TSMC Q3 Earnings Beat Estimates: Net Profit Surges 69% to Record High as AI Demand Remains Strong

TradingKey - On October 15, TSMC (TSM) reported its third-quarter 2026 financial results. Driven by sustained growth in demand for AI chips and advanced nodes, both revenue and net profit reached record highs, with net profit surging nearly 69% year-over-year and beating market expectations.

Source: TSMC

Financial results showed that TSMC's third-quarter revenue reached NT$1.494 trillion (approximately $46.72 billion), up 50.9% year-over-year and 17.6% quarter-over-quarter, exceeding the company's previous revenue guidance of $44.6 billion to $45.8 billion; net profit reached NT$763.06 billion, up 68.7% year-over-year and higher than the NT$746.3 billion expected by analysts surveyed by LSEG; earnings per share stood at NT$29.43.

In terms of profitability, the data showed it remained at a high level, with third-quarter gross margin reaching 66.4%, up significantly from 59.5% in the same period last year, but down 1.3 percentage points from the second quarter; operating margin reached 58.7%, and net margin was 51.1%. TSMC stated that the sequential decline in gross margin was mainly affected by margin dilution from the initial volume production of its 2nm node.

Advanced process technologies remained the core driver of this performance growth. In the third quarter, 2nm, 3nm, 5nm, and 7nm process technologies contributed 8%, 33%, 28%, and 10% of wafer revenue, respectively, with advanced technologies of 7nm and below accounting for a combined 79%. Among them, the revenue contribution from 2nm rapidly rose from 3% in the second quarter to 8%. By application, High-Performance Computing (HPC) revenue share rose further to 68%, up from 57% in the same period last year, reflecting that demand for AI servers and data center chips remains at a high level.

Regarding capital expenditure, TSMC spent approximately $13.84 billion in the third quarter, bringing cumulative capital expenditure for the first three quarters of the year to $40.64 billion. The company had previously raised its full-year 2026 capital expenditure guidance to between $60 billion and $64 billion, mainly for expanding capacity in advanced process technologies and AI-related production.

TSMC's third-quarter net profit set a record for the sixth consecutive quarter. The company will announce its fourth-quarter and latest full-year business outlook during the subsequent earnings conference call. For investors, key areas of focus include the sustainability of AI demand, 2nm expansion progress, CoWoS advanced packaging capacity, and the 2027 capital expenditure plan.