TSMC (TSM.US) Q3 net profit increased by 68.7% year-on-year, exceeding expectations; AI orders surged, and 2nm process contributed to 8% of wafer revenue

According to Jinse Finance APP, global foundry giant TSMC (TSM.US) announced its Q3 2026 financial report on Thursday. Driven by a continuous influx of AI orders, the company’s revenue and net profit for the quarter both exceeded average analyst expectations, sending a key signal that computing demand remains robust, even as market sentiment toward AI-related trades has recently turned more cautious.

The report shows that consolidated revenue for the quarter was NT$1.494 trillion, up 50.9% year-on-year and 17.6% quarter-on-quarter; net profit reached NT$763.06 billion, up 68.7% year-on-year. Both figures beat market expectations. Earnings per share were NT$29.43. Calculated in US dollars, quarterly revenue was $46.72 billion, a year-on-year increase of 41.2%.

In terms of profitability, gross margin for the quarter was 66.4%, operating margin was 58.7%, and net margin was 51.1%. Regarding process node composition, the most advanced 2nm process contributed 8% of wafer revenue during the quarter; 3nm accounted for 33%, 5nm for 28%, 7nm for 10%, and advanced processes at 7nm and below made up a combined 79% of wafer revenue.

As the exclusive foundry for the most advanced semiconductors of Nvidia (NVDA.US) and Apple (AAPL.US), TSMC’s performance is viewed as a key indicator for global AI demand. Major industry players such as Nvidia, AMD (AMD.US), and Google under Alphabet (GOOGL.US) all rely on TSMC to turn cutting-edge chip designs into physical components.

Despite rising concerns about long-term AI infrastructure development, TSMC has maintained rapid growth, which has somewhat eased negative sentiment facing AI-related stocks. However, worries over investment returns and long-term financing in the downstream supply chain continue to grow. On Wednesday, CoreWeave (CRWV.US), a cloud service provider and Nvidia customer, saw its stock and bond prices plummet amid broad sell-offs.

TSMC has accelerated sales growth for two consecutive quarters while simultaneously ramping up capacity expansion. The company stated this year’s capital expenditures would reach a record high of up to $64 billion. Earlier this month, TSMC’s share price hit a record high, making it one of the first chip stocks globally to reach new highs after the market slump in July. Thanks to its leading position in AI processor manufacturing, its share price continues to outperform peers, though it was still caught in the broader technology stock pullback over the past week.

Consensus expectations for TSMC’s 2027 capital expenditure continue to rise. Goldman Sachs now forecasts its 2027 capex at $85 billion, and UBS estimates it at $90 billion, both higher than the average forecast of $75 billion. The company is currently pushing forward with the construction and equipment installation of about 20 fabs, spanning the Taiwan region and overseas—a pace far exceeding its usual four to five projects underway simultaneously.

According to reports, in addition to its $26.5 billion investment commitment in Arizona, TSMC is also considering adding new US locations in Texas due to the US data center construction boom.

Industry research analyst Charles Shum noted in a report that the market’s main focus in TSMC’s Q3 results was on 2027. Arizona fab expansion, a potential Texas hub, and negotiations related to Terafab could affect the company’s capital expenditures and the dilutive effect of overseas capacity expansion on gross margin; additionally, reports indicate wafer prices could see increases of 3% to 6%. Updates on the next-generation A14 process node and advanced packaging progress are also expected to further clarify TSMC’s response to Intel’s (INTC.US) challenge.