TSMC earns NT$763 billion in the third quarter on AI chip demand

What happened

Taiwan Semiconductor Manufacturing (TSMC) reported on Thursday 15 October net income of NT$763.06 billion (New Taiwan dollars) for the third quarter, 68.7 percent more than a year earlier. ^[1]

Revenue was NT$1,494.24 billion, up 50.9 percent; in US dollars it was $46.72 billion, up 41.2 percent. The gross margin, the share of revenue left after the cost of making the chips, was 66.4 percent. Chief financial officer Wendell Huang said the quarter 'was supported by strong demand for our leading-edge process technologies'. ^[1]

TSMC is a foundry, a contract maker of chips that other companies design, and it had 534 customers in 2025. Its newest process, 2-nanometer (the smaller the number, the more densely packed the transistors), made 8 percent of wafer revenue, up from 3 percent in the second quarter. The company said that ramp-up was the main reason the gross margin was 1.3 percentage points lower than in the second quarter. ^{[1, 3, 6, 8]}

Why it matters

Chips for high-performance computing made 68 percent of revenue, up from 57 percent a year earlier; smartphones made 21 percent, down from 30 percent. Chief executive C.C. Wei said AI demand was 'extremely robust' and 'higher than the supply', and the company now expects 2026 revenue to grow around 44 percent in US dollars. Its previous forecast was more than 40 percent. ^{[2, 3, 4, 6]}

What TSMC said about 2027

Wei said TSMC expects its 2-nanometer capacity to more than double in 2027, on demand from smartphones and from high-performance computing and AI. He also said consumer and price-sensitive markets 'are being challenged' by rising component prices and economic uncertainty, so TSMC is 'being prudent in our business planning going into 2027'. ^{[4, 5, 6]}

Asked about reports of price increases, Wei said 'our pricing strategy is very strategic' and depends on the market segment, the location and the technology. He gave no figures. ^[6]

TSMC spent US$13.84 billion on factories and equipment in the quarter and $40.64 billion in the first nine months, within a 2026 budget it kept at $60 billion to $64 billion. Huang said spending in 2026 to 2028 is expected to be significantly higher than in the past three years, and that 'the tool price inflation is real'. A figure beyond 2026 was 'a bit too early' to share, he said. ^{[3, 4, 6]}

What settles it next

TSMC said it expects fourth-quarter revenue of $52.3 billion to $54.3 billion, and Huang said the quarter would be supported by 'the steep ramp-up of our 2-nanometer technology'. Assuming 31.8 New Taiwan dollars to the US dollar, the company expects a gross margin of 65 to 67 percent. Its calendar lists October sales for Tuesday 10 November, November's for Thursday 10 December and December's for Friday 8 January 2027, the three months that guidance covers. ^{[1, 7]}

Who it reaches

TSMC (TSM) is direct: the results, the guidance and the spending plan are its own. Nvidia (NVDA) and Apple (AAPL) are adjacent: Reuters calls TSMC a key supplier to both. Advanced Micro Devices (AMD) is adjacent: its annual report says it relies on TSMC for all its processor and graphics chip wafers at 7 nanometers or smaller. ^{[1, 4, 8]}

Broadcom (AVGO) is adjacent: its annual report says TSMC made about 95 percent of the wafers its contract manufacturers produced in fiscal 2025, and has raised its prices to make them. ASML Holding (ASML) is adjacent: TSMC's presentation lists a joint initiative with ASML, announced Tuesday 8 September, on larger photomasks, the stencils that carry chip patterns, for High NA EUV chipmaking tools. Reuters calls ASML the world's largest maker of tools used to make AI chips. ^{[9, 2, 4, 6]}