TSMC Earnings Preview: All Eyes on the Industry Bellwether

TSMC (TSM) is the backbone of the global semiconductor industry, manufacturing over 90% of the world’s most advanced chips used in AI, smartphones, data centers, and automotive systems. As the sole producer of leading-edge nodes like 3nm and 2nm, it enables innovation for companies like Apple, NVIDIA, and AMD. Its scale, efficiency, and technological leadership make it irreplaceable in the chip supply chain. TSMC’s capital spending and outlook serve as a barometer for broader industry health, while geopolitical tensions and export controls involving TSMC have far-reaching implications for global tech and trade stability. Simply put, TSM is the industry’s heartbeat.

With its Q1 2025 earnings due before the market opens Thursday, investors will be combing through the results for signals on capital spending, AI chip momentum, geopolitical disruptions, and the impact of export control scrutiny. Particularly in a market rattled by tariff threats, TSMC’s forward commentary will weigh heavily on both sentiment and sector positioning.

Expectations and Performance Preview

Wall Street expects TSMC to report Q1 revenue of approximately $25.2 billion, marking a 33.6% increase year-over-year, alongside earnings per share of $2.02, up 46.4%. The company already revealed monthly revenue performance for Q1, totaling NT$839.25 billion (~$25.6B), slightly topping analyst expectations of NT$835.7 billion. Revenue rose sharply year-over-year in each month: January (+35.9%), February (+43.1%), and March (+46.5%), highlighting continued demand for high-performance compute (HPC) and AI chips.

While revenue strength appears intact, the report comes at a pivotal moment. The company faces questions around its exposure to export controls, including reports that it may be liable for over $1 billion in penalties related to chips made for Sophgo that ultimately landed in Huawei’s AI processor. Bernstein analysts estimate this situation could trim just ~1% off revenue and argue the financial risk is mitigated by prepayments and delivery timing.

CapEx Front and Center

CapEx will be the most scrutinized line item this quarter. TSMC previously guided for full-year capital expenditures between $38 billion and $42 billion. But Stifel now expects spending to land at the low end—or even slightly below—estimating $37–38 billion. That figure is still up mid-20% year-over-year but reflects rising caution amid tariff and geopolitical turbulence.

CFRA analyst Angelo Zino underscored the policy risk, noting that TSMC could be a prime target for tariffs intended to pressure Taiwan-based chipmakers into expanding U.S. production. Zino added that any softness in CapEx could reflect pressure to shift operations or hedge geopolitical exposure. Stifel further warned that softness in 2nm GAA rollout could weigh on expectations for wafer fab equipment (WFE) vendors, which rely heavily on TSMC investment cycles.

WATCH: TSMC earnings the bellwether for big tech

AI Demand Still Driving Growth

Despite the trade noise, demand for advanced nodes remains robust. Nearly 75% of TSMC’s revenue is derived from nodes 7nm and below, and the 3nm node has already tripled its contribution from ~6% in 2023 to ~18% in 2024. TSMC is also on track to begin volume production of its 2nm (N2) node in the second half of 2025. According to company commentary, N2 could deliver a 10–15% performance boost or 20–30% power efficiency gain, which is particularly relevant for energy-hungry AI workloads.

Management has also leaned into system-level integration. Its TSMC-SoIC™ chip stacking architecture is reportedly delivering ~10x speed gains, 190x bandwidth improvements, and 20x energy efficiency over traditional 3D chip designs. This further enhances the competitive moat that’s allowed TSMC to maintain a near-60% gross margin and ROIC above 20%.

Guidance, Risk, and Key Watch Items

Beyond CapEx, investors will look closely at full-year revenue guidance and any commentary on customer pull-forward behavior due to tariffs. March’s strong revenue surge raised questions about demand timing, especially as U.S.-China trade policy remains highly fluid. Daiwa expects Q2 revenue to rebound ~5% sequentially, aided by AI server builds and iPhone-related pre-builds. However, the risk of volume softness in 2H25 due to tariff-induced demand destruction cannot be ignored.

Angelo Zino and other analysts also want clarity on how TSMC plans to handle U.S. pressure to move more of its production stateside. TSMC already announced a $100 billion U.S. investment with five new fabs, but enforcement actions and political momentum suggest more friction is ahead.

Tariff Exposure and the Nvidia Ripple

TSMC’s close ties with North American customers—responsible for roughly 70% of its revenue—insulate it from direct China export losses. Still, indirect exposure remains a concern. Bernstein, for instance, estimates the impact of the Nvidia H20 export ban will be immaterial, possibly ~1% of revenue, due to the long lead time (7–8 months) between order and delivery.

Meanwhile, Citi projects global WFE spend to decline 5% in 2025 due to softening industrial and auto demand, with Intel and Samsung likely to slash their CapEx more than TSMC. The latter may still provide stability, but a notable guide down could shift WFE consensus to low-single digit growth, a step down from earlier expectations.

Investor Sentiment and Price Action

TSMC shares have slumped 24% from their 2025 high of $204 to around $156. The stock briefly rebounded from April lows of $134.25 but remains volatile ahead of earnings. The options market is pricing in a ±$7.91 move for the week—about 5% of the stock price—indicating muted expectations, potentially due to the Good Friday market closure.

In sum, TSMC remains the semiconductor industry’s bellwether. With strong Q1 revenues, robust AI node demand, and a best-in-class product pipeline, the fundamentals remain intact. But geopolitical friction, CapEx clarity, and any revisions to 2025 guidance could tip sentiment sharply in either direction. Thursday’s report may be less about Q1 and more about what lies ahead in a tech landscape where regulation increasingly rivals innovation as the key driver.