ASML posts earnings beat, shrugging off downbeat tone from chip makers

Yahoo Finance Live anchors discuss the surge in shares for ASML amid strong third-quarter earnings.

Video transcript

BRIAN SOZZI: Welcome back. Still some time before the opening bell on Wall Street. Let's take a look at what's moving here in the pre-market. Shares of ASML in focus. Actually, the shares were higher after the company topped earnings estimates on its top and bottom lines for the third quarter. ASML, who makes the machines that creates chips and sells them to semiconductor companies, saw revenue rise 10% year over year and said it expects the direct impact from the US's chip curbs on China to be, quote, "limited."

Interesting report. Didn't-- I would say a lot of folks on the Street maybe didn't see this coming, given the downbeat tone we've heard from A&D, Intel in recent weeks. So somewhat of a surprising quarter.

JULIE HYMAN: That last thing you mentioned is the most important thing, right? And just to give a little bit more detail on what they said on the call on the statement here, based on our initial assessment, the new restrictions do not amend the rules governing lithography equipment shipped by ASML out of the Netherlands. And we expect a direct impact on the ASML's overall 2023 shipment plan to be limited.

So, remember, what this was, was the US restricting US companies from supplying Chinese companies specifically in the semiconductor industry. And so there was some concern that an ASML would be caught up in that. And remember, these stocks fell on concerns over what this was going to mean. So that's why this is such an alleviation of the concern. And we're seeing some lift to some of the other semiconductor equipment makers as well.

BRAD SMITH: Continued concern as well around what the type of revenue would look like in the face of a recession, excuse me. They've mentioned within this there's uncertainty in the market due to a number of global, once again, macroeconomic concerns, including, but not limited to, inflation, consumer confidence, and the risk of a recession. And so for them being able to sell through what they are effectively being able to create, that's still going to be one of the issues that the company has to navigate through in this near term period of time.

BRIAN SOZZI: Yeah, one of the sectors I'm really excited about to get their earnings-- maybe the market's not so excited about it-- but it is from an Intel and AMD and the whole chip space because guidance has been lowered for a lot of these companies, but do they come out here and warn again for the fourth quarter? And do these stocks continue to get rerated? Or if Intel and AMD, even Texas Instruments, Qualcomm, if they come out here and guide down, do you finally see buyers step in here, even though they know that the news is likely to be-- just continue to be bad?

BRAD SMITH: I think if it's anything similar, they're going to have to continue to guide down. I mean, even in this report, they're saying that they're starting to see diverging demand dynamics per market segment. And so if you've already got ASML that is citing that within their report for this earnings season-- and of course, we've already seen NVIDIA and AMD also announce some of or pre-announce in quarters past where they are starting to see that divergence-- I think that's just going to be something that we continue to hear even throughout this earnings season from some of the chipmakers.

JULIE HYMAN: Well, and what we've seen throughout this whole period, right, is the rerating of these stocks, right? So at some point, is it priced in even if the outlook continues to be bad, given the enormous slumps that we have had in not just semiconductors, but, like, everything?

BRIAN SOZZI: Not a great time to buy this year.

JULIE HYMAN: It was everything that was growthy, right? Yeah, I mean, so I guess that's the consideration here that people are weighing.

BRAD SMITH: Absolutely.