Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects mixed signals: strong AI demand and a slight EPS beat are positive, but revenue decline and margin pressure due to external factors (earthquake, overseas expansion) are concerning. Q&A highlighted demand strength but also management's evasiveness on certain risks. No explicit Q2 guidance was given, which can cause uncertainty. The absence of a share repurchase plan and increased inventory days further contribute to a neutral outlook. Without market cap data, a neutral prediction is prudent, considering both positive and negative elements.
Key Financial Performance
EPS $2.12 (up from $2.03 expectations)
Revenue Decreased 3.4% sequentially in NT dollar or 5.1% in U.S. dollars due to smartphone seasonality, partially offset by growth in AI-related demand.
Gross Margin Decreased 0.2 percentage points sequentially to 58.8%, primarily due to earthquake impact and start of overseas dilution, partially offset by cost improvement efforts.
Operating Margin Decreased 0.5 percentage points sequentially to 48.5%.
Cash and Marketable Securities TWD2.7 trillion or US$81 billion.
Cash from Operations Generated about TWD626 billion.
CapEx Spent TWD331 billion.
Cash Dividend Distributed TWD104 billion for second quarter 2024.
Accounts Receivable Turnover Days Increased one day to 28 days.
Days of Inventory Increased three days to 83 days, primarily due to ramping of new overseas fabs.
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Operating Highlights
Revenue Contribution by Technology: 3-nanometer process technology contributed 22% of wafer revenue in Q1 2025, while 5-nanometer and 7-nanometer accounted for 36% and 15%, respectively. Advanced technologies (7-nm and below) accounted for 73% of wafer revenue.
Revenue Contribution by Platform: HPC increased 7% quarter-over-quarter to account for 59% of Q1 revenue. Smartphone decreased 22% to account for 28%. IoT decreased 9% to account for 5%. Automotive increased 14% to account for 5%, and DCE increased 8% to account for 1%.
Operational Recovery: Despite the January 21 earthquake and aftershocks, TSMC worked diligently to recover much of the lost production, resulting in revenue slightly above the midpoint of guidance.
Cost Improvement Efforts: Gross margin decreased 0.2 percentage points to 58.8%, primarily due to earthquake impact and overseas dilution, but was partially offset by cost improvement efforts.
CapEx: In Q1 2025, TSMC spent TWD331 billion (approximately USD 10.1 billion) in CapEx.
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Risk or Challenges
Revenue Impact: First quarter revenue decreased 5.1% in U.S. dollars due to smartphone seasonality, indicating vulnerability to market fluctuations.
Earthquake Impact: The January 21 earthquake and aftershocks significantly impacted production, leading to a decrease in gross margin by 0.2 percentage points.
Operating Margin: Operating margin decreased by 0.5 percentage points to 48.5%, reflecting challenges in maintaining profitability amid external pressures.
Supply Chain Challenges: The ramping of new overseas fabs contributed to an increase in days of inventory by three days to 83 days, indicating potential supply chain inefficiencies.
Tax Liabilities: Current liabilities increased due to accrued income tax payables, which may affect cash flow management.
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Guidance & Outlook
Revenue Contribution by Technology: 3-nanometer process technology contributed 22% of wafer revenue in Q1 2025, while 5-nanometer and 7-nanometer accounted for 36% and 15%, respectively. Advanced technologies (7-nanometer and below) accounted for 73% of wafer revenue.
Revenue Contribution by Platform: HPC increased 7% quarter-over-quarter to account for 59% of Q1 revenue. Smartphone decreased 22% to account for 28%. IoT decreased 9% to account for 5%. Automotive increased 14% to account for 5%, and DCE increased 8% to account for 1%.
CapEx: Spent TWD331 billion in CapEx during Q1 2025.
Q2 2025 Revenue Guidance: Revenue guidance for Q2 2025 was not explicitly stated in the provided transcript.
Gross Margin Outlook: Gross margin decreased 0.2 percentage points sequentially to 58.8%, with expectations of continued impact from the earthquake and overseas dilution.
