How did TSM's Q4 2024 earnings surprise investors?

TSMC's Q4 2024 earnings report exceeded investor expectations in several key areas, leading to a positive market reaction despite some geopolitical risks and concerns about the normalization of chip demand.

1. **Earnings Per Share (EPS) and Revenue**: TSMC reported an EPS of $2.16 for Q4 2024, which surpassed market estimates. The company's revenue for the quarter was estimated at $26.38 billion, and it exceeded this figure, achieving $26.5 billion. This revenue outperformance reflects robust business activity and operational efficiency.

2. **Gross and Net Margins**: TSMC's gross margin for the quarter was projected to be between 57% and 59%, and it achieved a gross margin of 57.8%, exceeding the upper end of the guidance. The net margin was also strong, reaching 47.5%, above the company's guidance of 44.5%. These margins indicate efficient cost management and profitability.
3. **Capital Expenditures and AI Demand**: TSMC announced capital expenditures slightly exceeding $30 billion, which is in line with the previous estimate. The company highlighted the continued robust demand for AI servers, with AI server revenue contributing more than triple compared to the previous year. This underscores TSMC's strategic positioning in the high-growth AI segment.
4. **Stock Market Reaction**: Following the earnings release, TSMC's stock surged by 5% in after-hours trading, reaching $198 per share. This positive price movement reflects investor confidence in TSMC's financial performance and growth prospects.

Overall, TSMC's Q4 2024 earnings report demonstrated the company's ability to outperform market expectations in key financial metrics, which contributed to a favorable stock market reaction despite existing risks and uncertainties.