Financial Trends -- 9.0/10
- Revenue acceleration: Growth went from -9% in FY2023 (cyclical trough) to +30% in FY2024 to +36% in FY2025, driven by explosive AI/HPC demand
- EPS nearly tripled in 2 years: From NT$32.34 (FY2023) to NT$66.24 (FY2025) -- a 105% increase reflecting both revenue growth and margin expansion
- FCF robust despite peak capex: NT$1,003B in FY2025 (+15% YoY) despite $40.9B capex -- demonstrating the operating leverage of the monopoly model
- Capex escalating: $40.9B in FY2025 vs $29.8B in FY2024, with $52-56B guided for FY2026. Higher capex is correlated with higher growth opportunities per CFO Wendell Huang
- Consensus FY2026: ~20% revenue growth to ~$147B and ~20% EPS growth. Management guides long-term revenue CAGR approaching 20% in USD terms for 2024-2029
- Gross margin expansion extraordinary: From 53.1% in Q1 2024 to 62.3% in Q4 2025 -- a 920bps expansion in 8 quarters for a capital-intensive manufacturer
- Operating margin broke 50%: Hit 54.0% in Q4 2025, up from 42.0% in Q1 2024. This is world-class operating leverage
- Margin expansion despite overseas dilution: Arizona fab dilution of 2-3% is being absorbed while margins still expand, reflecting pricing power and mix shift to advanced nodes
- Long-term GM floor of 53% appears conservative: Management guides "53% and higher" as the long-term gross margin floor -- actual Q4 2025 was 62.3%, a full 930bps above the stated floor
Note: Q3 2025 FCF decline of -25% YoY was driven by peak capex of $9.7B while operating cash flow remained strong. Q4 2025 recovered strongly to NT$369B (+43% YoY).
3nm revenue share has tripled from 9% in Q1 2024 to 28% in Q4 2025, reflecting rapid AI-driven node adoption. Advanced nodes (<=7nm) reached 77% of wafer revenue in Q4 2025 -- one of the fastest node ramps in TSMC history.
HPC surged from 46% to 55-60% of revenue in 2025, driven by explosive AI/data center demand. This is the structural shift that defines the current TSMC cycle. Smartphone share declined from 38% to 27-32% as HPC growth outpaced mobile.
TSMC receives a financial trends score of 9.0/10 -- the highest tier, reflecting exceptional financial execution across all metrics.
Revenue grew 36% in FY2025 to $122.4B, accelerating from 30% in FY2024 and recovering strongly from the -9% cyclical trough in FY2023. EPS nearly tripled from NT$32.34 to NT$66.24 in just two years. Gross margins expanded an extraordinary 920bps over 8 quarters, from 53.1% to 62.3% -- a remarkable achievement for a capital-intensive semiconductor manufacturer. Operating margins broke through 50% and reached 54.0% in Q4 2025.
FCF remained robust at NT$1,003B (~$31B USD) despite the largest capex year in company history ($40.9B). Revenue growth has consistently outpaced capex growth, demonstrating the operating leverage inherent in the foundry monopoly model.
The score does not reach 9.5 or 10 because: (a) FY2023 was a revenue decline year (-9%), showing cyclical sensitivity; (b) FY2026 capex of $52-56B creates execution risk if AI demand disappoints; and (c) FX sensitivity (40bps per 1% NT move) introduces margin volatility that is structural and unpredictable. These are minor caveats against an otherwise best-in-class financial profile.