Company DCF analysis file
TSMC DCF Analysis
TSMC’s DCF needs a manufacturing and qualification case expressed in a consistent currency and reporting basis. Revenue growth can require new process, packaging and geographic capacity before the cash return arrives. The annual profit and cash bridges below use the Form 20-F’s consolidated IASB IFRS figures in New Taiwan dollars, with parent earnings identified separately.
Read fabrication cost and technology expense on one reporting basis
Years ended December 31, 2024 and 2025; consolidated IASB IFRS Form 20-F basis. Monetary figures are NT$ millions, not convenience U.S. dollar translations. Amounts use the monetary scale stated in each table caption. Source: annual financial statements. Reported lines retain the issuer’s scope; derived ratios use the displayed denominators.
| Measure | FY2024 | FY2025 |
|---|---|---|
| Revenue | 2,894,307.7 | 3,809,054.3 |
| Cost of revenue | 1,269,954.1 | 1,527,760.3 |
| Gross profit | 1,624,353.6 | 2,281,294 |
| R&D | 204,181.8 | 246,427.2 |
| General / administrative | 83,745 | 82,304.3 |
| Marketing | 13,143.6 | 16,918.1 |
| Other operating income / (expense), net | -1,230.2 | 447.3 |
| Operating income | 1,322,053 | 1,936,091.7 |
| Consolidated net income | 1,157,523.9 | 1,695,124.9 |
| Parent-attributable net income | 1,158,380.2 | 1,697,604 |
| Operating margin: derived | 45.7% | 50.8% |
Research, administration and marketing remain in the operating cost base needed to support the manufacturing plan. Parent-attributable earnings exceed consolidated net income here because noncontrolling interests record a loss; consolidated cash should not start from parent earnings without that ownership reconciliation.
Keep the Form 20-F basis throughout a forecast. A local annual-report presentation or a convenience U.S. dollar translation should not silently replace one line inside this income bridge. In a manufacturing case, technology development, process readiness and the relevant packaging capacity must support the same customer demand assumption.
Distinguish physical investment, intangibles and government receipts
The Form 20-F investing cash statement reports these separate cash items. A grant receipt is a funding inflow; it does not turn gross equipment purchases into a smaller physical investment program.
| Item | Cash amount | Direction |
|---|---|---|
| Property / plant / equipment | 1,272,410.5 | Outflow |
| Intangible assets | 10,146.9 | Outflow |
| Property / equipment government grants | 76,258.8 | Inflow |
| Selected purchases less this grant: derived | 1,206,298.6 | Net outflow; other investing excluded |
Model grant eligibility and collection timing alongside gross construction and equipment payments. Neither a grant nor an announced factory establishes qualified production or a customer sale. Process, geography and packaging bottlenecks need their own commissioning and demand schedules rather than one interchangeable capacity assumption.
Trace earnings into cash and reinvestment
Reconciliation source: annual earnings and cash-flow statements. Subtotals below are checkpoints, not extra amounts to add. Grouped adjustments are calculated from the disclosed cash-flow lines.
| Step | FY2025 |
|---|---|
| Operating income | 1,936,091.7 |
| Nonoperating income, net | 105,563 |
| Profit before tax: subtotal | 2,041,654.7 |
| Depreciation + amortization | 688,096.4 |
| Other reconciliation adjustments | -90,466 |
| Operating asset / liability changes | -96,752 |
| Cash generated before cash tax: subtotal | 2,542,533.1 |
| Cash income taxes paid | -267,557.5 |
| Operating cash: subtotal | 2,274,975.6 |
| Property / plant / equipment purchases | -1,272,410.5 |
| Cash after these purchases: derived | 1,002,565.1 |
Other reconciliation reverses finance costs, interest and associate income and includes compensation, asset charges, foreign-exchange effects and other disclosed adjustments. Operating-balance changes include related-party balances, financial assets, employee accruals and noncurrent items as well as trade funding. The group is broader than ordinary receivables and inventory.
The cash statement starts from profit before tax and deducts cash tax. It also separates interest and other financing or investing receipts from operating cash. Preserve that classification when choosing enterprise or equity cash. The displayed post-equipment remainder excludes the separate intangible purchases, grants and other investment flows shown above; it is not the full change in cash or common-share distribution capacity.
Stress the cash cost of manufacturing investment
Illustration: raise equipment and plant cash purchases by 10%, holding operating cash and all other investing flows fixed. This is a funding sensitivity, not a forecast of wafer demand, utilization, yields or grants.
| Measure | Historical basis | Illustrative case |
|---|---|---|
| Operating cash | 2,274,975.6 | 2,274,975.6 |
| Property / plant / equipment purchases | 1,272,410.5 | 1,399,651.6 |
| Cash after these purchases | 1,002,565.1 | 875,324.0 |
The exact funding reduction is NT$127,241.05 million; table figures are rounded to one decimal. Additional equipment creates value only through a stated productive-output, cost and customer-collection case. Any later grant or revenue benefit must be modeled separately rather than credited automatically to this spending increase.
Keep interim reporting separate from the annual basis
Q3 2026 covers 2026-07-01 through 2026-09-30 and was released 2026-10-15. Revenue was NT$1,494.24 billion, as rounded in the issuer release. Source: official Q3 2026 results.
The later quarter’s revenue is rounded in NT$ billions, while the annual tables use NT$ millions. Convert the scale before comparison, retain the quarter’s own reporting basis and roll the annual balances forward. A single quarter does not establish the steady-state return on a multi-year technology or geographic investment program.
Turn the financial basis into a DCF case
| Decision | Treatment |
|---|---|
| Demand | Connect qualified customer programs to the relevant process and packaging capacity. |
| Operating basis | Keep IASB IFRS consolidated earnings, parent claims and rounded local presentations distinct. |
| Investment | Schedule gross equipment and intangible cash, commissioning and any separately timed grant receipts. |
| Cash convention | Reconcile operating tax, interest classification and operating-balance funding consistently. |
| Per-share bridge | Use one currency and dated capital claims; distinguish ordinary shares from ADS units before presenting a per-security result. |
A conventional enterprise case uses operating earnings after an explicit operating tax assumption, suitable non-cash adjustments and the reinvestment and funding required by qualified output. The terminal case must sustain technology development and manufacturing capability. Currency conversion and the security-unit bridge should be explicit steps after the operating valuation, not a mixture of NT$ cash and convenience-dollar earnings.
The TSMC company analysis explains the wider operating context. Use the company forecast tool and DCF calculator with explicit assumptions. Use the historical financials to define an explicit operating and reinvestment case, then supply valuation-date capital costs, claims and diluted shares. Check that each cash claim is counted once before deriving a per-share value.
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