Earnings Preview | TSMC's Q2 profits expected to drop by nearly 30%, focusing on AI chip demand

TSMC's stock price has risen by about 40% this year and will announce its second-quarter financial report before the US stock market opens on Thursday.

According to TSMC's disclosed monthly revenue, the second-quarter revenue reached NT$480.841 billion, an MoM growth of over 10%. However, analysts predict that the second-quarter profit will decline significantly by 27%.

Due to weak demand, an analyst stated that it is not appropriate to buy TSMC stocks at the moment.

Second Quarter Performance Forecast

According to Reuters' calculations, TSMC's second-quarter revenue is NT$480.8 billion (US$15.53 billion), within the range of US$15.2 billion to US$16 billion forecasted in April, compared to US$18.16 billion in the same period last year.

Based on the average of 21 analysts surveyed by Reuters, TSMC's net profit in the second quarter is expected to decline by 27% to NT$172.53 billion (US$5.58 billion), lower than the NT$237 billion in the same period last year.

However, analysts believe that the business performance in this quarter may improve, and the decline in profit forecast partly reflects the strong performance last year.

A senior fund manager stated that profits are expected to rebound in the third quarter due to the anticipated demand for artificial intelligence and the launch of the new iPhone before the year-end holiday shopping season.

Analysts at Fubon Investment stated that the second quarter is expected to be the bottom of the current downturn cycle. Although the situation is expected to improve in the third quarter, the continuous increase in inventory that is still being resolved will weaken the situation compared to normal levels.

The Importance of the Third Quarter

Of course, the third quarter is more important,

And it is reported that TSMC has already started the preliminary work for the trial production of the 2nm process.

TSMC's revenue in the third quarter is expected to grow by more than 10% MoM, which means it will exceed NT$528.9 billion.

Limited Short-term Upside for TSMC

TD Cowen believes that investors should wait for a reasonable stock price before buying TSMC stocks.

On Monday, the analyst reiterated his "market perform" rating on TSMC and reiterated his target price of $85 for TSMC's US stocks.

He wrote, "In the short term, there is limited upside for TSMC, and we will wait for a better entry point." "The main risks are weaker-than-expected demand for Android phones and a potential slowdown in the automotive chip market."

It is expected that TSMC's revenue in the third quarter will grow by 10% MoM, which is lower than the average level of 15% over the past five years. He cited that the oversupply of smartphone chips has not yet dissipated.

"The focus of the earnings conference call will be on data centers and ."

Last month, TSMC stated that the rapid growth in demand for artificial intelligence applications has driven a large number of orders, and performance in the second half of the year is expected to be better than the first half.