Tower Semiconductor (TSEM) Margin Compression Challenges Bullish High P/E Narrative

Latest Earnings Snapshot

Tower Semiconductor (NasdaqGS:TSEM) has posted its FY 2025 third quarter numbers with revenue of US$395.7 million and basic EPS of US$0.48, giving investors a clear read on how the year is shaping up. The company has seen revenue move from US$351.2 million in Q2 2024 to US$395.7 million in Q3 2025, while quarterly basic EPS has ranged from US$0.48 to US$0.49 over that period, alongside trailing 12 month revenue of about US$1.5 billion and basic EPS of roughly US$1.75. With a trailing net profit margin of 12.9% versus 14.7% last year and mixed recent earnings signals, this set of results puts the focus squarely on how sustainable the margin profile really is.

See our full analysis for Tower Semiconductor.

With the numbers on the table, the next step is to see how this earnings print lines up with the most widely held stories about Tower Semiconductor, highlighting where the narrative fits the data and where it starts to break.

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Margins Ease Back From 14.7% To 12.9%

• The trailing 12 month net profit margin sits at 12.9%, down from 14.7% last year, alongside trailing net income of US$195.5 million on about US$1.5b of revenue.
• Analysts' consensus view talks about margin improvement potential over time, yet the actual data show the opposite recently, with:
  • Trailing 12 month EPS at US$1.75, slightly below the US$1.87 level seen in the earlier trailing set, pointing to pressure on profitability.
  • Quarterly net income staying in a fairly tight band around US$53 million to US$55 million over the last six reported quarters, even as the narrative highlights capacity investments aimed at stronger margins.

Revenue Near US$1.5b Versus High P/E Of 77.4x

• With trailing 12 month revenue of about US$1.5b and net income of roughly US$195.5 million, the trailing P/E of 77.4x sits well above the peer average of 50.9x and the US semiconductor industry at 44.6x.
• Consensus narrative points to expanding demand in areas like Silicon Photonics and Silicon Germanium, but the current numbers frame a trade off, where:
  • The current share price of US$134.44 is also far above the DCF fair value of US$40.36, so the market is paying a large premium relative to that cash flow estimate.
  • Five year earnings growth of 16.9% a year supports the long term story, while the most recent year shows negative earnings growth, which is different from the steady expansion implied in the optimistic view.

Investors who want to see how these growth themes, margins and valuation tension fit into the fuller story can check the broader community view on Tower Semiconductor here, including how different analysts connect the multi year earnings record to today’s price: 📊 Read the full Tower Semiconductor Consensus Narrative.

Quarterly Profits Steady Around US$53 to US$55 Million

• Across the last six reported quarters, net income excluding extra items has stayed close to US$40.1 million to US$55.1 million, with Q3 2025 at US$53.6 million compared with US$54.6 million in Q3 2024 and US$53.4 million in Q2 2024.
• Where the consensus narrative talks about capacity expansions and higher value product mix supporting stronger profit over time, the recent quarterly pattern points to a more level picture, as:
  • Basic EPS per quarter has moved in a narrow band between roughly US$0.36 and US$0.49 over the six reported quarters, rather than showing a sharp shift higher in profitability.
  • Trailing 12 month EPS stepping down from US$1.87 to about US$1.75 occurs alongside those stable quarterly profit levels, suggesting the ramp up expected in the more optimistic narrative is not yet visible in the figures provided.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Tower Semiconductor on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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See What Else Is Out There

Tower Semiconductor's rich P/E of 77.4x, alongside easing margins from 14.7% to 12.9% and softer trailing EPS, suggests the current price carries a steep premium.

If that premium makes you cautious about paying up for slower earnings momentum, check out our 51 high quality undervalued stocks today to look for companies where price and fundamentals line up more tightly.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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