Update shared on 17 Oct 2025
Fair value Increased 1.31%1. Recent Financial Results & Guidance
Q3 2025 (latest quarter) highlights
- TSMC delivered a very strong quarter, driven by continued AI / HPC demand:
- Net profit: NT$ 452.3 billion (~US$14.8 billion), ~39 % year-over-year growth.
- Revenue: NT$989.9 billion, ~30 % YoY growth (in USD terms, revenue growth was ~41 %)
- TSMC raised its full-year 2025 revenue growth guidance to mid-30 % (USD terms), up from earlier ~30 %.
- Capital expenditure (CapEx) guidance remains high, with up to US$42 billion planned for 2025.
These results reinforce that TSMC is benefiting strongly from secular demand trends in AI, cloud computing, and high-performance computing (HPC).
Previous quarters & trends
- In Q1 2025, revenue was ~NT$ 839 billion (USD ~$25.5 billion), down ~3 % sequentially; gross margin dipped slightly to ~58.8 %.
- For Q2 2025, some reports (e.g. independent analysis) indicated revenue growth of ~38−44 % YoY, with net income growth even stronger (~60 %), driven by AI / HPC demand and favourable USD / NT$ dynamics.
- From its 2024 annual reports, advanced nodes (7 nm and beyond) already accounted for a significant share (69 % of wafer revenue).
Risks/headwinds noted by analysts
- Building new fabs in the U.S., Japan, and Europe introduces cost pressures. Some of the margin dilution is expected, especially in earlier ramp phases.
- Geopolitical / trade risk, especially around export controls and U.S.–China tensions.
- As newer fabs in more expensive jurisdictions ramp, operating costs may rise relative to incumbents in Taiwan.
- Profitability in non-AI / legacy nodes may see more headwinds vs. the AI / HPC segment.
2. Implications for Valuation
Given these strong results and outlook, how might valuation move? Below are the key drivers and considerations.
Multiples relative to peers / historical
From financial data:
- TSMC currently trades at a trailing P/E of ~31.6× (based on available ratio data).
- Other metrics: P/S ~10.35×, P/B ~7.62×, EV/EBITDA ~14.33× (these are historical/ recent values).
- In commentary, some analysts note that valuation multiples are elevated relative to historical norms, though possibly justified by growth optimism.
Thus, there is a tension: robust growth/guidance pushes for a higher multiple, while higher risks and already elevated valuations limit further expansion.
3. Outlook & Verdict
Overall, TSMC’s latest results are very strong, especially driven by the AI / HPC tailwinds. Raising guidance is a positive signal, and the market has responded with optimism.
However, valuation expansion has limitations:
The market likely has already baked in a large part of this AI narrative.
Execution risks (in new investments, margin dilution, regulatory/geopolitical exposures) are real.
The sustainability of premium multiples depends on sustained growth and margin discipline over multiple quarters.
TSMC’s valuation has upside potential if it continues to deliver and manage its cost base well. But the margin of safety is narrower now compared to a few years ago, so downside risk is more acute if things slip.
Disclaimer
The user oscargarcia has a position in NYSE:TSM. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.