Why ASML Stock Is Plummeting Today

Key Points

• ASML published its second-quarter results before the market opened this morning and beat Wall Street's sales and earnings targets.

• ASML's performance outlook for this year looks strong, but management issued very cautious guidance for next year.

• The semiconductor equipment specialist is concerned that tariffs and geopolitical risk factors could stifle growth.

• 10 stocks we like better than ASML ›

ASML (NASDAQ: ASML) stock is getting hit with big sell-offs Wednesday following the company's recent earnings report. The semiconductor manufacturing equipment specialist's share price was down 7.8% as of 3:20 p.m. ET. The stock had been down as much as 11.2% earlier in the day's trading.

ASML published its second-quarter results before the market opened this morning and actually posted sales and earnings for the period that beat Wall Street's targets. But despite strong performance in Q2, the company issued cautious forward guidance -- and investors are selling the stock in response.

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ASML stock sinks despite strong Q2 results

ASML posted a net profit of 2.29 billion euros (roughly $2.66 billion) on sales of 7.7 billion euros (roughly $8.95 billion) in the second quarter. Meanwhile, the average analyst estimate had called for the business to record a profit of 2.04 billion euros on sales of 7.52 billion euros. Sales were up roughly 23% year over year, and the company posted a gross margin of 53.7% in the period. The tech specialist continued to see demand catalysts related to equipment sales for the manufacturing of artificial intelligence (AI) chips, but management issued a cautious outlook for next year.

What's next for ASML?

On the heels of the strong performance in the second quarter, ASML now expects that it will see annual revenue growth of roughly 15% and gross margin of approximately 52% this year. While those targets might otherwise have been cause for a valuation rally, management said that it could not confidently state that the business would grow next year. With tariffs and other macroeconomic and geopolitical risks, ASML isn't sure that there will be a sales expansion next year -- and investors are selling out of the stock in response to the disappointing guidance.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy.