose 91% to 6.74 billion euros. Both numbers topped analyst estimates, and the company reiterated their 2023 estimates, citing an order backlog of over 38.9 billion euros. With that said, it did note that customers are beginning to delay the timing of product deliveries and new orders. 📆
The company is Europe’s largest tech firm by market cap and dominates the market for lithography equipment, so investors watch it closely.
The smaller U.S.-based firm, Lam Research, did not hold up as well. On the one hand, its third-quarter adjusted earnings per share (EPS) of $6.99 and $3.87 billion in revenue topped the estimated $6.52 and $3.82 billion. But, on the other hand, the company’s fourth-quarter forecast for $5 per share on $3.1 billion in revenues was well below the $5.61 and $3.46 billion analysts expected. ⚠️
Lam’s executives say they’re focused on managing costs to offset the slowdown in customer spending. However, they’re also investing in critical longer-term growth initiatives to put the business in an excellent position to outperform when wafer fabrication equipment (WFE) spending picks up again.
While not a dire outlook by any means, both companies are clearly cautious about the future.
The slowdown in global growth and post-COVID inventory glut has caused demand to pull back meaningfully in the near term. As a result, investors will watch these companies’ outlook closely in the future for an early read into when the sector could be approaching its cyclical low. So far, it doesn’t seem like we’re there yet. 🤷
And since we’re talking chips, it’s worth mentioning that the U.S. is receiving pushback on some CHIPS Act requirements from the world’s largest semiconductor manufacturer, Taiwan Semiconductor, as it seeks $15 billion in subsidies. ⚔️