Apple Chip Supplier TSMC Posts Q1 Earnings: What Investors Need To Know

Apple, Inc. AAPL chip supplier Taiwan Semiconductor Manufacturing Company Ltd TSM on Thursday reported a modest year-over-year growth in revenue amid falling contributions from most of its end markets. The company said it sees a decline in second-quarter revenue and a contraction in gross margin.

What Happened: TSMC reported earnings per share of NT$7.98, or $1.31 per ADR for the first quarter that ended March 31, 2023, up 2.1% from a year earlier.

On a quarter-over-quarter basis, EPS fell 30%.

Net sales climbed 3.6% year-over-year but were down 18.7% quarter-over-quarter to NT $508.63 billion or $16.72 billion. The company earlier guided to revenue of $16.7 billion to $17.5 billion.

Analysts, on average, expected EPS of $1.20 and revenue of $16.81 billion.

High-performance computing and smartphones contributed 44% and 34% to total revenue, respectively, while the automotive segment brought in 7%. Sales to smartphone customers fell 27%, while the automotive end-market was the only one to show growth.

The company noted that the gross margin expanded from 55.63% in the year-ago quarter to 56.3%. The metric, however, slipped from the fourth quarter's 62.22%.

First-quarter operating and net profit margins came in at 45.4% and 40.7%, respectively.

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TSMC noted that 5-nm technology accounted for 31% of the total wafer revenue and 7-nm about 20%, making advanced technologies' contribution at 51% of the total wafer revenue.

TSMC's earnings assume importance for most of the tech giants, including Apple and Nvidia Corp. NVDA, which source from the Taiwanese company the chips that power their products.

Forward Outlook: TSMC guided second-quarter revenue to $15.2 billion to $16 billion, assuming an exchange rate of NT $30.4 to one U.S. dollar. The guidance surrounded the consensus estimate of $15.98 billion.

The company expects the gross margin to contract by 52%-54%.

Price Action: The U.S.-listed ADR of TSMC ended Wednesday's session down 1.03% to $87.23, according to Benzinga Pro data.

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