TMTPost -- Netherlands-listed shares of ASML Holding NV crashed as much as 16% and settled more than 15.6% lower to 668.10 euros on Tuesday, the lowest since January 17. Shares logged their biggest daily fall since June 1998 after  the world’s leading lithography machine manufacturer reported weaker-than-expected bookings and guidance, along with the downward sales outlook in its major market China. The plummet of ASML, Europe’s most valued tech firm, pushed tech stocks of the pan-European STOXX 600 index plunged 6.5% in the sector’s biggest one-day drop since October 2020.

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ASML delivered quite a lot of surprises in its latest financial report. It published the results a day earlier than its schedule in what a spokesperson called a “technical error”. ASML’s net sales for the third quarter of 2024 rose 20% from three months ago to 7.47 billion euros (US$8.2 billion), better than analysts’ projection of 7.17 billion euros. Gross margin that quarter stood at 50.8%, slightly ahead of analysts’ estimates of 50.7%. However, net bookings slumped 53% quarter-over-quarter (QoQ) to 2.63 euros, only half of the Wall Street projected 5.39 euros.

In addition to the widely miss of bookings by half, ASML cut its guidance next year, which disappointed investors as well. The company now expects the net sales for the year 2025 to come in between 30 billion euros and 35 billion euros, representing the lower half of the range of 30 billion euros and 40 billion euros it previously provided. Analysts anticipated the annual net sales would be 35.94 billion euros. Net gross margin for 2025 is expected to be 51% to 53%, down from the previous forecast of 54% to 56%. ASML expects net sales of this year to be 28 billion euros, beating analysts estimated 27.71 billion euros, and net sales for the fourth quarter is expected to be 8.8 billion euros to 9.2 billion euros, compared with analysts’ forecast of 8.95 billion euros.

ASML management became more cautious on recovery of the broader semiconductor industry despite artificial intelligence (AI) boom these years. “While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover. It now appears the recovery is more gradual than previously expected. This is expected to continue in 2025, which is leading to customer cautiousness,” said ASML President and CEO Christophe Fouquet.

China remains ASML’s largest market with a 47% of system sales in the September quarter, down from 49% in the quarter ended June. ASML is bracing further decline in sales contribution of China in 2025.  ASML Chief Financial Officer (CFO) Roger Dassen said Tuesday he expects the company’s China business to show a “more normalized percentage in our order book and also in our business.” “We do see China trending towards more historically normal percentages in our business,” Dassen said.“So we expect China to come in at around 20% of our total revenue for next year. Which would also be in line with its representation in our backlog.”

Founded in 1984, Netherlands-based ASML provides comprehensive lithography solutions encompassing hardware, software, and services, assisting chip manufacturers in large-scale image etching on silicon wafers. Meanwhile, ASML is currently the only manufacturer of Extreme Ultraviolet (EUV) lithography systems in the world. As a key for the future lithography technology and advanced process, EUV lithography is the most expensive step in making the advanced microchips that power data centers, cars and iPhones.

ASML has been restricted from selling its high-end machines in China since 2019 due to U.S.-led export controls. The company confirmed at the beginning of this year that a license for the shipment of NXT:2050i and NXT: 2100i has been revoked by the Dutch government, but added the revocation just affected a small number of customers in China. “We do not expect the current revocation of our export license or the latest U.S. export control restrictions to have a material impact on our financial outlook for 2023,” ASML said in the statement in January.

Later January, CFO Dassen disclosed new U.S. and Dutch export curbs are expected to reduce sales of its mid-range deep ultraviolet lithography product lines to China by about 10% to 15% this year, after they hit record levels last year. Dassen said the company will not get export licenses for shipment into China for advanced immersion tools like NXT:2000i and up this year, but he still expected demand from China for older tools to stay very solid.

The Dutch governmenet said last month it will further expand the scope of export controls on lithography machines, which builds on the semiconductor export control measures implemented in 2023. Exports of ASML's 1970i and 1980i Deep Ultraviolet (DUV) immersion lithography tools are subject to the latest curb. ASML said in a statement that it did not expect the change in oversight to impact earnings this year or in the future.