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Taiwan Semiconductor Returns To Growth With First-Quarter Beat

Taiwan Semiconductor Manufacturing (TSM), the world’s largest contract chipmaker, on Thursday beat expectations for the first quarter. But TSM stock fell in early trading.

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The chip foundry, better known as TSMC, earned $1.38 per U.S. share on sales of $18.87 billion in the March quarter. Analysts polled by FactSet had expected earnings of $1.30 a share on sales of $18.31 billion. In the year-earlier period, TSMC earned $1.30 per U.S. share on sales of $16.62 billion.

With its Q1 report, TSMC returned to sales and earnings growth after four consecutive quarters of declines on a year-over-year basis. Taiwan Semiconductor’s sales rose 12.9% while earnings climbed 6.2%.

For the current quarter, TSMC expects revenue of $19.6 billion to $20.4 billion. The midpoint of $20 billion topped Wall Street’s target of $19.44 billion. In the second quarter last year, TSMC generated revenue of $15.47 billion.

TSM Stock Drops After Report

In premarket trading on the stock market today, TSM stock slid 2% to 136.21.

TSMC’s customers include Apple (AAPL), AMD (AMD), Nvidia (NVDA), Qualcomm (QCOM) and more.

“Our business in the first quarter was impacted by smartphone seasonality, partially offset by continued HPC (high-performance computing)-related demand,” Chief Financial Officer Wendell Huang said in a news release.

He added, “Moving into second quarter 2024, we expect our business to be supported by strong demand for our industry-leading 3-nanometer and 5-nanometer technologies, partially offset by continued smartphone seasonality.”

Circuit widths on chips are measured in nanometers, which are one-billionth of a meter.

TSM Stock Is Recent Breakout

In the first quarter, shipments of 3-nanometer chips accounted for 9% of total wafer revenue, 5-nanometer accounted for 37%, and 7-nanometer accounted for 19%. Advanced technologies, defined as 7-nanometer and smaller nodes, accounted for 65% of total wafer revenue.

TSMC lowered its industry growth expectations slightly but kept its company target, Barclays analyst Simon Coles said in a client note. The company reiterated its guidance for revenue growth in the low to mid 20% range, he said.

“AI remains the bright spot” for Taiwan Semiconductor as the company sees a gradual recovery in most of its end markets this year, Coles said. He rates TSM stock as overweight with a price target of 145.

On Jan. 18, TSM stock broke out of a cup-with-handle base at a buy point of 105.52, according to IBD MarketSurge charts. The breakout occurred after TSMC delivered a beat-and-raise report for the fourth quarter.

Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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