Taiwan Semi (TSM) reported a significant surge in July sales, leading to its stock rising more than 4% Friday. Its U.S.-listed shares also rose at the open.
According to analysts, TSMC's July revenue reached NT$256.953 billion, marking a 24% increase month-over-month from June's NT$207.869 billion.
This impressive performance is said to position TSMC well ahead of typical quarterly linearity, covering 35% of both analysts' and consensus Q3 estimates, which stand at NT$741.223 billion and NT$746.279 billion, respectively.
Analysts attribute this strong performance to several key tailwinds. "AI server demand remains robust, while standard server demand appears to be bouncing back," they noted.
Additionally, TSMC is said to be benefiting from a strong ramp-up in Apple’s second-half iPhone supply and Intel's increased forecasts for its Lunar Lake processors.
However, analysts advise caution in extrapolating this early strength across the entire quarter.
They state that while the July results are undeniably positive, past patterns suggest that TSMC often delivers stronger-than-expected results early in the quarter but ends up reporting more in-line with its initial guidance by quarter-end.
Analysts say exchange rates have also played a role, with the USD/TWD exchange rate shifting favorably in July, although it remains slightly weaker than when TSMC provided its Q3 guidance. A weaker TWD generally benefits TSMC's top-line and gross margins.
Given the strong start to the quarter and a positive outlook for TSMC, analysts maintain an Outperform rating on the stock with a target price of $1,175, supported by TSMC's long-term growth prospects in markets such as 5G, high-performance computing, and automotive sectors.