TSMC posted a record 69% jump in quarterly profit as AI chip demand held up

TSMC $TSM reported third-quarter net income of NT$763.06 billion on Thursday, up 68.7% from a year earlier. That marked a record for the sixth straight quarter, according to CNBC.

Revenue rose 50.9% from a year earlier to NT$1,494.24 billion, or U.S.$46.72 billion, a 41.2% increase in U.S. dollars. Diluted earnings per share were NT$29.43, or U.S.$4.60 per ADR unit. Compared with the second quarter, revenue increased 17.6% and net income rose 8.0%.

Gross margin was 66.4%, operating margin was 58.7% and net profit margin was 51.1%. The operating margin topped the 56.0% to 58.0% range the company had guided for the quarter. Gross margin fell 1.3 percentage points from the second quarter, mainly because of margin dilution from the initial ramp-up of its N2 technology, the company said.

Net income came in above the analyst consensus of NT$746.34 billion, according to CNBC, which cited LSEG SmartEstimates.

Chips built on 2-nanometer technology made up 8% of wafer revenue, while 3-nanometer chips accounted for 33%, 5-nanometer for 28% and 7-nanometer for 10%. Chips built on 7-nanometer processes or smaller — what TSMC classifies as advanced technologies — together accounted for 79% of total wafer revenue. High-performance computing accounted for 68% of net revenue, up from 57% a year earlier, and smartphones accounted for 21%.

TSMC expects fourth-quarter revenue of U.S.$52.3 billion to U.S.$54.3 billion. Based on an exchange rate of 31.8 New Taiwan dollars to the U.S. dollar, it expects a gross profit margin of 65% to 67% and an operating profit margin of 56.5% to 58.5%. The company also expects 2026 revenue to increase by around 44% in U.S. dollar terms.

"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," Senior Vice President and Chief Financial Officer Wendell Huang said in a statement.

Chairman and CEO C.C. Wei sees no sign of a slowdown in demand for AI infrastructure, according to MarketWatch.

The company pointed to the rising uptake of agentic AI and open-source AI models as key forces sustaining robust demand for its chips. TSMC projected that its capital spending over the 2026–2028 period would rise substantially compared with the three years prior. Capital expenditures totaled U.S.$13.84 billion in the third quarter.