Nvidia Supplier TSMC Q3 Trumps Estimates On Strong AI Chip Demand, Guides Q4 Above Consensus (UPDATED)

Taiwan Semiconductor Manufacturing Company Ltd. TSMC announced quarterly results that came in ahead of forecasts, thanks to strong demand for advanced processor node technologies used in artificial intelligence applications. The foundry, which supplies chips to most global corporations including Nvidia Corp. NVDA and Apple, Inc. AAPL, guided fourth-quarter revenue sharply above the consensus.

TSMC’s Key Q3 Metrics: Hsinchu, Taiwan-based TSMC reported consolidated third-quarter revenue of NT$759.69 billion ($23.50 billion), up 39% year-over-year. Sequentially, the top line expanded by 12.8%. In dollar terms, the revenue growth was 36% year-over-year and 12.9% quarter-over-quarter.

Revenue topped the NT$748 billion consensus, as provided by Bloomberg.

The top-line performance also exceeded the company’s guidance of $22.4 billion- $23.2 billion.

TSMC said its business was supported by strong smartphone and AI-related demand for our industry leading 3nm and 5nm technologies.

Net income and earnings per share climbed a steeper 54.2% each to NT$325.26 billion and NT$12.54 per share ($1.94), respectively. Analysts, on average, expected a net profit of NT $300.2 billion, according to LSEG estimate available through Reuters.

The company said 3-nm accounted for 20% of the total revenue, while 5-nm and 7-nm technologies accounted for 32% and 17%, respectively. The more advanced technologies together made up 69% of the total wafer revenue, up from 67% in the previous quarter.

“Our business in the third quarter was supported by strong smartphone and AI-related demand for our industry-leading 3nm and 5nm technologies," said Wendell Huang, Senior VP and Chief Financial Officer of TSMC.

See Also: Best Semiconductor Stocks

Margin Profile: Here’s how margins compare to the prior-year periods:

	Q3’24	Q2’24	Q3’23
Gross Margin	57.8%	53.2%	54.3%
Operating Margin	47.5%	42.5%	41.7%
Net Profit Margin	42.8%	36.8%	38.6%

TSMC’s End-Market Performance: High-performance computing accounted for 51% of the total revenue and smartphone 34%. The fastest quarter-over-quarter growth was in IoT.

	Contribution to revenue	Q-o-Q growth
HPC	51%	+11%
Smartphone	34%	+16%
IoT	7%	+35%
Automotive	5%	+6%
DCE	1%	-16%
Others	2%	+8%

TSMC’s Outlook: TSMC guided to fourth-quarter revenue of $26.1 billion to $26.9 billion. The guidance is well above the $24.86 billion consensus estimate. Huang said, “Moving into fourth quarter 2024, we expect our business to continue to be supported by strong demand for our leading-edge process technologies.”

Assuming an exchange rate of NT$32 for one USD, the company expects gross and operating profit margins of 57%-59% and 46.5%-48.5%, respectively.

TSMC Stock: The AI euphoria has driven shares of companies levered to the technology sharply higher and TSMC is no exception. The Taiwanese company’s ADRs listed on the NYSE are up over 82% for the year-to-date period. It ended Wednesday’s session up 0.19% at $187.48, according to Benzinga Pro data.

Photo by Sundry Photography on Shutterstock

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