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Taiwan Semiconductor Manufacturing Company (TSM) (TSMC), the world’s largest chipmaker, saw its profits soar 54% in the third quarter, driven by continued demand for its artificial intelligence-capable chips.
The Taiwan-based company reported Thursday $23.5 billion in revenue for the quarter, up 36% from a year ago and topping Wall Street’s expectations. Net income came in at $10.1 billion, also blowing past estimates compiled by FactSet (FDS).
“Our business in the third quarter was supported by strong smartphone and AI-related demand for our industry-leading 3nm and 5nm technologies,” said Wendell Huang, chief financial officer of TSMC. “Moving into fourth quarter 2024, we expect our business to continue to be supported by strong demand for our leading-edge process technologies.”
TSMC’s U.S.-listed shares jumped 9% in Thursday morning trading following the earnings report.
Huang had previously said that the company expected smartphone- and AI-related demand to drive business in the third quarter. Looking ahead, TSMC chief C.C. Wei has said he expects chip production to catch up to demand by 2025 or 2026.
Wedbush analysts say the company could keep riding this high for a long while. In a note Thursday titled “No End in Sight to AI Derived Strength,” analysts, led by Matt Bryson, said the third-quarter results give more confidence to views that TSMC will be able to continue growing gross margins. TSMC’s gross margins were 58% for the quarter.
The analysts expect AI chip revenues to more than triple in 2024 and account for around a mid-teens percentage of TSMC’s revenues.
For the fourth quarter, TSMC estimates that its revenue will come in between $26.1 billion and $26.9 billion — a multi-billion dollar increase from last quarter. It’s projecting gross profit margin of 57.0% to 59.0%, consistent with the third quarter or slightly higher.
