Taiwan Semiconductor CFO Anticipates Tariffs Impact But Has Not Seen Change In Customer Behavior Yet, Issues Strong Q2 Outlook

On Thursday, Taiwan Semiconductor Manufacturing Co's TSM first-quarter results beat forecasts, fueled by demand for advanced processor node technologies for artificial intelligence applications.

The contract chipmaker, which supplies chips for Nvidia Corp's NVDA graphics processing unit (GPU) and Apple, Inc's AAPL smartphones, guided for strong second-quarter revenue.

Taiwan Semiconductor reported first-quarter net sales of $25.53 billion (839.25 billion New Taiwanese Dollars), up 41.6% year-over-year, topping the analyst consensus estimate of $23.92 billion. Net sales declined 3.4% quarter-over-quarter.

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Net income and earnings per share were $361.56 billion New Taiwanese Dollars and 13.94 New Taiwanese Dollars per share (or $2.12), topping the analyst consensus of $1.82.

In U.S. dollar terms, revenue growth was 35.3% year over year and down by 5.1% quarter over quarter. The top-line performance aligned with the company's guidance of $25.0 billion to $25.8 billion.

The company said 3-nm accounted for 22% of the total revenue, 5-nm accounted for 36%, and 7-nm technologies accounted for 15%. 7-nm and more advanced technologies comprised 73% of the total wafer revenue.

Margin Profile: Taiwan Semiconductor's AI technology moat helped it expand its quarterly gross margins by 572 bps to 58.8%. Taiwan Semiconductor's operating margin expanded by 649 bps to 48.5%.

Outlook: Taiwan Semiconductor guided second-quarter 2025 revenue of $28.4 billion to $29.2 billion versus the $26.79 billion analyst estimate. It expects a gross margin of 57% to 59% and operating profit margins of 47% to 49%.

CFO Wendell Huang said, "Moving into second quarter 2025, we expect our business to be supported by strong demand for our industry-leading 3nm and 5nm technologies. While we have not seen any changes in our customers' behavior so far, uncertainties and risks from the potential impact from tariff policies exist. We will continue to closely monitor the potential impact on the end market demand, and manage our business prudently."

Taiwan Semiconductor did not engage in discussions to form a venture or share its technology with any company, dismissing speculation of possible collaboration with struggling chipmaker Intel Corp INTC, Bloomberg reported, citing company executives.

In March, Taiwan Semiconductor chief C.C. Wei announced an additional $100 billion investment in U.S. chipmaking (on top of $65 billion in April 2024). The investment followed President Donald Trump's verbal attacks on Taiwan "for stealing" the U.S. semiconductor business, which led to massive trade deficits for Washington.

Price Action: TSM stock traded higher by 4.40% to $157.33 premarket at the last check on Thursday.

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