Taiwan Semiconductor Drops 1.4% Pre-Market Despite Q3 Earnings Beat

Taiwan Semiconductor Mfg. Co. Ltd. TSM beat earnings expectations in the third quarter of 2020 report before market open on Thursday.

"Our third quarter business benefitted from the strong demand for our advanced technologies and specialty technology solutions, driven by 5G smartphones, HPC and IoT-related applications," VP and Chief Financial officer, Wendell Huang said.

Huang forecasts a sequential growth in the fourth quarter, driven by strong demand for its 5-nanometer technology.

Key Highlights for Q3 2020

• Consolidated revenues for the quarter grew 29.2% year-over-year to $12.14 billion (NT$356.43 billion) versus an estimate of $11.93 billion, and 16.9% sequentially from the second quarter revenue of $10.38 billion.
• Diluted earnings per ADR of $0.90 beat the consensus estimate of $0.81, increasing from $0.78 in the second quarter.
• Gross margin, operating margin, and net profit margin for Q3 2020 were 53.4%, 42.1%, and 38.5% respectively, largely unchanged from the previous quarter.
• Of the Wafer Revenues, 61% was generated from advanced technologies of 16-nanometer, and 35% from 7-nanometer technology.

Outlook for Q4 2020

• Management estimates revenues between $12.4 billion to $12.7 billion, considering an exchange rate of 1$ = 28.75 NT$.
• The company expects a marginal shrink in profit margins, with estimates ranging from 51.5% to 53.5% for gross margin and 40.5% to 42.5% for operating margin.

Price Action: TSM shares are 1.4% lower to $87.33 in the pre-market session Thursday at press time.