TSMC's third-quarter profit jumps 69% as 2-nanometer ramps and it guides a larger fourth quarter

Taiwan Semiconductor Manufacturing Co. reported third-quarter net income of NT$763.06 billion, up 68.7% from a year earlier, as dollar revenue of $46.72 billion topped its prior guide and 2-nanometer technology contributed 8% of wafer revenue.

Third-quarter profit on leading-edge demand

Taiwan Semiconductor Manufacturing Co. said third-quarter net income was NT$763.06 billion, up 68.7% from a year earlier, and diluted earnings were NT$29.43 a share, or US$4.60 per ADR. Revenue rose 50.9% to NT$1.49 trillion. In U.S. dollars, revenue was $46.72 billion, up 41.2% from a year earlier and 16.2% from the prior quarter.

Gross margin was 66.4%, operating margin 58.7%, and net profit margin 51.1%. Compared with the second quarter, revenue rose 17.6% and net income rose 8%. The results were prepared under consolidated accounting standards used by the company.

The dollar revenue figure landed above the US$44.6 billion to US$45.8 billion range TSMC had previously guided for the quarter, according to the company's third-quarter earnings presentation filed with the U.S. Securities and Exchange Commission. Gross margin of 66.4% sat inside the 65% to 67% band shown as prior guidance on that same presentation slide.

Advanced nodes and the 2-nanometer ramp

Shipments of 2-nanometer technology accounted for 8% of total wafer revenue in the third quarter. Three-nanometer accounted for 33%, five-nanometer for 28%, and seven-nanometer for 10%. Advanced technologies, which TSMC defines as seven-nanometer and more advanced processes, made up 79% of wafer revenue.

"Our business in the third quarter was supported by strong demand for our leading-edge process technologies," Wendell Huang, senior vice president and chief financial officer, said in the company's earnings release. "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."

That mix matters because the newest nodes typically carry higher prices and are where artificial-intelligence accelerators and other high-performance chips are built. The earnings release reports that technology mix and does not state a high-performance-computing share of revenue.

Cash generation and the balance sheet

Cash from operating activities was NT$919.77 billion in the third quarter, up from NT$783.36 billion in the second quarter and NT$426.83 billion a year earlier, the presentation showed. Capital expenditures were NT$443.21 billion. Free cash flow, which TSMC defines as operating cash flow minus capital expenditures, was NT$476.56 billion.

Cash and marketable securities rose to NT$4.02 trillion, or 39.9% of total assets, from NT$3.52 trillion three months earlier. Total assets were about NT$10.05 trillion at quarter-end.

Fourth-quarter and full-year outlook

For the fourth quarter, TSMC guided revenue of US$52.3 billion to US$54.3 billion. Assuming an exchange rate of 1 U.S. dollar to 31.8 New Taiwan dollars, it expects gross margin of 65% to 67% and operating margin of 56.5% to 58.5%. Even the bottom of that revenue range would be a large step up from the $46.72 billion just reported.

In the same earnings presentation, management said it expects 2026 revenue to increase by around 44% in U.S. dollar terms, based on its current business outlook.

ADR trading after the report

The company's New York Stock Exchange-listed ADRs (ticker TSM) were near $415.12 in Friday session trading, according to Yahoo Finance market data pulled while this article was prepared, after closing at $422.25 on Thursday. Prices change continuously; check a live quote for the current level.

TickerGrove previously covered TSMC's September monthly sales print, which pointed to record third-quarter revenue before the full profit-and-loss statement and guidance were released.