Taiwan Semiconductor Manufacturing Co. delivered a record third-quarter net profit of NT$763.06 billion on Thursday, surpassing the NT$746.3 billion Reuters/LSEG estimate. Strong worldwide demand for AI chips supported the earnings gain and helped push operating profitability beyond the company’s forecast.
For the quarter ended September 30, net income increased nearly 69% from a year earlier, while revenue rose 50% to NT$1.49 trillion. TSMC recorded an operating margin of 58.7%, above its guidance ceiling of 58%, reflecting its pricing power amid AI-driven semiconductor demand. Gross and net profit margins stood at 66.4% and 51.1%, respectively.
Cash generation also strengthened: quarterly free cash flow reached NT$476.56 billion, compared with NT$139.38 billion a year earlier. Separately, the board authorized a second-quarter cash dividend of NT$7.00.
High-performance computing generated 68% of quarterly revenue, ahead of the 21% contribution from smartphones. Automotive delivered the strongest sequential growth among platforms, rising 23%. Across manufacturing technologies, 3-nanometer products led with a 33% revenue share; 5-nanometer and 7-nanometer chips ranked next.
TSMC has the largest production capacity among contract chipmakers and produces the market’s most advanced semiconductors. Its manufacturing position has enabled it to capture rising demand for advanced AI processors, with Nvidia Corporation among its largest customers. Investors also regard the company as an indicator of worldwide semiconductor demand.
That demand is driving a broader expansion program. TSMC’s U.S. plans, detailed alongside its second-quarter results in July, included a planned $265 billion investment in Arizona. The company is reportedly assessing Texas as another possible investment location as it considers extending its American manufacturing operations beyond Arizona.
The capacity push carries a profitability cost. During the earnings webcast, Chief Financial Officer Wendell Huang said efforts to expand production in Taiwan and overseas would continue to weigh on gross margins, even as they address growing customer demand.
Huang put the expected gross-margin dilution from the buildout at closer to 2% for 2026. He also anticipated a greater drag from overseas factories in subsequent years and forecast a fourth-quarter gross-margin decline of at least 0.4%.
The company retained its 2026 capital expenditure budget of $60 billion to $65 billion. Huang nevertheless indicated that spending would rise substantially in the years ahead as sustained, exceptionally strong AI demand requires additional manufacturing capacity.
He did not quantify how much capacity TSMC expects to add over the coming months.
