Rising AI Chip Demand to Boost Taiwan Semiconductor's Q3 Revenues

Taiwan Semiconductor Manufacturing Company Ltd. TSM is scheduled to release its third-quarter 2025 earnings on Oct. 16. The world’s top contract chipmaker looks well-positioned for another strong quarter, supported by the surging demand for artificial intelligence (AI) chips and its leadership in advanced semiconductor technologies.

Click here to know how TSM’s overall third-quarter results are likely to be.

Advanced Node Momentum Drives TSM’s Revenue Growth

Taiwan Semiconductor projects third-quarter revenues to come between $31.8 billion and $33 billion, implying a year-over-year increase of approximately 38% at the midpoint. The Zacks Consensus Estimate for the top line is pegged at $31.5 billion, indicating year-over-year growth of 34%.

The growing adoption of AI in cloud services, consumer devices and data centers continues to fuel the need for powerful, energy-efficient chips. TSMC remains a key beneficiary of this trend. Its dominance in 3-nanometer (3nm) and 5-nm manufacturing nodes has been central to this surge, as major chip designers like NVIDIA, Apple and Advanced Micro Devices rely heavily on its cutting-edge processes.

Taiwan Semiconductor has been witnessing strong demand for its AI-focused products, including Chip-on-Wafer-on-Substrate advanced packaging solutions. This segment has seen consistent demand exceeding supply, reflecting the company’s critical role in powering AI and high-performance computing applications.

Margin Headwinds From Global Expansion and Energy Costs

While revenue momentum looks solid, rising operational costs are likely to have hurt Taiwan Semiconductor’s gross margin in the to-be-reported quarter. Taiwan Semiconductor’s aggressive global expansion — with new fabs in Arizona, Japan and Germany — has added cost burdens from higher labor and utility expenses. These sites, though strategically important for geographic diversification and customer proximity, are expected to reduce gross margins by 2-3% annually over the next few years as production ramps up.

Higher energy prices in Taiwan, following a 25% electricity hike in 2024, pose additional challenges, especially as advanced nodes demand greater power.

Despite the prevailing challenges, analysts remain optimistic about TSM’s bottom-line growth in the to-be-reported quarter. The Zacks Consensus Estimate for Taiwan Semiconductor’s third-quarter earnings has been revised upward by a penny to $2.59 per share, indicating year-over-year growth of 33.5%.

TSM’s Zacks Rank & Stocks to Consider

Currently, Taiwan Semiconductor carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the broader Zacks Computer and Technology sector are Seagate Technology STX, Meta Platforms META and Corning GLW. While Seagate Technology sports a Zacks Rank #1 (Strong Buy), Meta Platforms and Corning each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Seagate Technology’s fiscal 2026 earnings has been revised upward by 2.1% to $10.52 per share in the past 30 days, suggesting an increase of 29.9% from fiscal 2025’s reported figure. Seagate Technology shares have surged 154.3% year to date (YTD).

The Zacks Consensus Estimate for Meta Platforms’ 2025 earnings has moved upward by 2 cents to $28.15 per share in the past seven days, implying a year-over-year improvement of approximately 18%. Meta Platforms shares have risen 22.2% YTD.

The Zacks Consensus Estimate for Corning’s full-year 2025 earnings has moved northward by a penny to $2.47 per share over the past 30 days and suggests a year-over-year increase of 26%. Corning shares have soared 79.9% YTD.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research