TSMC Posts Record Q3 2026 Profit, Beats Estimates Amid AI Chip Boom

TSM reported record third-quarter net income of NT$763.1 billion on October 15, up 68.7% from a year earlier and its sixth straight quarter of record profit. Consolidated revenue was NT$1,494.24 billion, up 50.9% from a year earlier, or US$46.72 billion. Per CNBC, LSEG SmartEstimates had called for revenue of NT$1.47 trillion and net income of NT$746.34 billion, so both lines beat.

Profitability came in at the high end. The operating margin was 58.7%, above the top of the 58% guidance range, and the gross margin was 66.4%, inside the 65%-67% range management had guided in July. Revenue in US dollars also cleared the US$44.6 billion to US$45.8 billion range management had guided for the quarter. Free cash flow rose to NT$476.56 billion from NT$139.38 billion a year earlier.

The mix shows where growth is coming from. Advanced technologies, meaning 7-nanometer and more advanced, were 79% of wafer revenue, with 3-nanometer the largest node at 33%. The 2-nanometer node reached 8% of wafer revenue, up from 3% in the prior quarter. By platform, high-performance computing was 68% of revenue and smartphones 21%, while automotive grew fastest sequentially at 23%.

For the fourth quarter, TSMC guided revenue to US$52.3 billion to US$54.3 billion, a 14% sequential increase at the midpoint, with a gross margin of 65% to 67% and an operating margin of 56.5% to 58.5%. The top of that operating margin range sits below the 58.7% just reported. The company also expects capital spending from 2026 to 2028 to be significantly higher than in the previous three years, after raising its 2026 capital expenditure outlook to US$60 billion to US$64 billion in July. It said mass production at its second Arizona fab is expected in the third quarter of 2027.

What to watch: SemiAnalysis analyst Sravan Kundojjala told CNBC that TSMC says demand remains well above its supply capacity, while the company is assessing whether customers have the financing and supporting components needed to deploy AI systems. Reuters headlined the company's stance going into 2027 as "prudent". Margin dilution from the 2-nanometer ramp and overseas fabs, and any change in customer spending, are the variables that could move the outlook.