Taiwan Semiconductor Manufacturing ((TSM)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Taiwan Semiconductor Manufacturing (TSMC) recently held its earnings call, revealing a strong performance in the third quarter. The company reported notable revenue and margin improvements, driven by robust demand in AI and advanced technology sectors. Despite facing challenges from overseas fab dilutions and foreign exchange impacts, TSMC remains optimistic about its future growth prospects.
Strong Revenue Growth
TSMC reported a 10.1% sequential increase in third-quarter revenue, reaching $33.1 billion in U.S. dollar terms, slightly surpassing its guidance. This growth underscores the company’s ability to capitalize on market opportunities and maintain its competitive edge.
Improved Profit Margins
The company achieved a gross margin increase of 0.9 percentage points to 59.5%, while the operating margin rose by 1.0 percentage points to 50.6%. These improvements reflect TSMC’s operational efficiency and cost management strategies.
Advanced Technology Revenue Contribution
Advanced technologies, including the 3-nanometer process technology, played a significant role, contributing 23% of wafer revenue. Overall, advanced technologies accounted for 74% of TSMC’s wafer revenue, highlighting the company’s leadership in cutting-edge semiconductor manufacturing.
Positive AI Demand Outlook
TSMC expressed optimism about AI-related demand, projecting a full-year 2025 revenue increase of close to mid-30s percent year-over-year in U.S. dollar terms. This positive outlook is driven by the growing integration of AI technologies across various industries.
Global Manufacturing Expansion
The company is making progress in expanding its global manufacturing footprint, with developments in overseas fabs located in Arizona, Japan, and Germany. TSMC also plans to enhance its advanced packaging facilities, reinforcing its commitment to global growth.
Challenges from Overseas Fabs
TSMC acknowledged the gross margin dilution resulting from the ramp-up of overseas fabs, expecting it to be 2% to 3% initially and widening to 3% to 4% later. This challenge is part of the company’s strategic expansion efforts.
Decreased Revenue in DCE Platform
The DCE platform experienced a 20% revenue decrease, now accounting for just 1% of total revenue. This decline highlights the shifting focus towards more lucrative technology sectors.
Foreign Exchange Rate Impact
Unfavorable foreign exchange rates partially offset the benefits of cost improvements and higher capacity utilization. This impact underscores the challenges of operating in a global market with fluctuating currency values.
Forward-Looking Guidance
For the fourth quarter of 2025, TSMC projects revenue between USD 32.2 billion and USD 33.4 billion, representing a 1% sequential decrease but a 22% year-over-year increase at the midpoint. The company anticipates a gross margin between 59% and 61% and an operating margin between 49% and 51%. This guidance reflects TSMC’s confidence in sustained demand for its leading-edge technologies, particularly in the AI sector, despite external uncertainties like tariff policies.
In conclusion, TSMC’s earnings call highlighted a strong third-quarter performance with significant revenue and margin improvements. The company’s strategic focus on advanced technologies and AI demand positions it well for future growth, despite challenges from overseas expansions and foreign exchange impacts. Investors and market watchers will be keen to see how TSMC navigates these dynamics in the coming quarters.