TSMC Posts Record NT$763 Billion Profit and Guides Fourth-Quarter Revenue as High as $54.3 Billion

TSMC reported record third-quarter net income of NT$763.06 billion on Thursday and guided fourth-quarter revenue to between $52.3 billion and $54.3 billion, a further step up from the third quarter's $46.72 billion that keeps the AI chip build-out accelerating into year-end.

The quarter itself was already a record before the guidance landed. Revenue of NT$1.49 trillion rose 50.9% from a year earlier and 17.6% from the second quarter; in U.S. dollars, revenue was $46.72 billion, above the top of the company's own $44.6 billion to $45.8 billion guidance range. Net income rose 68.7% from a year earlier and 8.0% sequentially to a record NT$763.06 billion, about 2.2% ahead of the NT$746.3 billion LSEG SmartEstimate compiled from 16 analysts, and diluted earnings per share were NT$29.43, or $4.60 per ADR unit. It was the company's sixth consecutive record quarter for profit and its 11th consecutive quarter of profit growth.

The outlook raises the bar again

Management expects fourth-quarter revenue of $52.3 billion to $54.3 billion, against $33.73 billion in the fourth quarter a year earlier — growth of roughly 55% to 61% — at an assumed exchange rate of 31.8 New Taiwan dollars per U.S. dollar. Gross margin is guided to 65% to 67%, the same range as for the third quarter, and operating margin to 56.5% to 58.5%. TSMC also kept its 2026 capital spending expectation at $60 billion to $64 billion, the range it raised to in July. The spending arithmetic is the tell: capital expenditures were $13.84 billion in the third quarter and $40.64 billion through nine months, so reaching even the low end of the maintained full-year plan implies roughly $19.4 billion of fourth-quarter spending, well above any quarter so far this year. Brokerages had broadly expected fourth-quarter revenue to rise 10% to 15% sequentially; the guidance range implies about 12% to 16%, at or above the top of that expectation.

AI work carried the quarter, and the newest node is diluting margin

High-performance computing, the category that holds the AI accelerators, supplied 68% of net revenue, with smartphones at 21%. By process node, 3-nanometre took 33% of wafer revenue, 5-nanometre 28%, 7-nanometre 10% and the new 2-nanometre 8%, up from 3% in the second quarter; advanced technologies of 7-nanometre and below together were 79%. Gross margin of 66.4% landed inside the guided 65% to 67% range but fell 1.3 percentage points from the second quarter, which the management report attributes primarily to dilution from the initial ramp of 2-nanometre production. Operating margin of 58.7% did the opposite, finishing above the top of the 56% to 58% guidance range. The company generated NT$919.77 billion of operating cash flow and NT$476.56 billion of free cash flow in the quarter, and wafer shipments rose 3.2% sequentially to 4.48 million 12-inch-equivalent wafers.

A record print in a nervous tape

The results arrive while AI shares are being repriced, not rewarded on trust. TSMC's Taipei-listed shares closed down 2% ahead of the release, in line with a broader technology sell-off, and South Korean rivals Samsung Electronics and SK Hynix fell more than 10% amid worries that further U.S. Federal Reserve rate increases could hit AI stocks that are sensitive to borrowing costs. That is the context the guidance has to work against: a market capitalisation of around $2 trillion, a stock up 57% this year, and a sector coming off a hot September inflation print. One day earlier ASML, the largest maker of AI chipmaking tools, gave an upbeat outlook and said customers were already looking to place orders for 2029 and 2030 — the demand chain, on the evidence of this week, is still being built years out even as the shares wobble.

What is not in the release, and what to watch

The presentation materials contain fourth-quarter guidance only; no updated full-year revenue growth forecast appears in them, and the prior full-year framing — U.S.-dollar revenue growth slightly above 40%, set in July — is neither raised nor withdrawn in the documents published with the results. Whether management refines that on the call's question-and-answer session, and what it says about the potential Texas expansion it has been evaluating and about 2027 demand, are the open items. The concrete watch list from here: whether fourth-quarter capital spending actually steps up toward the roughly $19.4 billion the maintained plan implies, whether 2-nanometre's share of wafer revenue keeps climbing faster than its margin dilution, and whether the fourth quarter's gross margin holds the 65% to 67% range as that ramp steepens. The next hard data point is TSMC's October monthly revenue report in November.