Taiwan Semiconductor Manufacturing Company Limited

(New York Stock Exchange)
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Bullish +65

TSMC shatters profit records as AI boom accelerates, but shares falter ...

Earnings report Guidance raised New AI features AI-generated analysis

πŸ“ˆ TSMC reported record third-quarter revenue of NT$1.494 trillion and net profit of NT$763.06 billion, both surpassing analyst expectations and company guidance.

πŸ’° Gross margin reached 66.4% and operating margin hit 58.7%, exceeding the upper end of previous guidance by 0.7 percentage points.

πŸ€– High-performance computing accounted for 68% of Q3 revenue, reflecting surging demand for AI-related semiconductors.

πŸš€ CEO C.C. Wei raised the full-year US dollar revenue growth forecast to approximately 44% from slightly above 40%.

πŸ’Έ Q4 revenue guidance was set between US$52.3 billion and US$54.3 billion, implying roughly 14% quarter-on-quarter growth.

πŸ—οΈ Capital expenditure guidance for 2026 remains unchanged at US$60 billion to US$64 billion to support capacity expansion.

πŸ“‰ Shares declined approximately 1.8% following the earnings announcement due to investor concerns about valuation and AI sustainability.

πŸ”¬ Two-nanometer manufacturing technology ramp-up contributed to a 1.3 percentage point decline in gross margin from the preceding quarter.

πŸ“± Smartphone revenue contribution dropped to 21% year-on-year but still increased 10% quarter-on-quarter.

🏦 BNP Paribas raised its price target for TSMC's Taiwan-listed shares to NT$3,090 and increased EPS forecasts for 2026-2028.

Bullish Signals
  • TSMC delivered record-breaking third-quarter revenue of NT$1.494 trillion and net profit of NT$763.06 billion, significantly exceeding both market expectations and company guidance.
  • Gross margin reached 66.4% and operating margin hit 58.7%, with the operating margin exceeding the upper end of previous guidance by 0.7 percentage points.
  • High-performance computing accounted for 68% of third-quarter revenue, up from 57% a year earlier, underscoring robust AI demand.
  • CEO C.C. Wei raised the full-year US dollar revenue growth forecast to approximately 44%, indicating strong business momentum.
  • The company provided Q4 revenue guidance between US$52.3 billion and US$54.3 billion, implying approximately 14% quarter-on-quarter growth at the midpoint.
  • Advanced process technologies at seven nanometers and below represented 79% of wafer revenue, reinforcing TSMC's dominance in cutting-edge manufacturing.
  • BNP Paribas raised its price target for TSMC's Taiwan-listed shares to NT$3,090 and increased EPS forecasts for 2026 through 2028 by 3% to 10%.
Risk Factors
  • Gross margin declined 1.3 percentage points from the preceding quarter primarily reflecting the initial ramp-up of TSMC's two-nanometer manufacturing technology.
  • Shares declined approximately 1.8% following the earnings announcement as investors weighed valuation concerns against the sustainability of the AI boom.
  • CEO C.C. Wei cautioned that rising component prices and broader economic uncertainties were weighing on consumer-oriented and price-sensitive markets for 2027.
Full Analysis
Taiwan Semiconductor Manufacturing Co. (TSMC) reported exceptional third-quarter results, shattering profit records with revenue of NT$1.494 trillion and net profit of NT$763.06 billion, both significantly exceeding market expectations and prior guidance. The company's gross margin stood at 66.4% and operating margin at 58.7%, demonstrating formidable profitability despite a slight decline in gross margins due to the initial ramp-up of its two-nanometer manufacturing technology. High-performance computing, driven by AI infrastructure demand, accounted for 68% of third-quarter revenue, highlighting the pivotal role of artificial intelligence in TSMC's business. While smartphone revenue contribution decreased to 21%, the segment still saw a 10% quarter-on-quarter increase. Advanced process technologies at seven nanometers and below represented 79% of wafer revenue, with three-nanometer and two-nanometer processes contributing significantly to the company's advanced manufacturing capabilities. CEO C.C. Wei raised TSMC's full-year US dollar revenue growth forecast to approximately 44% and provided Q4 guidance between US$52.3 billion and US$54.3 billion. The company maintained its capital expenditure guidance of US$60 billion to US$64 billion for 2026, signaling continued expansion to meet sustained demand for advanced semiconductor technologies. However, despite these strong fundamentals, TSMC's shares declined following the earnings announcement as investors weighed valuation concerns against the sustainability of the AI boom.