Taiwan Semiconductor Manufacturing Company Limited earnings recap
Q3 FY2026, reported October 15, 2026 · Beat 7 of last 7 quarters
Taiwan Semiconductor Manufacturing Company Limited reported Q3 FY2026 revenue of $46.06B, a beat of 0.9% against consensus, and EPS of $4.60, a beat of 3.4%.
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TSMC's raised full-year outlook and reiterated $60B–$64B capital budget reinforce that leading-edge logic and advanced packaging capacity, not demand, remains the binding constraint on the AI buildout, with HPC now 68% of revenue and 2nm ramping steeply. Plans to more than double N2 capacity in 2027 and add new 3nm fabs in Taiwan, Arizona and Japan are a direct capacity signal for AI accelerators, agentic AI CPUs and networking silicon. Management's own checks on U.S. data center build-out progress and power supply, described as 'so far so good,' suggest the foundry currently sees the downstream AI infrastructure pipeline as adequately provisioned.
| Estimate | Actual | vs est | ||
|---|---|---|---|---|
| Revenue | $45.67B | $46.06B | +0.9% | beat |
| EPS | $4.45 | $4.60 | +3.4% | beat |
This company reports in TWD. Figures are shown as supplied by our data provider and may be in a different currency or per-share basis than the company's filing.
TSMC reported third-quarter 2026 revenue of $46.7B, up 16.2% sequentially and above the high end of guidance, with gross margin of 66.4% (down 1.3pp q/q on initial 2nm ramp dilution), operating margin of 58.7%, EPS of TWD 29.43 and ROE of 45.5%. Advanced technologies (7nm and below) accounted for 79% of wafer revenue, with 2nm at 8%, 3nm at 33%, 5nm at 28% and 7nm at 10%. By platform, HPC increased 22% q/q to 68% of revenue, smartphone rose 10% to 21%, automotive rose 23% to 4%, IoT rose 5% to 4%, and DCE declined 12% to 1%. Third-quarter capital expenditures totaled $13.8B, and the company ended the quarter with cash and marketable securities of TWD 4 trillion, or $126 billion.
TSMC expects its full-year 2026 revenue growth to be around 44% year-over-year in U.S. dollars, and guided fourth-quarter revenue to $52.3B–$54.3B — a 14% sequential and 58% year-over-year increase at the midpoint — with gross margin of 65%–67% and operating margin of 56.5%–58.5%. Management reiterated its 2026 capital budget of $60B–$64B and said CapEx from 2026 to 2028 will be significantly higher than the past three years, while noting that tool price, material and labor cost inflation is real. Gross margin dilution from the steep 2nm ramp continues, and overseas fab dilution is expected to widen to 3%–4% in the latter part of the five-year period as more fabs ramp in the U.S. C.C. Wei described AI demand as 'extremely robust' with no sign of slowdown, said the AI accelerator CAGR could exceed the previously guided mid-to-high 50s range, and said TSMC is moving full speed ahead with nearly 20 fabs in progress worldwide. N2 family capacity is expected to more than double in 2027, A14 risk production is on track for 2027 with volume production in 2028, and three new 3nm fabs are being added, including an additional Tainan 3nm fab scheduled for the first half of 2028. Management said it is being prudent in 2027 planning given challenges in consumer and price-sensitive segments from rising component prices and macroeconomic uncertainty, even as assessed demand remains above supply.
“We have no intention to leave food on the table for others, and we want to capture every piece of business possible.”
on Capacity expansion
“Whether it is a high 50 CAGR, it does not matter. It probably will be higher.”
on AI demand outlook
“The tool price inflation is real. The tool price, material, labor cost, et cetera.”
on CapEx cost inflation
Given aggressively increasing AI semiconductor demand, how does TSMC see its AI revenue CAGR, and how does it reconcile customer capacity requirements with potential data center power availability, funding, and component bottlenecks like HBM, advanced packaging and lasers — and how would capacity be adjusted to minimize potential overbuilding?
C.C. Wei said TSMC runs a sophisticated and disciplined capacity planning process that factors in CSP CapEx, data center build-out, financials, power supply and other component supply, and that its own judgment is demand remains higher than supply with the company working hard to narrow the gap. On the AI accelerator CAGR previously guided at mid-to-high 50s percent from 2024 to 2029, he said demand is extremely robust with no sign of slowdown and that the number 'probably will be higher.'
With more aggressive overseas expansion and reports of a potential new fab cluster in Texas, what are the contours of the U.S. build-out and any engagement with the customer building Terafab — would these be TSMC-run fabs, similar to the JASM or ESMC framework?
C.C. Wei said TSMC is working hard to expand U.S. capacity because most large customers are there and the U.S. government is helpful, and that the company has extended its evaluation outside Arizona to Texas, sending teams to evaluate. He confirmed TSMC is in discussion with a customer building Terafab about possibly utilizing that capacity, that no solid conclusion has been reached, and that whatever the structure, the fab has to be run by TSMC.
With N3 turning accretive and N2 still dilutive alongside widening overseas dilution, and reports of significant price increases across mature and advanced nodes, does pricing apply across the existing contracted book or mainly to incremental capacity above committed volumes — and how does TSMC think about procuring interposers from specialty foundries such as GlobalFoundries versus in-house?
C.C. Wei said pricing strategy is very strategic and depends on market segment, location and technology, with physical location flexibility such as U.S. production priced a little differently from Taiwan output, while TSMC tries to have its value recognized. On GlobalFoundries, he said TSMC designed a deal that is part of its overall back-end supply strategy, aimed at fully supporting customers across front end and back end given a shortage in the back end, so both TSMC and GlobalFoundries can support TSMC customers with enough capacity.