Why Taiwan Semiconductor Stock Surged Today
Key Points
Taiwan Semiconductor Manufacturing Company beat on sales and beat on earnings last night.
Earnings are growing much faster than analysts had anticipated.
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Taiwan Semiconductor Manufacturing Company (NYSE: TSM) stock soared 6.1% through 10:25 a.m. ET Thursday on a strong Q4 2025 earnings report.
Analysts forecast TSMC to earn $2.98 per share on sales of $32.7 billion. The company instead reported last night that it earned $3.14 per share on sales of $33.7 billion -- $1 billion more than projected.
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TSMC Q4 earnings
TSMC grew its sales 25% year over year, and earnings rose 35%. The company scored a 62.3% gross profit margin, a 54% operating profit margin, and 48.3% for its net margin.
TSMC broke down its semiconductor shipments as follows: 28% of total wafers shipped were 3-nanometer chips, 35% were 5-nanometer, and 14% were 7-nanometer. Such "advanced" chips, therefore, accounted for 77% of the company's business. CFO Wendell Huang predicts "continued strong demand for our leading-edge process technologies" in the first quarter of 2026.
Is TSMC stock a buy?
In dollars and cents, TSMC guided investors to expect Q1 revenue of $34.6 billion to $35.8 billion, implying sequential growth of up to 9%. Management says profit margins should be in the 63% to 65% range (gross) and 54% to 56% (operating).
So not only are revenues improving, but TSMC expects to earn even more profit on each dollar of revenue it books. What does this mean for investors?
TSMC's well on course to earn at least its expected $2.80 per share this year, and probably more. It's growing earnings much faster than the 33% forecast by analysts for this year, and is likely to outperform its long-term 29% earnings growth forecast as well.
Even at its current P/E ratio of nearly 25, TSMC stock looks like a buy to me.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
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