TSMC(US:TSM) HTSC·2025-10-17 03:15Investment Rating - The report maintains a "Buy" rating for the company with a target price raised to $370 from $320 [1][5][7]. Core Insights - The company reported a 10.1% quarter-over-quarter revenue increase in Q3 2025, with a gross margin of 59.5%, exceeding guidance [1][12]. - For Q4 2025, the company expects revenue between $32.2 billion and $33.4 billion, with a gross margin forecast of 59%-61% [1][14]. - The company has raised its 2025 revenue guidance to a year-over-year growth of close to 35%, up from approximately 30% [1][14]. - The company expressed strong confidence in the growth of AI-related demand, expecting it to exceed previous guidance of a 40% CAGR from 2024 to 2029 [1][2]. Summary by Sections Financial Performance - In Q3 2025, the company achieved a revenue of $33.10 billion, with a gross margin of 59.5%, significantly above the guidance of 57.5% [1][12]. - The company’s capital expenditure for Q3 2025 was $9.70 billion [13]. AI Demand - The company noted that customers are requesting higher capacity due to increasing confidence in AI trends, with expectations for semiconductor demand growth to exceed the previously estimated CAGR of 40% from 2024 to 2029 [2][30]. - The company plans to increase investments in advanced nodes and packaging to meet the growing demand [2][30]. Global Expansion - The company is accelerating production in Arizona and has plans for additional facilities in Japan and Germany to support AI demand [3][31]. - The company expects a gross margin dilution of 1% to 2% in 2025 due to overseas factory ramp-up, which is an improvement from previous estimates [3][29]. Advanced Processes - The company is on track to achieve mass production of its N2 process in late 2025, with N2P and A16 expected to enter production in the second half of 2026 [4][32]. - The N2 series is anticipated to become a significant and lasting core node, enhancing the company's profitability [4][32]. Profit Forecast and Valuation - The revenue forecasts for 2025-2027 have been adjusted upward by 1.9%, 2.8%, and 0.4% respectively, with net profit estimates raised by 7.3%, 7.9%, and 6.1% [5][26]. - The company is assigned a 30x PE for 2026, reflecting its leading position in the semiconductor foundry market [5][26].