TSMC Q2 Earnings Preview: Can Strong AI Demand Drive a New Rally?

Taiwan Semiconductor Manufacturing Company ($TSM) is set to report its Q2 2025 earnings this Thursday, July 17, at 2:00 AM ET (14:00 Taiwan Time). Investor expectations are running high. Riding on the back of strong AI-driven demand, TSMC’s stock has already surged about 62% from its 2025 low, with a year-to-date gain of 18.24% as of Tuesday’s close.

With Nvidia recently becoming the first company ever to break the $4 trillion market cap mark, market enthusiasm around AI infrastructure has been reignited. As the world’s most advanced chip foundry, TSMC sits at the heart of this renewed investor enthusiasm.

What to Expect This Quarter

Market consensus expects:

Revenue: NT$919.9 billion (up 36.6% YoY)
EPS: NT$68.03 (up 41.0% YoY)

But even before the official release, TSMC offered an early glimpse through its monthly revenue report. It posted Q2 revenue of NT$933.8 billion, up 13.6% from Q1 and slightly above market expectations. June alone saw NT$263.7 billion in revenue, down MoM but up 26.9% YoY — further confirming the strength of the AI wave.

CEO C.C. Wei has consistently reiterated that AI chip demand is outstripping supply, and expects USD revenue to grow around 20% in 2025. He even used just three words to describe the company’s outlook for the next 5–10 years: “very, very good.”

Key Focus Areas for Investors

1. Gross Margin Sensitivity to FX:

One of the biggest concerns this quarter is the impact of the stronger New Taiwan dollar. Management previously noted that every 1% appreciation in NT$ could reduce gross margin by 0.4 percentage points. Given that NT$ appreciated by about 7% in Q2, gross margin could be pressured by roughly 3 points.

TSMC’s Q2 guidance of gross margin is 57%–59%, while current street consensus is 57%–58%. JP Morgan still expects 57.9%, thanks to better fab utilization and some rush orders.

2. Arizona Fab and U.S. Expansion:

TSMC’s U.S. expansion remains in the spotlight. The company plans to build five fabs in Arizona, with the first batch of 4nm chips already shipped to Apple, Nvidia, and AMD. However, these new fabs are still margin-dilutive, and investors will be watching how this affects profitability going forward.

3. 2nm Roadmap and Capex Plans:

TSMC's lead in advanced nodes is critical. Investors are looking for updates on the 2nm rollout, particularly as Nvidia and others begin transitioning toward N3P/N3X nodes. Capex plans for this year and 2026 could also give hints about long-term AI capacity planning.

4. Full-Year Guidance – Will It Be Raised?

TSMC’s revenue is now 59% from HPC (high-performance computing) customers like Nvidia, Broadcom, and AMD. Smartphone customers like Apple, Qualcomm, and MediaTek make up just 28%, and that segment remains sluggish. IDC noted only 1.5% YoY growth in global smartphone shipments in Q1.

Given the strong performance in HPC and expected volume ramps for Nvidia’s GB300 series and Google’s TPUv6, there’s a good chance TSMC might raise its full-year USD revenue guidance above the current 20%.

What Are Analysts Saying?

JPMorgan remains upbeat, pointing to strong structural demand for TSMC’s advanced nodes. They expect tight capacity and high utilization for 3nm through 2026–2027, driven by AI accelerators.
Morgan Stanley is even more bullish, advising investors to buy before the earnings call, citing a likely guidance raise thanks to robust AI demand.
Bloomberg analysts say Q2 sales may reach the upper end of expectations, despite FX pressures. They expect operating margin to hover near the 47% low-end of estimates.

Final Thoughts

While short-term headwinds like FX and overseas fab costs remain, the long-term story for TSMC is still AI-driven — and very compelling. If Thursday’s earnings call confirms strong HPC demand and clearer visibility on 2nm, TSMC might be poised for another leg higher.