ASM Lithography reported third-quarter results that were within the range of our expectations. We are maintaining our fair value estimate and moat rating.

For the quarter, revenue was EUR 1.32 billion, up 11% sequentially, and an increase from sales of EUR 1.23 billion in the year-ago quarter. Sales benefited from improved business conditions and a full quarter of contribution from ASML’s recent acquisition of lithography light source maker Cymer. Orders grew to EUR 1.4 billion from EUR 1.07 billion in the second quarter. ASML’s order numbers do not consider bookings for next-generation extreme ultraviolet tools, which the firm has been working to commercialize.

As expected, ASML continued to benefit from growing demand from foundry chipmakers and Intel during the quarter, as these customers increase purchases of cutting-edge lithography tools to advance their semiconductor fabrication technologies. In addition, the firm saw higher demand from memory chipmakers, as this segment increases capital spending in response to a pick-up in the memory market. Of ASML’s total orders, memory chipmakers made up 42%, while foundries and integrated device manufacturers accounted for 32% and 26%, respectively. The firm achieved an operating profit of EUR 212 million.

Looking to the fourth quarter, management expects revenue to be about EUR 1.8 billion, which would imply sequential growth of 37%. The pick-up in business conditions in the lithography space will further strengthen and continue to benefit ASML for the foreseeable future, as chipmakers continue to invest in lithography equipment to advance their chip manufacturing technologies, and management expects sales to remain robust into the first half of 2014.