TSMC Posts a Sixth Straight Record Quarter as AI Demand Lifts Profit 69 Percent

By The News Desk, Previously

October 15, 2026

TSMC's third-quarter net profit rose 68.7 percent to NT$763.06 billion, beating estimates, on revenue up 50.9 percent. High-performance computing — the AI business — now accounts for 68 percent of everything the world's biggest chipmaker sells.

The most important company in the AI boom just had the best quarter in its history — again. Taiwan Semiconductor Manufacturing Co. reported on Thursday that third-quarter net profit rose 68.7 percent from a year earlier to NT$763.06 billion, beating the NT$746.3 billion SmartEstimate compiled by LSEG, Reuters reported. Revenue climbed 50.9 percent to NT$1.49 trillion, roughly $46.7 billion, above even the top of the company's own guidance. It is TSMC's sixth consecutive quarter of record net profit, and the composition of the numbers explains the streak: the artificial intelligence buildout is no longer a growth segment at TSMC. It is most of the company.

The Quarter, in Numbers

Earnings per share rose to NT$29.43 from NT$17.44 in the same quarter a year ago, the Seoul Economic Daily reported in its account of the results. Gross margin reached 66.4 percent — well up from 59.5 percent a year earlier, though 1.3 percentage points below the second quarter, a dip the company attributed to dilution from the initial ramp of its newest 2-nanometre production. Operating margin was 58.7 percent and net margin 51.1 percent, figures that would be remarkable for any manufacturer and are close to routine for this one.

The revenue beat came with a beat on expectations baked in. Wall Street had already pencilled in a surge — analysts expected profit to jump by roughly two-thirds — and TSMC still cleared the bar, as it did on revenue, which came in above the market consensus of about NT$1.46 trillion. When a company this large, this closely followed, keeps landing above the top of its own guidance range, the story stops being execution and starts being demand: its customers are ordering everything it can make.

AI Is Now 68 Percent of the Business

The mix shift is the quarter's real headline. High-performance computing — the segment that includes AI accelerators and data-centre chips for customers such as Nvidia — accounted for 68 percent of revenue, up from 57 percent a year ago, and grew 22 percent from the previous quarter, Reuters reported via the Seoul Economic Daily. Smartphones, once the engine of the company, made up 21 percent and grew 10 percent sequentially. The world's largest contract chipmaker now earns more than two dollars from AI and data centres for every dollar it earns from phones.

The technology mix tells the same story at the leading edge. Processes of 7 nanometres and below supplied 79 percent of wafer revenue, up from 74 percent a year ago. The newest 2-nanometre node jumped from 3 percent of wafer revenue in the second quarter to 8 percent in the third, while 3-nanometre production contributed 33 percent, 5-nanometre 28 percent and 7-nanometre 10 percent. Every percentage point of that shift is an AI customer moving to the newest silicon — and paying leading-edge prices for it.

A Record Quarter the Market Shrugged At

Here is the paradox of the week in chips: the numbers keep getting better and the stocks keep getting sold. TSMC's US-listed shares closed Wednesday at $430, down 3.4 percent, in a broad technology selloff, TalkMarkets reported — the day before the company printed a sixth straight record profit. ASML, the Dutch equipment maker whose machines TSMC buys, posted its biggest quarter ever this week and fell anyway. The Philadelphia Semiconductor Index has now dropped for six straight sessions.

The reason is not the present; it is the price of the future. Wednesday's hotter-than-expected US inflation report — the story in our companion report on the CPI shock and the overnight selloff in Asia — revived talk of a Federal Reserve rate increase, and higher rates punish exactly the kind of long-duration, spend-now-grow-later valuations the AI trade runs on. TSMC's results landed in the middle of that argument as the strongest available evidence for the bulls: whatever investors fear about the financing of the boom, the demand at its centre is real, growing, and currently larger than the supply.

Reading the One Number That Went Down

Buried in a wall of records, one figure moved the wrong way, and it is the one analysts will interrogate hardest: gross margin slipped 1.3 percentage points from the second quarter, to 66.4 percent. The cause, as the company framed it, is success arriving early — the initial volume production of its 2-nanometre node dilutes margins before yields and pricing mature, TradingKey reported in its account of the results. New nodes always start expensive; the question is how quickly they climb the same profitability curve the 3-nanometre generation climbed before them.

The mix data suggests the climb is already steep. Two-nanometre production went from 3 percent of wafer revenue in the second quarter to 8 percent in the third — a near-tripling of share in ninety days — while the advanced-node total reached 79 percent. A margin dip caused by your newest technology ramping faster than expected is the kind most companies would frame and hang on the wall. It becomes a problem only if it persists after the ramp matures, and nothing in Thursday's numbers suggests the underlying pricing power — the thing a 51.1 percent net margin actually measures — has weakened at all.

What the Result Decides Next

Attention now turns from the quarter just printed to the guidance that comes with it — in particular what TSMC says about capital spending for 2027 and about demand visibility into 2027 and beyond. Its customers are committing to data-centre buildouts years in advance, and ASML warned this week that supply in 2027 and 2028 will fall short of demand. If TSMC echoes that language, the AI infrastructure race has its marching orders for another two years; if it hedges, the selloff in chip stocks will find its justification.

For now, the scoreboard reads plainly. One company makes the overwhelming majority of the world's advanced AI chips, it just grew profit 69 percent in a single year, and the segment driving it has swollen from a little over half its business to more than two-thirds in twelve months. The boom has a centre, and on Thursday the centre reported.