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Key Morningstar Metrics for Taiwan Semiconductor Manufacturing
What We Thought of Taiwan Semiconductor Manufacturing’s Earnings
Taiwan Semiconductor Manufacturing’s TSM fourth-quarter 2024 revenue was $26.9 billion, up 39% year on year. Gross margin increased 6 percentage points from the year-ago quarter to 59%. The numbers beat management’s guidance.
Why it matters: Management provided upbeat guidance for 2025 and beyond. Taiwan Semiconductor expects its revenue to grow in the mid-20s in 2025 and average 20% over the next few years. This is higher than the previous guidance of mid-teens multiyear average growth and ahead of our 15% sales CAGR forecast.
AI chips made up 15% of the firm’s revenue in 2024, and by management’s mid-40s growth expectations, it will balloon to 50% of our TSMC revenue forecast by 2029. The upbeat AI outlook led us to raise 2025-28 revenue estimates by up to 21%.Taiwan Semiconductor budgets capital spending at $38 billion-$42 billion for 2025, or over 35% of revenue. This is a 28%-41% jump from 2024’s $29.8 billion, lending credence to the company’s latest revenue outlook. The figure is slightly ahead of our $37.1 billion forecast in October.
The bottom line: We’ve hiked our fair value estimate for Taiwan Semiconductor to $273 per share from $215, owing to a rosier outlook in AI demand and stronger-than-expected 2025 revenue guidance. The shares are attractive, and it’s our top pick among semiconductor foundries.
Bears say: Both large and small AI businesses are adding computing power to their arsenals with little regard to returns. Once some companies go bust, it may prompt a steep cut in AI data center spending.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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