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Here's our initial take on Taiwan Semiconductor Manufacturing's (TSM +0.00%) fiscal 2025 second-quarter financial report.
| Metric | Q2 2024 | Q2 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Net revenue | $20.8 billion | $30.1 billion | +44% | Missed |
| Earnings per share | $1.48 | $2.47 | +67% | Beat |
| Gross margin | 53.2% | 58.6% | +5.4 pp | n/a |
| Wafer shipments (thousand 12-inch equiv) | 3,125 | 3,718 | +19% | n/a |
TSMC, as it is better known, missed analyst expectations for revenue in the second quarter, but currency exchange rate fluctuations were mostly to blame. Revenue still soared 44% in U.S. dollars thanks to soaring demand for the company's most advanced 3nm and 5nm node semiconductor chips. TSMC's 3nm nodes accounted for 24% of total revenue, while the 5nm nodes accounted for 36% of revenue.
High-performance computing, which includes AI-related chips, accounted for 60% of revenue, up from 52% in the second quarter of last year. HPC revenue rose by 14% from the first quarter as AI infrastructure spending ramps up around the world.
The ongoing shift toward TSMC's more advanced nodes benefited the company's profitability. Gross margin jumped more than 5 percentage points year over year to 58.6%, operating margin rose more than 7 percentage points to 49.6%, and net profit margin jumped nearly 6 percentage points to 42.7%. The company spent $9.63 billion on capital expenditures during the second quarter to support its growth, bringing the year-to-date total to $19.69 billion.
For the third quarter of fiscal 2025, TSMC expects to generate revenue between $31.8 billion and $33 billion, a gross margin between 55.5% and 57.5%, and an operating margin between 45.5% and 47.5%.
Shares of TSMC were up around 4% by noon on Thursday. Strong revenue growth, thanks to soaring demand for AI chips, along with even stronger earnings growth, was enough to push up the stock.
TSMC has a stranglehold on the leading-node portion of the foundry market, making it the only game in town for AI chip designers like Nvidia (NVDA 0.01%) and Advanced Micro Devices (AMD +0.01%). With total planned AI infrastructure investments exploding, TSMC's advanced nodes will remain in high demand for the foreseeable future.
While AI is a tailwind, macroeconomic uncertainty could eventually hurt demand for other types of chips.
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