Taiwan Semiconductor Manufacturing, the world's largest contract chipmaker, on Thursday beat estimates for the second quarter and guided above views for the current period. TSM stock seesawed on the news but ended the day higher.
The chip foundry, better known as TSMC, earned $1.48 per U.S. share on sales of $20.82 billion in the June quarter. Analysts polled by FactSet had expected earnings of $1.41 a share on sales of $20.33 billion. On a year-over-year basis, TSMC earnings increased 31% while sales rose 35%.
For the current quarter, TSMC expects revenue of $22.4 billion to $23.2 billion. The midpoint of $22.8 billion beat Wall Street's target of $22.65 billion. In the third quarter last year, TSMC generated revenue of $16.89 billion.
In morning trades on the stock market today, TSM stock advanced as much as 4.4% to 178.69. But TSM stock closed regular-session trading up 0.4% to 171.87.
On Wednesday, TSMC dived 8% amid a chip sell-off in part sparked by former President Donald Trump saying Taiwan should pay for its own defense.
"Our business in the second quarter was supported by strong demand for our industry-leading 3-nanometer and 5-nanometer technologies, partially offset by continued smartphone seasonality," Chief Financial Officer Wendell Huang said in a news release.
Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.
TSM Stock Is A Tech Leader
"Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies," Huang said.
In the second quarter, shipments of 3-nanometer chips accounted for 15% of total wafer revenue, 5-nanometer accounted for 35%, and 7-nanometer made up 17%. Advanced technologies, defined as 7-nanometer and smaller nodes, accounted for 67% of total wafer revenue, TSMC said.
TSMC raised its revenue growth outlook for 2024 from "low- to mid-20s" percentage to "slightly above mid-20s," Needham analyst Charles Shi said in a client note. It also signaled price increases are coming for its customers.
Shi reiterated his buy rating on TSM stock with a price target of 210.
TSMC also nudged up its planned capital expenditures by $1 billion, but within expectations, Shi said. It now expects to spend $30 billion to $32 billion on capex this year. That is positive news for semiconductor equipment makers like ASML.
TSM stock is on the IBD Tech Leaders list.
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