European earnings season: Will China tailwinds offset FX headwinds?

Published 15/07/2025, 14:55
© Reuters

Investing.com -- European semiconductor equipment makers are heading into earnings season navigating a mixed environment of foreign exchange (FX) headwinds and a potential pickup in demand from China.

According to Morgan Stanley (NYSE:MS), Dutch chip-making equipment supplier ASM International (AS:ASMI) appears the most exposed on both fronts, facing FX-related downside risks to second-quarter orders while simultaneously benefiting from strengthening Chinese demand.

The weakening U.S. dollar against the euro and Swiss franc in the second quarter is expected to weigh on reported figures for companies with high dollar exposure, including ASMI, BE Semiconductor Industries (AS:BESI), and VAT Group AG (SIX:VACN).

“For these names, we estimate a high-singles digit sequential headwind to order intake, with margin pressure likely the most visible at VAT Group,” analysts led by Nigel van Putten said in a note.

However, improving momentum in China could partially offset these currency-related challenges. 

VAT Group, with around 50% of revenue tied to Chinese manufacturing, and ASML Holding (AS:ASML), which may see a greater share of full-year revenue from China than previously communicated, are seen as key beneficiaries.

Morgan Stanley has slightly raised its full-year 2025 (FY25) forecasts for both companies on this basis.

Among individual stocks, the Wall Street firm remains “constructive but positioned tactically cautious” on ASMI heading into the print.

The bank forecasts €800 million in order intake, below the consensus of €851 million, citing a roughly 6.5% FX headwind. “Consensus does not appear to reflect the currency headwind,” the analysts said.

Despite this, they remain optimistic about the longer-term prospects, expecting ASMI to maintain its FY25 growth guidance and signal increased revenue share from China.

BE Semiconductor, meanwhile, stands out with a potential for an upside surprise, aided by expected orders from OSATs and a previously announced $20 million TCB tools contract.

Morgan Stanley’s €157 million order estimate is above consensus and would mark a shift after three consecutive quarters of underperformance relative to the Street.

For VAT Group, the outlook is more challenging. Morgan Stanley forecasts a CHF 249 million order intake, well below the consensus of CHF 275 million.

The company faces pressure from both FX and elevated inventory, while its ability to maintain its FY25 growth outlook could come under scrutiny.

Meanwhile, German chip systems manufacturer Aixtron (ETR:AIXGn) is expected to report in-line results, with order intake and revenue broadly matching consensus. No changes are expected to its full-year guidance. Morgan Stanley sees this as a “boring quarter for a change.”

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