Coverage ended 10 updates · Last at 2:36pm ET

Live: Taiwan Semiconductor (NYSE: TSM) Crushes Q2 Earnings

By Eric Bleeker · Updated Jul 17, 2:36pm ET · Published Jul 17, 6:29am ET

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Taiwan Semiconductor Price Target Raised

Eric Bleeker

Taiwan Semiconductor’s price target was raised by Goldman Sachs to $274. The bank has the stock on its ‘conviction buy’ list.

Mid-Day Check-In: Taiwan Semiconductor Up 3.83%

Eric Bleeker

After dropping below $242 per share near the open, shares of Taiwan Semiconductor have been gaining throughout the day.

Overseas Expansion and U.S. Fab Updates

CEO Wei provided an update on TSMC’s massive U.S. expansion: $105B total for Arizona cluster, with production ramps accelerating on strong AI customer pull. “We are seeing strong interest from our leading U.S. customers and are working on speeding up the volume production schedule by several quarters.”

TSMC is accelerating its global footprint to meet AI-driven demand, with CEO C.C. Wei detailing plans during the call:

  • Arizona (U.S.): Total investment up to $105B for 6 advanced wafer fabs, 2 packaging facilities, and an R&D center. First fab (N4 tech) in high-volume production since Q4 2024 with Taiwan-comparable yields. Second fab (N3) construction complete, volume production sped up by several quarters due to customer demand. Third fab (N2/A16) underway; ~30% of 2nm+ capacity will be in Arizona post-expansion.
  • Japan: First specialty fab (Kumamoto) in volume production since late 2024; second fab construction starting later this year, focused on CMOS image sensors.
  • Europe (Germany): Specialty fab in Dresden progressing, targeted at automotive; ramp based on market needs.
  • Taiwan: 11 wafer fabs and 4 packaging facilities planned, including multiple N2 phases.
    Wei stressed this is driven by customer needs and government support (e.g., U.S. ITC increase to 35%), aiming to make TSMC “the most efficient and cost-effective manufacturer in every region.”

Foreign Exchange Impact and Margin Guidance Breakdown

Digging into the Q3 gross margin guidance of 55.5%-57.5% (down from Q2’s 58.6%), TSMC CFO Wendell Huang attributed the dip primarily to unfavorable foreign exchange rates and dilution from overseas fab ramps. Key details:

  • NT$ appreciation against the USD created a ~260 basis point headwind for Q3.
  • Sensitivity: Every 1% NT$ appreciation reduces gross margins by ~40 basis points and NT$ revenue by 1%.
  • Overseas fab dilution (e.g., Arizona, Kumamoto) expected at 2%-3% annually in early years, widening to 3%-4% later.
    Despite this, Huang reaffirmed a long-term gross margin target of “53% and higher,” emphasizing cost efficiencies and technology leadership. This isn’t a red flag—it’s macro noise TSMC has navigated before.
Factor
Q3 Impact on Gross Margin
FX Rate (NT$ Appreciation)
-260 bps
Overseas Fab Ramp
-100+ bps
Utilization & Cost Improvements
Partial Offset

CEO's Outlook on AI Demand and Full-Year Growth

During the earnings call, TSMC Chairman and CEO C.C. Wei emphasized the “explosive growth” in AI demand as the key driver behind the upgraded 2025 revenue growth target to ~30% (up from mid-20s%). Key quotes:

  • “The explosive growth in token volume demonstrates increasing AI model usage and adoption, which means more and more computation is needed, leading to more leading-edge silicon demand.”
  • “We also see AI demand continuing to be strong, including the rising demand from sovereign AI.”
    Despite this, Wei noted uncertainties from potential tariffs impacting consumer segments, leading to a “mild recovery” expectation in non-AI markets. This cautious tone could provide upside if macro conditions improve—echoing Needham’s note on further potential beats.

Wall Street Weighing in On Taiwan Semi's Q2

Eric Bleeker

Needham has issued a note on today’s Taiwan Semiconductor earnings, here’s what they like:

  • Next quarter’s 8% QoQ sales growth is a significant jump from prior implied guidance of flat growth.
  • The company’s full-year guidance remains cautious on macro uncertainties, providing further upside potential.
  • They like that TSM is hinting at 2026 pricing increases.
  • The news that NVIDIA can resume selling H20’s into China provides more upside in the back half of the year as NVIDIA plans to begin producing a Blackwell chip designed for the Chinese market.

Needham has maintained its price target on Taiwan Semicondcutor at $270.

TSM's Customer Mix

Taiwan Semi Still Rising in Premarket Trading

Eric Bleeker

Taiwan Semiconductor shares remain elevated in premarket trading. If the company’s 3.4% gains hold when the market opens, it will trade for more than $1 trillion in market cap. 

No Change to Capital Expenditures Forecast

Eric Bleeker

One note: while Taiwan Semiconductor raised its revenue target to 30% for the year, it helds its capital expenditures to $38 billion to $42 billion for the year.

Another note is that while gross margins were higher this quarter (58.6%), as the company continues to buildout fabs overseas its long-term gross margin target remains at 53%.

Segment Analysis

Eric Bleeker

Let’s take a look at Taiwan Semiconductor’s different segments last quarter:

Taiwan Semi (TSM) Segments

As you can see, the company’s revenue growth continues to be driven by HPC, which is mostly chips used for AI. However, strength is semiconductors has expanded to be more broad. The one segment that continues to lag is Automotive.

Live coverage has ended. The full story is below.

Full Coverage

The story so far

Taiwan Semiconductor (NYSE: TSM | TSM Price Prediction) reported Q2 earnings this morning, and like we recently predicted at 24/7 Wall St., it absolutely smashed earnings. 

In early after-hours trading the stock is up about 4%. We’ll be updating this live blog with analysis on the company’s earnings. 

The Need-To-Know Numbers from Taiwan Semi’s Q2 Report

  • Revenue: $30.07 billion (Wall Street expected $30.00 billion) 
  • EPS: $2.47 (Wall Street expected $2.12) 

Both of those numbers beat, with the highlight being Taiwan Semiconductor continuing to deliver solid earnings beats. The company hit 58.6% gross margins, which was solidly above Wall Street targets of 58%. 

However, the standout figure from Taiwan Semi’s earnings was their Q3 revenue guidance:

Q3 Guidance 

  • Revenue: $31.8 billion to $33 billion (Wall Street expected $31.7 billion) 
  • Gross Margin: 55.5% to 57.5% 

That revenue guidance is a big beat, and what is helping propel Taiwan Semiconductor shares this morning. The company raised its 2025 outlook to 30% growth (was previously set to ‘mid-20s’). 

The single area Wall Street could be upset with from these numbers is the gross margin forecast, which is below the 58.6% gross margins Taiwan Semiconductor posted this quarter. However, Wall Street can overlook the lower margin guidance with the company delivering such strong earnings guidance. 

 

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Eric Bleeker

Eric Bleeker has been investing for more than 20 years. He began his career working at Microsoft before joining Motley Fool, one of the largest publishers of financial research. In his 15 years at Motley Fool Eric served as the General Manager for Fool.com and led coverage in the Technology & Telecom sector. In addition, he was a featured columnist and has hosted dozens of investing seminars attended by more than a million total investors. Eric has more than 1,000 financial bylines to his name and has been featured in The Wall Street Journal, CNBC, Fox Business, and many other leading publications. He is currently focused on artificial intelligence investing and is a CFA Charterholoder.

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