TSMC recently held its third quarter earnings conference, and its revenue, gross profit margin, and EPS were all better than expected. In this regard, the latest report issued by the US-based foreign capital JPMorgan Chase (JPMorgan) pointed out tha...
TSMC recently held its third quarter earnings conference, and its revenue, gross profit margin, and EPS were all better than expected. In this regard, the latest report issued by the US-based foreign capital JPMorgan Chase (JPMorgan) pointed out that it is still quite optimistic about TSMC's long-term performance, with an Overweight rating and a target price of 1,550 yuan.
Benefiting from increased capacity utilization and cost optimization, TSMC’s third-quarter financial performance was better than expected, and its fourth-quarter financial forecast was also in line with expectations. Even if the dilution effect of U.S. factories begins to appear, gross profit margins are still likely to remain at 59% to 61%. Xiaomo believes that TSMC’s stock price has risen 16% in the past month, reflecting the market’s strong demand for AI and fourth-quarter expectations, and the short-term stock price reaction may be moderate.
The market expects that TSMC’s 2026 financial forecast will have a chance to perform strongly, which is expected to provide further upward momentum for the stock price within three months.
TSMC mentioned in the conference that the demand for AI is still strong, and the compound annual growth rate (CAGR) of the data center AI business is expected to be revised up to 45%. When it comes to non-AI demand, TSMC believes that there will be a moderate recovery in the second half of the year, and issues with inventory and early shipments are considered positive signals.
Xiaomo believes that the strong performance in the third quarter, the reduction of the gross profit dilution effect of the US factory, strong AI demand, non-AI demand is bottoming out, and the recent strengthening of iPhone demand signals, concerns about early shipments and inventory have been significantly alleviated, are all positive signals. In addition, TSMC has been adopting a cautious strategy in capacity expansion, which can avoid a sharp jump in capital expenditures and may prolong the AI boom cycle.
However, Xiaomo also mentioned possible uncertainties. If the fourth-quarter financial forecast is in line with expectations, it may disappoint some investors who expect higher growth due to stronger demand for Apple. In addition, TSMC's iPhone wafer shipment revisions are usually not reflected in revenue until the first quarter of the following year because of the long production cycle.
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