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Taiwan Semiconductor's Q3 Earnings Beat Estimates, Revenues Rise Y/Y

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Key Takeaways

  • TSM's Q3 EPS of $2.92 rose 39% year over year, topping consensus by 12.74%.
  • Net revenues hit $33.10B, up 40.8% and above estimates by 5.06%.
  • Gross and operating margins expanded to 59.5% and 50.6%, respectively.

Taiwan Semiconductor Manufacturing Company Limited ((TSM - Free Report) ) reported third-quarter 2025 earnings per share (EPS) of $2.92, which increased 39% year over year. TSM’s third-quarter EPS surpassed the Zacks Consensus Estimates by 12.74%.

TSM reported net revenues of $33.10 billion, up 40.8% year over year. The figure surpassed the Zacks Consensus Estimate by 5.06%.

TSM’s Financials in Detail

TSM’s revenue distribution by platform comprises high-performance computing, smartphone, Internet of Things, automotive, digital consumer electronics and Other segments, which contributed 57%, 30%, 5%, 5%, 1% and 2%, respectively, in the third quarter.

Wafer revenues by technology account for 3nm, 5nm, 7nm, 16/20nm, 28nm, 40/45nm, 65nm, 90nm, 0.11/0.13um, 0.15/0.18um and 0.25um and above products. In the third quarter, the largest contribution to wafer revenues was from 5nm technology, accounting for 37% of the total.

This was followed by 3nm at 23% and 7nm at 14%. The 16/20nm and 28nm nodes each contributed 7%, while 40/45nm and 0.15/0.18um technologies both made up 3% of the revenues. Contributions from 65nm and 0.11/0.13um technologies were 4% and 1%, respectively. The 90nm node accounted for 1% and revenues from 0.25um and above were negligible at 0%.

Geographically, North America was the dominant contributor to net revenues, accounting for a substantial 76% of the total. China and the broader Asia Pacific region contributed 8% and 9%, respectively, while Japan generated 4% of the revenues. The EMEA region had the smallest share, contributing just 3%.

TSM’s gross margin was 59.5%, which expanded 170 basis points (bps) from the year-ago quarter. TSM’s operating margin of 50.6% expanded 310 bps year over year. TSM’s net profit margin was 45.7%, which expanded 290 basis points.

Balance Sheet & Cash Flow of TSM

As of Sept. 30, 2025, cash, cash equivalent balances and investments in Marketable Financial Instruments were $90.107 billion, marginally down from $90.36 billion as of June 30, 2025.

Inventories were $9.456 billion in the third quarter compared with $10.43 billion in second-quarter 2025. Accounts receivable increased to $10.082 billion from $8.08 billion in the previous quarter.

The long-term debt was $34.15 billion at the end of the quarter, which changed marginally from the previous quarter’s $34.73 billion. TSM posted a free cash flow of NT$199.85 billion.

Guidance

For the fourth quarter of 2025, TSM stated that it expects revenues to range between $32.2 billion and $33.4 billion, based on its current business outlook. The Zacks Consensus Estimate is pegged at $31.97 billion.

The company also noted that, assuming an exchange rate of one U.S. dollar to 30.6 New Taiwan dollars, it anticipates a gross profit margin between 59% and 61% and an operating profit margin in the range of 49-51%.

Zacks Rank and Stocks to Consider

Currently, TSM carries a Zacks Rank #3 (Hold).

Some better-ranked stocks that investors can consider are Analog Devices ((ADI - Free Report) ), Dell Technologies ((DELL - Free Report) ) and CrowdStrike ((CRWD - Free Report) ), each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Analog Devices’ shares have gained 13% year to date. The Zacks Consensus Estimate for Analog Devices’ full-year fiscal 2025 earnings is pegged at $7.75 per share, up 4.7% over the past 60 days, indicating an increase of 21.5% from the year-ago quarter’s reported figure.

Dell Technologies shares have gained 31.4% year to date. The Zacks Consensus Estimate for Dell Technologies’ full-year fiscal 2026 earnings is pegged at $9.54 per share, up 0.7% over the past 60 days, indicating a rise of 17.2% from the year-ago quarter’s reported figure.

CrowdStrike’s shares have rallied 40.6% year to date. The Zacks Consensus Estimate for CrowdStrike’s full-year fiscal 2026 earnings is pegged at $3.67 per share, down by a cent over the past 30 days, indicating a decline of 6.6% from the year-ago quarter’s reported figure.

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