**Despite solid in-line revenue and improved capital spending, TSMC’s latest quarterly earnings failed to deliver market-beating results, falling short of AI sector’s high expectations for a strong confidence boost.**
1、In-line revenue but weaker-than-expected gross margin. TSMC posted quarterly revenue of $40.2 billion, matching market buyers’ expectation of around $40 billion. However, the market focused more on its profitability performance.
Its quarterly gross margin hit 67.7%, the upper limit of its guidance range, yet slightly below the upgraded market expectations, with some aggressive forecasts targeting over 69%.
2. Two core drivers underpin rising gross margin. TSMC’s gross margin maintains an upward trend steadily. First, the utilization rate of advanced processes (N5 and below) has stayed above 100%. Second, expedited orders lift average selling prices, with some orders carrying a price premium of over 50%.
3. Sharply raised capital expenditure tops market forecasts. Benefiting from full-capacity production, TSMC hiked its capital expenditure budget to $60–64 billion, up from the previous high range of $52–56 billion and exceeding the market’s $58 billion expectation.
Its second-half capital expenditure will reach $33.2–37.2 billion, a 56%-75% year-on-year increase, aligning with ASML’s full-year revenue outlook of a late-year upturn.
4. Upgraded full-year growth offsets mild next-quarter guidance. TSMC forecasts next-quarter revenue of $44.6–45.8 billion and a 65%-67% gross margin. The guidance’s significance is weakened as the firm raised its full-year revenue growth target to 40%, surpassing the prior minimum 30% goal and topping the mainstream market expectation of over 35%.
Overall, only TSMC’s capital expenditure clearly outperformed market hopes, bringing relative benefits to upstream equipment firms like ASML.
The earnings report failed to deliver outstanding surprises to shore up the AI market’s confidence.