What happened
Shares of Taiwan Semiconductor Manufacturing (TSM 3.91%), the world's largest semiconductor foundry, were moving higher today after the company (also known as TSMC) beat bottom-line estimates in its fourth-quarter earnings report in a difficult environment for the chip sector.
As of 10:57 a.m. ET on Thursday, the stock was up 6.6%.
Image source: Getty Images.
So what
TSMC posted strong growth on the top and bottom lines with revenue up 42.8% to $19.93 billion, though that was short of estimates at $20.56 billion.
The company said sales were affected by end-market softness and customer inventory adjustments, which have been a headwind in the semiconductor industry for much of the past year. TSMC's shipments of wafers actually declined slightly, falling 0.6% from the year-ago quarter to 3.7 million.
Gross margin surged from 52.7% in the quarter a year ago to 62.2% due mainly to more favorable foreign exchange and cost efficiencies, and the company raised prices. That drove a 78% surge in earnings per share to $1.82, which topped the consensus at $1.77.
Management also said that advanced technologies, which include its 7-nanometer and 5-nanometer wafers, made up 54% of total wafer revenue, a sign it's executing on its strategic goals and strengthening its competitive advantages.
Chief financial officer Wendell Huang said, "Moving into first quarter 2023, as overall macroeconomic conditions remain weak, we expect our business to be further impacted by continued end-market demand softness, and customers' further inventory adjustment."
Now what
Given Huang's comments, it wasn't a big surprise that guidance came up short of estimates. TSMC called for revenue of $16.7 billion to $17.5 billion, which was below the consensus at $17.71 billion. It also sees gross margin of 53.5% to 55.5% and operating margin of 41.5% to 43.5%, down from the fourth quarter.
Lastly, TSMC forecast capital expenditures of $32 billion to $36 billion this year, which compares to $36.3 billion in 2022.
While top-line results and guidance were a bit short, the company continues to push its lead in advanced technologies, and it's no small feat for a company of this size to nearly double EPS. Based on that result, it's not surprising to see TSMC stock up today.
