TSMC Posts 20% Q4 Revenue Gain and Plans $52–56B AI Capex for Node Ramps
Taiwan Semiconductor reported TWD 1.05 trillion revenue in Q4 2025, up 20.5% year-over-year, with net income of TWD 505.7 billion (+40.6%) and EPS of TWD 19.50, lifting net margin to 48.4%. It trades at ~32× trailing P/E, 14.5× P/S and plans USD 52–56 billion capex in 2026 to ramp N3, N2 and A16 nodes.
1. TSMC Achieves First $100 Billion Revenue Year
In 2025, Taiwan Semiconductor Manufacturing Company generated NT$4.05 trillion (US$122.4 billion) in revenue, marking the first time the company surpassed the US$100 billion threshold. This represents a 36% increase from 2024, driven primarily by the surge in demand for advanced AI chips for data centers. The company’s investment in cutting-edge process nodes and capacity expansion—including the ramp of N3 wafers and the commissioning of additional lines in its Arizona facility—enabled it to capture more than 90% of the market for high-performance computing semiconductors.
2. Robust Margin Expansion Highlights Operational Strength
TSMC’s gross margin expanded from 56.1% in 2024 to 59.9% in 2025, while operating margin climbed from 45.7% to 50.8%. In the fourth quarter alone, the foundry delivered a gross margin of 62.3% and an operating margin of 54.0%. This improvement reflects both the company’s pricing power over bespoke AI chip customers and its ability to drive yield improvements at advanced nodes. Lower per-wafer costs and higher average selling prices contributed to the margin gains, underscoring TSMC’s virtual monopoly in the most technologically demanding segments of the semiconductor market.
3. Market Leadership and Long-Term Growth Outlook
TSMC continues to hold a dominant position in advanced logic, with N3 and below accounting for approximately 63% of total sales and N2 on track to ramp from 35,000 wafers per month in 2025 to over 130,000 in 2026. High-performance computing now represents more than half of revenue, while smartphone, automotive and IoT applications comprise the remainder. Management has guided for capital expenditures of US$52–56 billion in 2026 to meet projected growth, and forecasts revenue growth of nearly 30% next year as AI infrastructure spending intensifies globally.
4. Valuation Attractive Relative to Peers
Despite a 69% share price increase since the start of 2025, TSMC trades at approximately 25 times next-year’s projected earnings—below the multiples of other leading semiconductor peers. Given its sustained 25–30% revenue CAGR target through 2029, near-50% net margins and recurring free cash flow generation of over US$200 billion annually, the current valuation presents a compelling entry point for investors focused on durable exposure to the AI build-out.