TSMC's third-quarter profit jumped 68.7% to 763.1 billion Taiwan dollars, and its fourth-quarter revenue outlook beat market expectations. The company is expanding capacity as orders for AI data-center chips surge.
On October 15, TSMC reported its sixth consecutive quarter of record profit. Earnings rose 68.7% from a year earlier to 763.1 billion Taiwan dollars, or about 21.2 billion euros, as demand for chips used in artificial-intelligence data centers lifted orders and pricing. The result topped analysts' average estimate of 746.34 billion Taiwan dollars, according to CNBC's report.
The world's largest contract chipmaker is committing heavily to new manufacturing capacity. NVIDIA and AMD are among its customers. Apple is another. Chief executive C.C. Wei said demand remained extremely robust, with no sign of a slowdown. TSMC's forecast for next-quarter revenue also came in above analysts' expectations.
Revenue reached 1.49 trillion Taiwan dollars in the third quarter, up 51% from a year earlier and equivalent to about $46.36 billion. That beat the market forecast of 1.47 trillion Taiwan dollars. TSMC reported a 66.4% gross margin, meaning 66.4 cents of each revenue dollar remained after production costs, before administrative and selling expenses. Its operating margin was 58.7%, above the company's forecast ceiling of 58%. Profit grew faster than sales as demand strengthened and chip prices rose.
Gross margin measures what remains after the direct cost of making chips. It does not account for administrative and selling costs, or other expenses that can affect net profit. TSMC's fourth-quarter revenue outlook offers a separate gauge of expected demand, while its factory spending shows how much the company is putting behind that outlook.
The surge is tied in particular to the expansion of AI data centers, especially in the United States. That buildout requires advanced chips and has helped push prices higher, according to the report. Demand has also spread to CoWoS advanced packaging, which combines computing chips and memory in AI processors. TSMC says the market is shifting from demand for individual chips toward complete AI systems, driven by generative AI and newer agentic AI applications. Investment is reaching beyond chip manufacturing: NVIDIA's five-year commitment to provide UK-based AI computing capacity was covered in an earlier report.
For the fourth quarter, TSMC expects revenue of $52.3 billion to $54.3 billion. The upper end equals about 48.6 billion euros in the source report. At that level, revenue would rise as much as 14% sequentially and about 58% from a year earlier, beating analysts' expectations. The company also raised its forecast for 2026 revenue growth in U.S. dollar terms to about 44%, from roughly 40% previously. TSMC forecast a gross margin of 65% to 67%, broadly in line with market estimates and close to the third-quarter result of 66.4%, TrendForce reported.
Capacity will take major investment. TSMC confirmed a 2026 capital budget of $60 billion to $64 billion and said spending on expansion from 2026 to 2028 would be significantly higher than in the previous three years. The company expects about 70% to 80% of capital spending to go toward advanced process technologies, with around 10% allocated to specialty technologies. It plans to spend as much as $64 billion on new facilities this year.
Analysts tracked by Bloomberg expect capital spending to average about $75 billion next year. UBS's estimate reaches $90 billion, but neither figure is a confirmed spending commitment. TSMC is building or upgrading 20 factories at once, a program designed to expand output as customer demand grows. On its earnings call, the company reiterated its $60 billion to $64 billion budget, pointing to multi-year customer demand that includes the emerging agentic AI market.
The shares slipped despite the results. TSMC stock was down 0.2% in Taipei on the reporting day as the chip sector weakened, even after reaching a record 2,590 Taiwan dollars the previous week. The stock had gained 57% since the start of the year and quadrupled over five years. TSMC's market value was nearly 1.8 trillion euros.
A strong earnings report can arrive alongside a falling share price when the wider sector is under pressure or investors have already priced in good news. The 57% year-to-date gain and the five-year increase describe past performance, not a forecast. TSMC's guidance and construction plans show management expects demand to support continued growth; the buildout also brings large capital costs and relies on customer orders continuing to justify them.
