TSM Stock Drops Despite Q3 Earnings Exceeding Expectations

Taiwan Semiconductor Manufacturing Company (TSM) reported Q3 diluted EPS of $2.92, beating expectations by $0.32. Revenue reached $33.1 billion, a 40.8% YoY increase. Despite this, the stock dipped by 0.7% in early trading.

Taiwan Semiconductor Manufacturing Company (TSM) reported its third-quarter (Q3) results, showcasing robust financial performance. The company's diluted earnings per share (EPS) of $2.92 exceeded expectations by $0.32, while revenue hit $33.1 billion, representing a 40.8% year-over-year (YoY) increase, according to Seeking Alpha. Despite these impressive figures, the stock dipped by 0.7% in early trading.

Key highlights of TSMC's Q3 performance include:
- Revenue Growth: Revenue of $33.1 billion marked a significant increase of 40.8% compared to the same period last year, driven by strong demand for advanced semiconductors.
- Gross Margin: The company reported a gross margin of 59.5% for the quarter, indicating healthy profitability.
- Operating Margin: The operating margin stood at 50.6%, reflecting efficient operational performance.
- Net Profit Margin: The net profit margin was 45.7%, demonstrating strong profitability.
- Advanced Technologies: Shipments of 3-nanometer and 5-nanometer technologies accounted for 23% and 37% of total wafer revenue, respectively. Advanced technologies, including 7-nanometer and more advanced technologies, made up 74% of total wafer revenue.

Free cash flow decreased by NT$60.47 billion to an inflow of NT$139.38 billion in 3Q25, primarily due to lower operating cash flow. Capital expenditures for TSMC on a consolidated basis totaled US$9.70 billion in 3Q25, as reported by Seeking Alpha.

The company's board of directors approved a NT$5.00 cash dividend for the second quarter of 2025, with the ex-dividend date set for December 11, 2025, the record date for December 17, 2025, and the distribution date for January 8, 2026, according to Seeking Alpha.

Analysts anticipate that TSMC's strong Q3 results will continue to drive growth, especially as the AI revolution intensifies . Despite the stock's initial dip, investors should closely monitor TSMC's ability to maintain its growth trajectory and adapt to market demands.