April 19, 2024
TSMC Returns to Growth with Q1 Beat

TSMC Returns to Growth with Q1 Beat

Taiwan Semiconductor Manufacturing Company (TSMC), commonly known as the chip foundry, exceeded analyst expectations in its first-quarter earnings report. TSMC reported earnings of $1.38 per U.S. share on sales of $18.87 billion for the March quarter, surpassing FactSet’s consensus estimates of $1.30 per share on sales of $18.31 billion. This marks a significant improvement from the previous year, where TSMC earned $1.30 per U.S. share on sales of $16.62 billion.

TSMC’s Q1 results mark a return to sales and earnings growth after experiencing four consecutive quarters of declines on a year-over-year basis. The company’s sales increased by 12.9%, while earnings climbed by 6.2%.

Strong Outlook for Q2 and Beyond

For the current quarter, TSMC anticipates revenue in the range of $19.6 billion to $20.4 billion, with a midpoint of $20 billion. This projection exceeds Wall Street’s target of $19.44 billion. In comparison, TSMC generated revenue of $15.47 billion in the second quarter of the previous year.

Despite a 2% decline in premarket trading following the earnings release, TSMC remains optimistic about its prospects. The company’s diverse customer base includes tech giants such as Apple, AMD, Nvidia, and Qualcomm.

According to Chief Financial Officer Wendell Huang, TSMC’s first-quarter performance was influenced by smartphone seasonality but offset by continued high-performance computing (HPC) demand. Looking ahead to the second quarter of 2024, TSMC expects strong demand for its industry-leading 3-nanometer and 5-nanometer technologies, albeit partially offset by ongoing smartphone seasonality.

In the first quarter, shipments of 3-nanometer chips accounted for 9% of total wafer revenue, while 5-nanometer and 7-nanometer chips contributed 37% and 19%, respectively. Advanced technologies, defined as 7-nanometer and smaller nodes, comprised 65% of total wafer revenue.

Analyst Insights and Market Performance

Barclays analyst Simon Coles noted that TSMC slightly lowered its industry growth expectations but maintained its company target. The company reiterated its guidance for revenue growth in the low to mid-20% range. Coles emphasized that artificial intelligence (AI) remains a bright spot for TSMC, with the company anticipating a gradual recovery in most of its end markets throughout the year. He rates TSMC stock as overweight with a price target of 145.

TSM stock surged past a cup-with-handle base on January 18, marking a breakout point at 105.52, as indicated by IBD MarketSurge charts. This breakout followed TSMC’s impressive performance in the fourth quarter, where it delivered a beat-and-raise report.

Image by WangXiNa on Freepik

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