TSMC Q3 Profit Soars 69% to Record, Sees Q4 Sales Up to $54.3 Billion

By
Harris
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Key Points

  • TSMC’s third-quarter net income rose 68.7% to a record NT$763.06 billion, with diluted EPS of NT$29.43, or US$4.60 per ADR unit.
  • Revenue reached $46.72 billion, up 41.2% from a year earlier and above the top of the company’s own $44.6 billion to $45.8 billion forecast.
  • TSMC guided fourth-quarter revenue to $52.3 billion to $54.3 billion, with gross margin of 65% to 67% and operating margin of 56.5% to 58.5%.
  • Chips of 7 nanometers and smaller made up 79% of wafer revenue, and the newest 2-nanometer process jumped to 8% from 3% in the second quarter.
  • On the earnings call, TSMC lifted its 2026 revenue growth outlook to about 44% in dollar terms and kept its $60 billion to $64 billion capital budget.

Taiwan Semiconductor Manufacturing Co. posted the largest quarterly profit in its history on Thursday and forecast another sharp jump in sales for the final quarter of the year, giving the AI chip trade a fresh test a day after a sell-off in U.S. tech stocks.

The TSMC Q3 earnings report, released at 1:30 a.m. ET, beat analyst profit estimates and topped the company’s own revenue and operating margin forecasts. The world’s largest contract chipmaker gave its outlook on a call that began at 2 a.m. ET.

What happened

In its earnings release, TSMC reported consolidated revenue of NT$1,494.24 billion for the quarter ended Sept. 30, up 50.9% from a year earlier and 17.6% from the second quarter. In U.S. dollars, revenue was $46.72 billion, up 41.2% year over year and 16.2% sequentially.

Net income climbed to NT$763.06 billion from NT$452.30 billion a year earlier and rose 8.0% from the second quarter’s record NT$706.56 billion. Diluted earnings per share were NT$29.43, up from NT$17.44 a year earlier, the company’s management report showed.

Profit topped the LSEG SmartEstimate of about NT$746.3 billion, CNBC and Reuters reported, and marked TSMC’s sixth straight quarter of record earnings.

Gross margin was 66.4%, inside TSMC’s 65% to 67% forecast but 1.3 percentage points below the second quarter, mainly because of dilution from the initial 2-nanometer ramp, the company said. Operating margin of 58.7% beat the 56% to 58% guidance range.

Where the growth came from

Leading-edge chips did the heavy lifting. The 2-nanometer process accounted for 8% of wafer revenue, 3-nanometer 33%, 5-nanometer 28% and 7-nanometer 10%, for a combined 79%, up from 77% in the second quarter.

Revenue from high-performance computing, TSMC’s largest platform, rose 22% from the second quarter to 68% of the total, while smartphones made up 21%. Customers based in North America accounted for 79% of revenue.

Latest development

TSMC expects fourth-quarter revenue of $52.3 billion to $54.3 billion, assuming 31.8 New Taiwan dollars to the U.S. dollar, with gross margin of 65% to 67% and operating margin of 56.5% to 58.5%, according to the release and its investor relations guidance table. At the midpoint, that implies growth of about 14% from the third quarter and 58% from a year earlier, CNBC and Taiwan’s Central News Agency reported.

“Moving into fourth quarter 2026, we expect our business to be supported by continued strong demand for our leading-edge process technologies, including the steep ramp-up of our 2-nanometer technology,” Chief Financial Officer Wendell Huang said in the release.

On the call, Chairman and CEO C.C. Wei said TSMC now expects 2026 revenue to grow about 44% in U.S. dollar terms, the Central News Agency reported, up from the outlook of slightly above 40% the company gave in July. TSMC kept its 2026 capital budget at $60 billion to $64 billion, Reuters reported, and CNBC said it expects spending from 2026 through 2028 to be significantly higher than in the previous three years. Third-quarter capital expenditures were $13.84 billion.

Why it matters

TSMC builds the most advanced processors designed by Nvidia, Apple and AMD, so its results are one of the clearest reads on AI infrastructure spending. That question hung over Wall Street on Wednesday, when hotter-than-expected September inflation data hit the AI trade and the Nasdaq Composite closed down 1.88%, CNBC reported. Our Nasdaq-100 outlook for Thursday had listed TSMC’s report among the day’s events to watch.

A record quarter, a higher full-year target and a forecast well above third-quarter sales point to demand that is still running hot. In CNBC’s report, SemiAnalysis analyst Sravan Kundojjala said TSMC is checking whether customers have the financing and components to deploy the systems they order. “Even after those checks, TSMC says demand remains well above its supply capacity,” he said.

The report also adds a tech heavyweight to an earnings season led so far by banks such as Bank of America, whose profit fell on a federal fine.

There is a U.S. manufacturing angle as well. TSMC has completed construction of its second Arizona fab and is installing equipment, with mass production expected in the third quarter of 2027, slightly ahead of schedule, CNBC reported.

What happens next

Confirmed: The September producer price index is due at 8:30 a.m. ET Thursday, ahead of the 9:30 a.m. ET open, the first full U.S. session for TSMC’s New York-listed shares and chip stocks to trade on the results. TSMC’s NT$7.00 second-quarter dividend goes ex-dividend on Dec. 10 and is paid Jan. 7, 2027. A call replay is on its investor relations site.

Still uncertain: It is not yet clear how the shares will react in regular U.S. trading, or whether 2-nanometer costs keep weighing on margins, since the fourth-quarter gross margin range is unchanged from the third quarter’s. CNBC said TSMC is reportedly evaluating a potential investment in Texas; the company has not announced one.

For now, the message from Hsinchu is that the AI build-out is still outrunning chip supply. Whether Wall Street buys back into the AI trade after Wednesday’s slide should become clearer once U.S. markets open.

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Sources