HSBC Research has released a report forecasting that Taiwan Semiconductor Manufacturing Company (TSMC) (TSM, Financial) will meet its second-quarter performance expectations, despite the unavoidable impact of currency fluctuations expected by the third quarter. HSBC anticipates TSMC's second-quarter revenue to increase by 39% year-on-year to NT$934 billion, slightly below their estimate of NT$936 billion but above the general market expectation of NT$930 billion. In USD terms, revenue is expected to reach approximately $30.2 billion, surpassing the company's guidance of $28.4-29.2 billion.
Looking ahead to the third quarter, HSBC expects TSMC's revenue in USD to grow by 4-5% sequentially, while a 2% decline is anticipated when calculated in New Taiwan dollars. This is weaker than the average 14% sequential growth seen in the same quarter over the past decade. The appreciation of the New Taiwan dollar is likely to pressure gross margins, forecasted to decrease to 56.5%, below the market expectation of 57.2%. HSBC estimates that for every 1% appreciation of the New Taiwan dollar, TSMC's operating profit margin will drop by 0.4 percentage points.
To reflect the currency impact, HSBC has lowered TSMC's earnings per share estimates for 2025 and 2026 by about 5% each but maintains a "buy" rating. The target price for TSMC's stock on the Taiwan Stock Exchange has been raised from NT$1,100 to NT$1,280, highlighting confidence in its leadership in advanced process manufacturing and the AI/HPC field.
