The company is seen as a leading indicator of the semiconductor industry given that it's a producer of chips for companies like Nvidia
Taiwan Semiconductor's revenue miss isn't exactly surprising given that consumer and enterprise demand for tech products has been steadily declining in 2022. One factor is that tech spending exploded during the pandemic, pulling forward future demand, due to stimulus payments and companies shifting to remote work. Yet, the positive reaction to the earnings miss could be an indication that these near-term headwinds have already been priced into the stock.
Inside the Numbers
In Q4, Taiwan Semiconductor reported $1.82 in earnings per share which was slightly higher than estimates of $1.80 in earnings per share. However, revenue also came in below expectations at $19.9 billion vs $20.8 billion. Overall, this was a 30% increase in revenue, while earnings were higher by 57%.
The company's 5-nanometer chips contributed 32% of its total revenue, while 7-nanometer chips generated 22% of its total revenue. For Q1, the company sees revenue between $16.7 billion and $17.5 billion. Wall Street analysts had a Q1 revenue forecast of $17.7 billion which equates to revenue growth of just 1%. The company noted weakness in nearly all of its end markets including data center chips, which had been a major growth driver for the industry.
In a statement accompanying the earnings release, CFO Wendell Huang said, "Our fourth-quarter business was dampened by end-market demand softness, and customers' inventory adjustment, despite the continued ramp-up for our industry-leading 5-nanometer technology. Moving into first-quarter 2023, as overall macroeconomic conditions remain weak, we expect our business to be further impacted by continued end-market demand softness, and customers' further inventory adjustment."
Overall, Taiwan Semiconductor's stock is ripping higher despite an assortment of bad news. This is similar to what we are seeing in many stocks and sectors, given that inflation seems to be trending lower which is providing relief on the rate front, and there is increasing evidence of a re-acceleration in economic growth.