TSMC (NYSE: TSM) – Q1 2025 Earnings Analysis (April 17, 2025)

● Analysis Background

TSMC announced its first-quarter 2025 results on April 17, 2025, highlighting robust revenue and profit growth driven by AI-related semiconductor demand. This report analyzes key metrics, segment performance, and outlook based on the company's official disclosures.

● Company Overview

Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest dedicated semiconductor foundry. It serves high-profile clients such as Apple, NVIDIA, and AMD, offering advanced nodes like 3nm and 5nm that are critical to the AI and high-performance computing markets.

● Business Segments and Performance Structure

3nm Process: Accounts for 9% of wafer revenue, supported by strong AI chip demand.
5nm Process: Makes up 37% of total revenue, widely used in smartphones and HPC chips.
High-Performance Computing (HPC): The largest end market at 46% of revenue, driven by data center demand.
Smartphones: Represents 38% of revenue, with a seasonal uplift.

● Financial Summary (April 17, 2025)

Metric	Q1 2025	Q1 2024	YoY Change
Revenue (USD)	$25.53B	$18.87B	+35.3%
Net Income (USD)	$11.0B	$6.87B	+60.3%
EPS (Diluted, USD)	$2.12	$1.34	+58.2%
Gross Margin	58.8%	58.6%	+0.2%p
Operating Margin	48.5%	47.0%	+1.5%p
Net Margin	43.1%	41.0%	+2.1%p
Q2 2025 Guidance	Revenue: $28.4B–$29.2B	—	—

● Key Issues and Strategy

AI Demand: AI chip demand from NVIDIA and other hyperscalers is fueling aggressive orders for advanced nodes, especially 3nm.
Geopolitical Risk Management: Ongoing investments in U.S. (Arizona), Japan, and Germany help diversify manufacturing and mitigate geopolitical exposure.
Capacity Expansion: TSMC continues to invest in 2nm R&D and 3nm volume production to maintain process leadership.

● Investment Considerations

Strengths

Technological leadership in advanced node manufacturing.
High-margin profile supported by strong pricing power.
Diversified client base across AI, smartphone, and automotive markets.

Risks

Geopolitical uncertainty surrounding Taiwan–China relations.
Capital expenditure intensity may pressure free cash flow.
Softening smartphone demand could affect volume leverage.

● Conclusion and Valuation

TSMC’s Q1 2025 results underscore its dominant role in the global semiconductor value chain, especially in AI and HPC segments. While geopolitical and macro risks remain, its technological edge and global client relationships position the company for sustained growth. It remains a core holding for long-term semiconductor investors.

Next Earnings Report Expected: July 17, 2025