TSMC Q4 Earnings Preview: AI Demand Ignites Earnings Expectations, Wall Street Bullish Sentiment Heats Up

TradingKey - The World's Leading Chip Foundry Giant TSMC is set to release its fourth-quarter fiscal 2025 financial results this Thursday.

TSMC boasts a formidable client roster, including tech giants such as Nvidia (NVDA.O) and Apple (AAPL.O). As one of the most valuable public companies in Asia, TSMC's market capitalization has reached $1.38 trillion, nearly double that of its main competitor, Samsung Electronics.

In recent years, while the consumer electronics market experienced a downturn due to the pandemic, the rapid surge in demand for AI chips has effectively offset this impact. With the accelerated deployment of AI applications, TSMC has successfully pivoted to the high-end computing chip segment, progressively establishing its dominance in AI chip manufacturing.

As of 2025, the company's stock price has risen by 56% cumulatively, more than tripling in value over three years. Entering 2026, the share price maintains an upward trend, rising approximately 6% since the start of the year.

Revenue and Profit May Hit Record Highs

According to SmartEstimate from LSEG, based on a consensus of 19 senior analysts, TSMC's net profit for the fourth quarter of fiscal 2025 is expected to reach NT$475.2 billion, approximately $15.02 billion. If these expectations are met, it would mark a record quarterly profit for the company and signify its eighth consecutive quarter of earnings growth.

In terms of revenue, TSMC reported December 2025 revenue of NT$335 billion last week, a slight month-on-month decline of 2.5% but a year-on-year increase of 20.4%, demonstrating strong growth resilience.

Based on monthly revenue data calculations, TSMC's total revenue for the fourth quarter is approximately NT$1.046 trillion (about $33.11 billion) , significantly higher than the NT$868.46 billion recorded in the same period last year.

Galen Zeng, Senior Research Manager at IDC, stated that TSMC's stellar performance this quarter is primarily due to the steady release of 3nm process capacity and robust growth in AI-related application demand, particularly showing strong momentum in high-performance computing and large-model chip manufacturing.

Seizing Dominance in High-End AI Chip Manufacturing

Since ChatGPT sparked a new wave of AI enthusiasm, TSMC has emerged as one of the core beneficiaries.

It possesses unique technological barriers in the field of high-end AI accelerator chip manufacturing, maintaining a firm grip on advanced process node supply. The commercialization of AI technology—especially across terminal applications like industrial manufacturing, consumer electronics, and data computing—has deepened reliance on high-performance chips, becoming a key driver for performance growth.

Furthermore, the rapid development of emerging technologies such as cloud computing, the Internet of Things (IoT), and the metaverse is reshaping the global semiconductor demand structure, providing solid support for TSMC's revenue expansion.

TSMC continues to increase R&D investment in advanced processes and heterogeneous integration, having achieved stable mass production at 7nm and 3nm nodes, providing high-energy-efficiency chip solutions for AI, server, and high-end smart terminal clients.

Meanwhile, with its full range of FinFET process capabilities (covering 3nm, 4nm, 5nm, 6nm, and 7nm), TSMC not only effectively meets the power and performance requirements of different customers and product sectors but also continues to expand its market share in high-performance computing (HPC) and high-end smartphone platforms.

From an application perspective, TSMC is accelerating its presence in diversified terminal markets, including automotive electronics, smart homes, and industrial controls. The company's Multi-Project Wafer (MPW) service helps customers conduct rapid trial production under cost control, lowering the barrier for small and medium-sized enterprises and tech startups to access high-end foundry services—a model that further enhances revenue diversity and broadens the customer base.

However, it is worth noting that while actively expanding its global production footprint, TSMC is facing mounting operational cost pressures .

Specifically, overseas plant projects in Arizona (USA), Kumamoto (Japan), and Dresden (Germany) have seen significant increases in initial capital expenditure and personnel costs, which may exert some pressure on the company's gross margin in the short term.

Additionally, global geopolitical uncertainty remains a risk factor that cannot be ignored, particularly the intensifying tech competition between China and the U.S., which could potentially impact its future order structure and customer collaboration landscape.

Wall Street Raises Price Targets

TSMC has long been one of the hot targets of interest on Wall Street, and several international investment banks have recently raised their price targets, generally believing that the company's future revenue and profit are poised for continued strong growth, especially against the backdrop of rapidly expanding AI demand.

Goldman Sachs stated that TSMC will invest up to $150 billion in advanced process capacity expansion over the next three years, expressing optimism about the company's mid-to-long-term growth potential amidst the AI wave. As AI increasingly becomes the core driver of TSMC's revenue growth, Goldman Sachs raised its price target by 35% to NT$2,330.

Morgan Stanley also provided a positive outlook. The bank noted that the company's gross margin for the fourth quarter of 2025 is expected to exceed 60%, with the full-year 2026 gross margin also projected to stay above 60%. Furthermore, based on current operational trends, TSMC's 2026 revenue could grow by approximately 30% year-on-year. On this basis, Morgan Stanley recommends that investors "Overweight" TSMC ahead of the earnings report and has raised its price target by 12%.

Bernstein also named TSMC a "top pick" in the semiconductor industry, citing the company's leadership in technology, management, and earnings quality.

Bernstein expects TSMC's revenue to grow by 23% and 20% in 2026 and 2027, respectively, with a compound annual growth rate (CAGR) for earnings per share of approximately 20%. They emphasized that AI will continue to dominate the development of the semiconductor industry in the coming years.

Bank of America raised its price target for TSMC from NT$1,960 to NT$2,150, maintaining a "Buy" rating. Its analysts believe that the current AI foundry market is showing robust annual growth of around 43%, and the company's leading position in this field will drive revenue growth of 27% and 22% in 2026 and 2027, respectively.

Analysis suggests that product structure upgrades, the premiums brought by high-end technology nodes, and reduced competitive pressure in legacy processes will drive the front-end manufacturing business to maintain a compound annual growth rate of approximately 20%.