Operating Margin Outlook: Operating margin decreased 0.5 percentage points sequentially to 48.5%.
EPS: First quarter EPS was TWD13.94.
Cash and Marketable Securities: Ended Q1 with cash and marketable securities of TWD2.7 trillion or US$81 billion.
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Shareholder Return Plan
Cash Dividend for Q2 2024: Distributed TWD104 billion for second quarter 2024 cash dividend.
Share Repurchase Program: None
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Key Q&A
Q:Could you talk a little bit about how you see demand versus supply for CoWoS?
A:The demand is still well above supply, and we need to build a lot of capacity to meet the demand. We have to double our CoWoS capacity.
Q:What does TSMC’s impression of what is required for more onshoring in the U.S.?
A:We are expanding in Arizona because of our customers’ request due to high demand, and we expect our 2-nanometer capacity around 30% will be in Arizona.
Q:How does the recent ban on H20 impact TSMC's focus and production planning?
A:We have taken this into consideration when providing our full-year growth outlook, but we have not seen any change in our customers’ behavior so far.
Q:Are you considering slowing down the capacity expansion in Japan or Europe?
A:No, we are executing our plan as scheduled because of the demand for specialty technologies.
Q:Does TSMC get involved in tariff negotiations between Taiwan and the U.S.?
A:No, we are a private company and do not get involved in government tariff discussions.
Q:Is there any visibility on second half revenues and N2 demand for wafers into next year?
A:It’s too early to talk about the second half, but the demand for N2 is very strong.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer regarding the specific impact of the H20 ban on production planning, as they only stated they are monitoring customer behavior without providing detailed insights.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Limited NYSE
Limited expectation
Manufacturing Limited
Mr Wendell
NYSE Transcript
TSMC conference
Transcript Taiwan
Wendell fist
Wendell summary
answer today
audio webcast
conference audio
expectation afternoon
fist Mr
line question
message line
question answer
release TSMC
today TSMC
webcast website
TSM Transcript
Taiwan Semiconductor Manufacturing Company Limited (TSM) Q1 2026 Earnings Call Transcript
Positive4-16
The earnings call reflects a strong business outlook driven by robust demand in HPC and AI applications, a high CapEx guidance, and a positive gross margin trajectory. While management avoided specifics on some metrics, the overall sentiment is positive with high confidence in technology leadership and strategic expansions, such as in Arizona. The positive guidance and strategic plans outweigh the lack of specific details, suggesting a positive stock price movement.
Taiwan Semiconductor Manufacturing Company Limited (TSM) Q3 2025 Earnings Call Transcript
Positive10-16
The earnings call reflects strong financial performance with record revenue growth, robust cash flow, and optimistic guidance for AI demand. Despite some concerns on margin dilution and vague responses in the Q&A, the overall sentiment is positive due to strong demand in AI and advanced technologies, coupled with a solid shareholder return plan. The optimistic guidance for AI and technology advancements outweigh potential risks, suggesting a positive stock price movement.
Taiwan Semiconductor Manufacturing Company Limited (TSM) Q2 2025 Earnings Call Transcript
Positive7-17
The earnings call reveals strong financial performance and optimistic guidance, with a 13% sequential revenue increase and high gross margins. The Q&A section highlights robust AI demand, strategic investments, and expansion plans, despite some uncertainties. These factors, along with a stable shareholder return strategy, suggest a positive stock price movement in the short term.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) Q1 2025 Earnings Call Transcript
Unknown4-18
The earnings call reflects mixed signals: strong AI demand and a slight EPS beat are positive, but revenue decline and margin pressure due to external factors (earthquake, overseas expansion) are concerning. Q&A highlighted demand strength but also management's evasiveness on certain risks. No explicit Q2 guidance was given, which can cause uncertainty. The absence of a share repurchase plan and increased inventory days further contribute to a neutral outlook. Without market cap data, a neutral prediction is prudent, considering both positive and negative elements.
TSM Report
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