TSMC(US:TSM) Xin Lang Cai Jing·2025-10-17 10:04Core Viewpoint - TSMC's Q3 2025 financial report showcases significant growth driven by AI demand, with revenue reaching $33.1 billion, exceeding market expectations and reflecting a 41% year-over-year increase, while net profit surged by 39% [1][2] Revenue and Profitability - TSMC's quarterly revenue of $33.1 billion surpassed market expectations of $31.5 billion, with a quarter-over-quarter increase of 10.1% and a year-over-year increase of 41%, translating to an average daily revenue of nearly $1.1 million [2] - Adjusted EPS reached $2.92, a 39% increase year-over-year, exceeding expectations by $0.33, with a net profit margin of 45.7%, positioning TSMC among the few tech giants maintaining a margin above 40% [2] Gross Margin - Gross margin improved to 59.5%, up 1.7 percentage points year-over-year and 0.9 percentage points quarter-over-quarter, surpassing the expected 58.9% [3][4] - Key drivers include a surge in shipments of 3nm and 5nm processes, a reduction in inventory turnover days to 74, and high capacity utilization rates [3] Advanced Process and AI Demand - Advanced processes (7nm and below) contributed 74% of wafer revenue, with 5nm accounting for 37% and 3nm for 23%, indicating a strong market position [6] - AI demand is expanding beyond cloud services to include enterprise and sovereign AI, with TSMC's CEO noting a stronger demand than three months prior, supported by three main drivers: cloud, enterprise, and sovereign AI [10] Technology Roadmap - TSMC's N2 family (2nm) is set to begin mass production by the end of 2025, with expectations of significant contributions to revenue by 2026 [14][15] - The N2 process is anticipated to have superior profitability compared to N3, with a 20% increase in logic density and a 30% reduction in power consumption [15] Global Expansion and Capital Expenditure - TSMC is advancing its global production capabilities, including a major facility in Arizona and expansions in Japan and Germany, to meet AI demand [18][19][20] - The capital expenditure for 2025 has been narrowed to $40-42 billion, with a clear allocation strategy focusing on advanced processes and special processes [21] Non-AI Market and Competition - The smartphone market is recovering, with a 19% quarter-over-quarter increase, while automotive electronics are also seeing growth, indicating a healthy inventory situation [23] - TSMC's "Foundry 2.0" strategy aims to build a competitive moat by offering comprehensive solutions, including front-end processing and back-end packaging [24] Future Indicators - Key indicators to monitor for TSMC's growth include Q4 revenue performance, the ramp-up speed of the N2 process, and the management of overseas factory gross margin dilution [26]