ASML Shares Slide Despite Earnings Beat Amid China Risks and Cautious Outlook

ASML Holdings (NASDAQ: ASML) experienced a 5.1% decline in share price following its Q2 earnings report, despite posting figures that surpassed consensus estimates and raising its full-year guidance. The sell-off reflects investor anxiety over the quality of the company's growth and escalating geopolitical risks. While the company raised its full-year revenue growth target to approximately 30%, a significant portion of this boost was attributed to an accounting change regarding 'fast shipment' protocols rather than organic demand alone. This change allowed DUV machines to be qualified faster, adding roughly 700 million euros to the year's revenue. Financial performance remained strong on paper, with revenue growing 27.8% to 6.9 billion euros, beating the expected 6.74 billion euros. Net profit rose 35% to 1.9 billion euros, exceeding the 1.82 billion euros forecast by analysts. A primary concern for investors is the surge in demand for trailing-edge deep ultraviolet (DUV) tools, particularly from China, where system sales now account for 24% of total revenue, up from 8% a year prior. This concentration exposes ASML to potential further sanctions from the U.S. and its allies. CEO Peter Wennink noted that while generative AI continues to drive growth, the recovery for PCs and smartphones may be delayed until next year due to high interest rates and recession fears. Additionally, some customers have delayed extreme ultraviolet (EUV) orders as new fabrication plants struggle with the expertise needed to become operational.