TSMC revenue rises 41% as AI chip demand drives growth

Taiwan Semiconductor Manufacturing (TSM) reported a 41.1% increase in third-quarter revenue on Thursday, beating estimates and forecasting fourth-quarter sales above market expectations as demand for advanced chips used in AI remains strong.

Though TSMC shares were down about 2% in premarket trading on Thursday, as chip stocks came under pressure globally amid rising borrowing costs and concerns about the financing and returns on AI infrastructure investments.

The world's largest contract chipmaker reported revenue of $46.72B for the quarter ended September, above analysts' expectations of $45.7B. Earnings per American depositary receipt were $4.60, exceeding estimates by 9 cents. Gross margin for the third quarter was 66.4%, while operating margin reached 58.7%. Net profit margin was 51.1%.

Danil Sereda, of Investing Group Leader for Beyond the Wall Investing, said TSMC's results supported the view that demand for its chips remained strong, with operating margins exceeding the company's guidance range. He noted that gross margin remained below the second quarter's 67.7%.

"Advanced technologies contribute 79% of wafer revenue, so TSMC is still the leader who keeps its moat in place with minimal risk to it (so far)," Sereda said.

Advanced technologies, defined as 7-nanometer and smaller process technologies, accounted for 79% of wafer revenue. The 3-nanometer process contributed 33% of wafer revenue, followed by 5-nanometer at 28% and 2-nanometer at 8%.

TSMC expects fourth-quarter revenue of $52.3B to $54.3B, above the analyst consensus of $50.48B, according to data compiled by analysts. The company forecast a gross profit margin of 65% to 67% and an operating profit margin of 56.5% to 58.5%.