TMTPOST --   With blockbuster quarterly earnings and rosy outlook, Taiwan Semiconductor Manufacturing Co.   ( TSMC )   is   sending upbeat   signals of the   longevity of stellar artificial intelligence ( AI )   demand.

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  TSMC   on   Thursday posted revenue of 989.92 billion   New Taiwan dollars   ( $33.1   billion )   for the   third quarter   with   a year-over-year ( YoY )   increase   of   30.3%,   beating analysts ’   estimated NT$977.46   according to LSEG.   The net income   also topped expectation,   jumping 39%   YoY to NT$452.3 billion. That   shattered   TSMC ’ s   profit   record,   representing a   13.6%   rise from   the previous record   set in   the quarter   ended in late   June.  

TSMC ’ s operating income for the   September quarter   rose 38.8%   YoY   to NT$500.69 billion, better than projection of NT$458.6 billion. Gross   margin advanced 0.9   percentage points   quarter-over-quarter   ( QoQ )   to 59.5%, rather   than   an   estimated 1.5   points   sequential   decline. Operating   margin   gained   1 points QoQ   to   50.6%, improving for the   second straight quarter.

TSMC booked capital   expenditure   in $9.7 billion, bringing the   total   Capex so   far this   year to $29.39 billion.

Looking forward the current quarter, TSMC projected revenue to be between $32.2 billion   and $33.4 billion, suggesting   a   YoY increase range between around   20%   and 24%. Gross   margin is expected to be between 59% and 61%,   with operating margin to be   between 49% and 51%.   

TSMC   felt more confident for the   full year. It raised   annual revenue growth   for   the second   time   in three months.   The chipmaker   now expects   a   mid-30%   surge in revenue   for the year 2025, up   from   around 30%   of   growth rate it raised to   in   July.

TSMC   management highlighted AI   demand, a   main   drive   for   their   guidance   upgrade.   "Our business in the third quarter was supported by strong demand for our leading-edge process technologies," said TSMC   Chief Financial Officer Wendell Huang. "Moving into fourth quarter 2025, we expect our business to be supported by continued strong demand for our leading-edge process technologies."

"Recent developments in AI market continue to be very positive," TSMC CEO C.C. Wei told analysts on an earnings call, adding that increasing adoption of AI models by consumers has led to more demand for compute, and by extension, semiconductor products.  

Wei   acknowledge   headwinds   including geopolitical   uncertainty,   but   believed   the AI   demand   can   offset   the loss of market due to the U.S.   sanctions.   "Conviction in the AI megatrend is strengthening," he said. "The AI demand actually continues to be very strong, stronger than we thought three months ago."   

Wall   Street analysts maintained   their bullish on TSMC. "This isn't just a transient spike. TSMC's blowout quarter tells a clear story ... this is no longer a cyclical story, it's structural," said AvaTrade's chief market analyst Kate Leaman.

Morgan Stanley   analyst Charlie Chan   reiterated his overweight rating and hiked his price target from $51.88 to $55.15, citing the company ’ s strong results and positive AI semi outlook. "Advanced packaging revenue is close to 10% of TSMC ’ s total revenue. We think Moore ’ s Law 2.0 era is coming, which focuses more on energy efficiency and system performance improvement, and that requires both front-end and back-end foundry technology migration," Chan wrote in a note.

Bank of America   analyst Mike Yang reiterated his buy rating and lifted his price target from $52.27 to $58.80, saying TSMC has an "unrivalled position amid the megatrend of AI growth." "In our view, TSMC ’ s position in such an area remains solid by ensuring system-level performance via front/back-end manufacturing, while it begins to evaluate with "customers ’ customers" to better fulfill demand for advanced technology," he continued.