Taiwan Semiconductor Manufacturing (TSMC) reported a 54% surge in net profit in the third quarter (Q3) of 2024, exceeding market expectations, driven by rising demand for chips used in artificial intelligence (AI) applications. The contract chipmaker’s US-listed shares were up 6.62% in premarket trading.
In its latest earnings report, the supplier of advanced chips for companies such as Apple and Nvidia forecasted capital spending for the current quarter to more than double to approximately $11.5bn. The company also anticipates further increases in its budget next year, reflecting its expectation of continued strong demand for its products.
The company posted a record net income of $10.05bn for the third quarter ended 30 September 2024 compared to $6.66bn in the corresponding quarter of the prior year. For the reported quarter, the company’s diluted earnings per share (EPS) was $0.39.
Revenue for the quarter rose 36% year-on-year (YoY) to $23.5bn, exceeding its forecast of $22.4bn-$23.2bn. The third quarter revenue also represented a growth of 12.9% from Q2 2024.
This strong performance is attributed to the demand for the Taiwanese company’s 3nm and 5nm chip technologies, which are widely used in smartphones and AI applications.
Capital expenditure for the third quarter reached $6.4bn, slightly up from $6.36bn in the previous quarter.
TSMC predicts full-year revenue for 2024 will grow by nearly 30%, improving on previous guidance of growth in the mid-20% range. The company noted that AI processors are set to contribute to a significant portion of its revenue this year, making up a mid-teens percentage of its overall earnings.
The company’s strong performance comes amidst concerns over the future of AI demand, raised earlier in the week when chipmaking equipment supplier ASML provided a lower-than-expected sales outlook for 2025. Despite these concerns, TSMC remains optimistic, projecting healthy demand for the next five years.
For 2024, TSMC expects capital expenditure to be slightly above $30bn, close to its previous estimate of $30bn-$32bn. The company also signalled that capital expenditure for 2025 is likely to surpass this year’s levels.
In addition, TSMC forecasts revenue of between $26.1bn and $26.9bn for the fourth quarter, up from $19.62bn in the same period last year.
TSMC invests in future capacity
TSMC is investing heavily in new manufacturing facilities overseas, including $65bn on three plants in Arizona, US. The first of these factories is expected to begin volume production in 2025, with the second and third slated to commence operations in 2028 and by the end of the decade, respectively.
TSMC’s shares have surged 75% so far this year, outperforming the broader Taipei stock market, which has gained 28%. This increase in value has brought TSMC’s market capitalisation to around $840bn.
Read more: TSMC’s Q3 2024 revenue surpasses forecast, driven by AI chip demand
