TLDR:
- TSMC expected to report 54% increase in Q1 profit on Thursday
- Revenue already reported at $25.6 billion, up 42% year-over-year
- Trump policies create uncertainty with tariff threats up to 100%
- TSMC investing heavily in US manufacturing ($100B recently announced)
- Analysts project EPS of $2.05, but some lowering price targets due to economic concerns
Taiwan Semiconductor Manufacturing Company (TSMC) is set to report its first-quarter earnings this Thursday, with analysts expecting a massive jump in profits. The world’s largest contract chipmaker has already released preliminary revenue figures that exceeded expectations.
Last week, TSMC reported Q1 2025 revenue of T$839.3 billion ($25.6 billion), representing a 42% increase compared to the same period last year. This revenue beat has set high expectations for the full earnings report.
According to a LSEG SmartEstimate drawn from 17 analysts, TSMC is projected to report a net profit of T$347.8 billion ($10.74 billion) for the quarter ending March 31. This would represent a 54% leap from the T$225.5 billion earned in Q1 2024.
Wall Street analysts are expecting earnings per share to come in around $2.05, which would be a 52% increase year-over-year.
Driving Forces Behind Growth
The chip giant’s stellar performance comes on the back of surging demand for advanced semiconductors, particularly those used in artificial intelligence applications. TSMC counts tech heavyweights like Apple and Nvidia among its key customers.
The company has benefited greatly from the industry-wide push to incorporate AI features into various products and services. This trend has created robust demand for the high-performance chips that TSMC specializes in manufacturing.
Another factor contributing to recent sales growth has been stockpiling by electronics manufacturers. Many companies have been building inventory in anticipation of potential new U.S. tariffs.
TSMC’s technological edge in producing the most advanced chips has helped it maintain its dominant position in the semiconductor industry.
Trump Policies Cast Shadow
Despite the strong financial performance, TSMC faces growing headwinds from U.S. trade policies under President Donald Trump.
Trump has taken an ambivalent stance toward Taiwan’s semiconductor industry, both praising it and threatening it with tariffs. Last week, he claimed to have told TSMC it would face taxes of up to 100% if it didn’t build factories in the United States.
On Sunday, Trump added that the current exclusion of smartphones and computers from tariffs on Chinese goods will be short-lived. He pledged a national security trade investigation into the semiconductor sector.
These statements have created uncertainty for TSMC, as many of its chips end up in products manufactured in China, such as Apple’s iPhone.
Cathay Futures analyst Venson Tsai highlighted this concern: “If the iPhone can’t be sold, then TSMC’s chips can’t either.”
Expansion Strategy
In response to geopolitical pressures, TSMC has been aggressively expanding its manufacturing footprint outside of Taiwan.
Last month, the company announced a $100 billion investment during a White House meeting with Trump. This comes on top of $65 billion already pledged for three plants in Arizona.
SemiAnalysis analyst Sravan Kundojjala suggests this strategy is deliberate: “The company will likely double down on overseas fab investments to mitigate the geopolitical risk, despite two to three percentage points of gross margin dilution for the next five years.”
“This will likely ensure TSMC gets favorable treatment from the U.S. government and minimize the tariff burden,” Kundojjala added.
On its January earnings call, TSMC said it expected capital spending for 2025 to be between $38 billion and $42 billion. This represents an increase of up to 41% from last year, reflecting the company’s commitment to expanding production capacity.
While TSMC has emphasized that most of its manufacturing will remain in Taiwan, these overseas investments serve as a hedge against geopolitical risks.
Analyst Outlook
Some analysts have become more cautious about TSMC’s prospects due to the uncertain trade environment.
JPMorgan analyst Gokul Hariharan maintained an Overweight rating on the stock but lowered his price target. He expects TSMC to see 5-8% growth in Q2 2025, driven by strong demand for advanced chips, rush orders before the end of the 90-day tariff pause, and growth in advanced packaging.
However, Hariharan believes the company may reduce its full-year revenue growth forecast for 2025 to a more conservative 20-23% range due to tariff concerns and the global economic slowdown.
Similarly, Citi analyst Laura Chen kept her Buy rating on the stock but reduced her price target. She noted that while current U.S. tariffs exempt semiconductors, future reciprocal tariffs could slow the global economy, impacting the semiconductor industry.
Options traders are pricing in a potential 6.9% move in TSMC’s stock price following the earnings announcement, according to TipRanks’ Options tool.
Despite these concerns, Wall Street maintains a largely positive view on TSMC. The stock has a Strong Buy consensus rating based on five Buys and one Hold assigned in the last three months.
TSMC stock has gained about 12% over the past year. The average price target of $240.83 implies a potential upside of 54.54% from current levels.
The company will provide more details on its Q2 outlook and full-year guidance, including planned capital expenditure, during its earnings call scheduled for Thursday.
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