TSMC Q1 2025 Earnings Preview

As Taiwan Semiconductor Manufacturing Company (TSM.US) prepares to release its first-quarter earnings on Thursday, April 17, 2025, investors are keenly focused on how the chip manufacturing giant will address growing trade tensions while capitalizing on continued strong AI-driven demand.

Key Performance Expectations

• Revenue: NT$839.25 billion ($25.8 billion), up 42% year-over-year
• Net Income: Approximately NT$354 billion ($10.86 billion), up 57% year-over-year
• Earnings Per Share: Around $2, up 45% from prior year
• Gross Margin: 57-59% (versus 58% in Q4 2024)
• Operating Margin: Approximately 47.7%

Earnings vs Expectations. Source: Bloomberg L.P.

AI-Driven Growth Continues

TSMC's advanced manufacturing processes remain critical to the AI computing revolution, with 3nm and 5nm technologies contributing 60% of wafer revenue in Q4 2024. The company continues to benefit from strong demand for high-performance computing chips, particularly AI accelerators for companies like NVIDIA, AMD, and Broadcom.

Advanced nodes (3nm, 5nm, and 7nm) collectively accounted for 74% of TSMC's sales in Q4, highlighting the company's dominant position in cutting-edge semiconductor manufacturing. Despite some capacity constraints in specialized CoWoS packaging for high-bandwidth memory chips, TSMC has maintained robust growth in AI-related segments.

To address growing demand, TSMC has planned capital expenditures of $38-42 billion for 2025, a significant increase from the approximately $29 billion spent in 2024. This investment will primarily focus on expanding advanced node capacity and improving packaging technologies.

Tariff and Geopolitical Concerns

Trade tensions have significantly impacted TSMC's stock performance, with shares down 18% year-to-date after a 15% drop in Q1. While semiconductors are temporarily exempt from recent tariff announcements, the market remains concerned about potential sector-specific tariffs under consideration by the Trump administration.

North American customers represented 75% of TSMC's revenue in Q4 2024, with China's contribution declining to just 9%. This heavy reliance on U.S. customers makes TSMC particularly vulnerable to changes in U.S. trade policy.

In March 2025, TSMC announced plans to invest at least $100 billion in U.S. chip manufacturing plants over the next several years, a move that may help mitigate trade risks but has raised concerns about potential margin pressure due to higher production costs in the United States. Recent reports indicate TSMC plans to implement a 30% price increase on 4nm chip production in the U.S. amid strong demand from major customers like Apple, NVIDIA, and AMD.

What to Watch For

1. 2025 Guidance: After previously projecting mid-20% revenue growth for 2025, analysts will look for any adjustments to full-year targets given recent trade tensions and macroeconomic uncertainty.
2. Margin Outlook: Commentary on how U.S. manufacturing expansion might impact the company's industry-leading margins will be crucial.
3. AI Demand Sustainability: Insights into whether the current AI investment cycle has staying power, particularly as some analysts express concern about potential overbooking by customers.
4. Trade Policy Impact: Management's assessment of how potential semiconductor tariffs could affect business with U.S. customers.
5. Intel Partnership: Any comments on reported discussions about a potential collaboration with Intel, which has raised questions about strategic alignment and profitability.
6. China Business: Updates on the impact of new restrictions on NVIDIA's H20 chip shipments to China and how this might affect TSMC's manufacturing volumes.

TSMC (D1)

The stock is currently trading near 23.6% Fibonacci retracement level, which was a strong support zone during last year's uptrend. Bulls will aim to recapture 38.2% Fibonacci retracement level, while bears will try to retest recent low. RSI is forming bullish divergence with higher high while MACD widens after bullish crossover.