Dutch microchip equipment maker ASML (ASML:AMS) has dished out some good news for investors. Earnings forecasts have been upgraded and a €12 billion share buyback programme is planned, news of which sent the share price surging nearly 15%, its biggest one-day gain since 2002.

The company now expects revenue of €30 billion to €40 billion by 2025, up from a previous estimate of €24 billion to €30 billion. The company’s 2021 sales totalled €18.6 billion.

ASML said it expects sales to continue growing for years to come, with a sales target of €44 billion to €60 billion by 2030.

‘While the current macro environment creates near-term uncertainties, we see longer-term wafer demand and capacity showing healthy growth,’ said the Eindhoven-based company and Europe’s largest semiconductor equipment producer.

The stock’s rally coincided with the PHLX Semiconductor index jumping 7.7%, with all 30 components gaining ground, while the S&P 500 surged 5.5% in the wake of weaker than expected US inflation data.

ASML dominates the market for lithography systems which are large machines used to map out the circuitry of semiconductors. It has been caught in the crossfire of a battle between the US and China to control semiconductor manufacturing technology.

The €228 billion business had been pressured by Washington to withhold its state-of-the-art EUV extreme ultraviolet technology from Chinese customers amid growing hostility between the
US and China.

‘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 the direct impact on ASML’s overall 2023 shipment plan to be limited,’ ASML’s president and chief executive officer Peter Wennink said on 19 October 2022.

Major ASML customers include Intel (INTC:NASDAQ), Samsung (005930:KS), Taiwan Semiconductor (2330:TPE) and Micron Technology (MU:NASDAQ), microchip manufacturers which have all announced big plans for increased chipmaking capacity in the US over the past year.

ASML said it expects to expand production of its flagship EUV extreme ultraviolet machines, which cost about €200 million each, to 90 annually from around 60 at present, by 2026, and 600 DUV deep ultraviolet systems and 20 high-NA EUV systems.

This demand tailwind helped drive new orders to a record €8.92 billion in the three months to 30 September 2022, of which €3.8 billion was for EUV machines. Gross profit margin expanded from 49.1% to 51.8%.

The recent pick-up in ASML’s share price will be welcomed by shareholders after a weak stock performance earlier this year.

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