TSMC Q2 Earnings Approach: AI Demand, Gross Margin and Capex Become Key Market Focus

TradingKey - Global foundry leader TSMC ( TSM) will release its second-quarter 2025 financial results on July 16. As one of the most critical manufacturing links in the current AI supply chain, TSMC's earnings performance is no longer just the operating data of a single company, but is viewed by the market as a key barometer for assessing the heat of global AI infrastructure investment, semiconductor cycle dynamics, and tech stock valuation logic.

Recently, the semiconductor sector has been pressured by valuation concerns, memory chip price volatility, and debates over the sustainability of AI investment, leading to a cooling of market sentiment. Therefore, investors are hoping that TSMC's upcoming earnings report can send stronger positive signals, verifying whether demand for AI chips remains highly robust and further confirming the growth potential in advanced process nodes and high-end packaging.

Q2 Revenue Realized Early, Profitability Becomes Market Focus

Based on current market expectations, TSMC's second-quarter results are highly likely to continue their rapid growth trend. The market expects the company's Q2 revenue to reach NT$1.27 trillion (approximately $39.47 billion), representing a year-on-year increase of 36%.

In fact, TSMC's previously released June revenue has already sent positive signals in advance. The company achieved revenue of NT$442.68 billion in June, up approximately 26% year-on-year and 6.2% month-on-month.

Therefore, for investors, mere revenue growth is no longer the main highlight. As AI demand drives a continuous increase in TSMC's advanced process orders, the market is more focused on the company's quality of earnings, especially its gross margin performance.

Wall Street currently widely expects TSMC's second-quarter gross margin to be around 67%, up over 8 percentage points from the same period last year and at the high end of the company's previous guidance range of 65.5% to 67.5%. Some institutions are even more optimistic, expecting TSMC's Q2 gross margin to potentially approach 70%.

If TSMC can once again deliver gross margin figures that exceed market expectations, it will further prove the company's strong pricing power in the advanced process field, while also implying that high-end AI chip orders are helping the company offset cost pressures from capacity expansion.

Conversely, if the gross margin falls short of market expectations, even if revenue maintains strong growth, investors may still worry about whether future profit margins will be dragged down by capacity expansion and the costs of overseas expansion.

AI Demand Sustainability Becomes Biggest Earnings Focus

Rather than the quarterly results themselves, the market is more focused on TSMC management's outlook on future AI demand.

Currently, AI chip companies such as Nvidia, AMD, and Broadcom are all key customers of TSMC. As AI models expand in scale and cloud computing vendors continue to increase their investments in AI infrastructure, the demand for high-performance computing chips remains in rapid growth.

The market believes that demand for AI accelerators, custom ASIC chips, server CPUs, and HBM-related supporting chips remains in an expansion phase. TSMC has previously raised its performance guidance consecutively, and investors hope the company will further raise its full-year growth target during this earnings call to prove that the AI hardware buildout cycle still has strong sustainability.

If management only maintains its previous target of "full-year revenue growing more than 30% year-on-year", although it indicates that business remains stable, it may fall short of some investors' expectations for a further guidance upgrade. On the other hand, if the company delivers a more positive demand outlook, it is expected to serve as an important catalyst to drive the stock price stronger again.

Advanced Processes and CoWoS Capacity Determine Future Growth Space

Currently, TSMC maintains a leading edge in the 3nm node, with related capacity remaining fully utilized, while the progress of its next-generation 2nm node will directly impact the company's growth potential over the next few years.

The market expects that TSMC's 2nm process is entering the volume production ramp-up phase, and investors hope management will disclose more information regarding yield improvement, customer adoption, and capacity expansion during the earnings call.

At the same time, demand for AI chips is not only driving growth in advanced logic processes but also propelling the rapid expansion of the advanced packaging business. In particular, CoWoS packaging technology has become a critical link connecting GPUs and HBM, with customers like Nvidia currently driving strong demand for related capacity.

If TSMC can confirm that CoWoS capacity expansion is proceeding smoothly and that orders for advanced processes continue to increase, it will further bolster market confidence in the long-term growth prospects of the AI supply chain.

Whether Capital Expenditure Expands Reveals AI Investment Confidence

Meanwhile, capital expenditure is also a key metric to watch in this earnings report.

TSMC previously projected that its capital expenditure for 2026 would be in the range of $52 billion to $56 billion, and indicated that it would approach the upper end of the range. Some institutions believe that as demand for AI chips continues to strengthen and global clients' demand for advanced capacity keeps rising, the company may further expand its investment scale in the future.

The market expects that TSMC's capital expenditure may approach $58 billion to support the expansion of advanced process capacity, the construction of advanced packaging facilities, and its overseas manufacturing footprint.

Currently, TSMC is advancing its large-scale fab investment plans in Arizona while continuing to expand its advanced manufacturing bases in Taiwan. Although the construction of overseas fabs will bring certain cost pressures and may affect its overall gross margin over the next few years, in the long run, these investments will help the company consolidate its core position in the global semiconductor supply chain.