Shares of Taiwan Semiconductor Manufacturing (TSM), a.k.a. TSMC, are rallying in pre-market trading after it reported blockbuster results for the second quarter of fiscal 2025. The company’s Q2 net profit (in U.S. dollars) surged by 67% year-over-year and sales increased by 44.4%, driven by continued demand for artificial intelligence (AI) chips.
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TSMC is the world’s largest contract chip manufacturer, serving leading chipmakers such as Nvidia (NVDA), AMD (AMD), and Apple (AAPL). Year-to-date, TSM stock has gained nearly 21%.
TSMC Is Riding the AI Wave
The semiconductor processor manufacturer’s revenue rose 44.4% year-over-year to $30.07 billion, beating the higher end of its own guidance of $29.2 billion. Similarly, diluted earnings per ADR (American Depositary Receipt) of $2.47 jumped nearly 67% compared to its Q2FY24 figure of $1.48.
TSMC attributed the strong performance to continued robust demand for AI and high-performance computing (HPC). Importantly, shipments of advanced technologies, including 3-nanometer (nm), 5nm, and 7nm processes, accounted for about 74% of total wafer revenue in Q2. Notably, the 3nm chips are used in smartphones and saw a significant boost in iPhone demand ahead of Trump’s tariffs, while the 5nm chips are primarily used for AI applications.
From a platform perspective, HPC contributed 60% and smartphones contributed 27% of total Q2 revenue. Meanwhile, from a geographic perspective, North America was the largest contributor at 75%, followed by China and Asia Pacific at 9% each, Japan at 4%, and EMEA at 3%.
TSMC Guides for Robust Q3 Backed by AI
TSMC has provided a robust outlook for Q3FY25, citing strong demand for its advanced process technologies. Revenue is forecasted to be between $31.8 billion and $33 billion. Meanwhile, gross profit margin is projected between 55.5% and 57.5%, and operating profit margin is expected between 45.5% and 47.5%. TSMC also raised its full-year fiscal 2025 revenue growth guidance to 30%, up from the previous 20%, driven by solid demand for its 3nm and 5nm chips.
Is Taiwan Semiconductor Stock a Buy?
Ahead of the Q2 print, analysts remained highly optimistic about Taiwan Semiconductor’s long-term outlook. On TipRanks, TSM stock has a Strong Buy consensus rating based on seven Buys and one Hold rating. Also, the average Taiwan Semiconductor price target of $237.63 implies that shares are almost fully valued at current levels.
Please note that these ratings could change once analysts revise their recommendations in light of the Q2 results.
