TSMC Q1 Profit Climbs 60%, Raises Q2 Revenue Outlook Amid AI Demand and Tariff Risks

Taiwan Semiconductor Manufacturing Co (TSMC) (NYSE:TSM; TW:2330) delivered a blockbuster first quarter, posting a 60% jump in net profit and guiding higher for Q2 as AI-driven chip demand remains robust. However, management flagged potential risks from evolving tariff policies and rising fab costs.

Q1 2025 Financial Highlights

• Net Income: NT$361.56 billion ($11.12 billion), up 60% year‑on‑year (analyst median: NT$354.6 billion)

• Revenue: NT$839.25 billion ($25.81 billion), up 41.6% YoY (forecast: NT$835.17 billion)

• Gross Margin: 58.8%, down 0.2 ppt—impacted by earthquake disruptions and initial cost dilution at the new Japan fab

Q2 2025 Outlook

• Revenue Guidance: US $28.4 billion-$29.2 billion

  • +13% sequential growth

  • +38% YoY at midpoint

• Margin Forecast: Expected to ease by 80 bps to 58% as Arizona ramp‑up costs kick in

• 2025 Margin Pressure: Projected 2-3% hit from overseas fab expansions (Arizona, Kumamoto); 3-4% annual dilution in later years

Strategic Drivers and Risks

• AI Chip Demand:

  • TSMC reaffirms that AI accelerator revenue will double in 2025, underpinned by continued customer ramp‑ups.

• U.S. Investment:

  • A $100 billion U.S. expansion—announced at the White House last month—furthers TSMC's global capacity footprint.

• Tariff Uncertainty:

  • “There are uncertainties and risks from the potential impact of tariff policies,” management noted, though customer ordering behavior remains unchanged so far.

• Operational Disruptions:

  • A 6.4‑magnitude earthquake in Taiwan and initial cost dilution from the new Japan fab weighed slightly on margins this quarter.

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TSMC's robust Q1 performance and confident Q2 guidance underscore its pivotal role in the AI semiconductor boom—even as it braces for margin dilution from new fab investments and potential tariff shocks.