Taiwan Semiconductor Manufacturing Company Limited (TWSE: 2330) (NYSE: TSM) reported third-quarter net income of NT$763.06 billion on Oct. 15, an increase of 68.7% from the same quarter a year earlier. The Hsinchu, Taiwan-based company released the results for the three months ended Sept. 30, 2026.
TSMC manufactures chips that other companies design, a business model known as a pure-play foundry. Chip designers use its factories to produce processors for products ranging from smartphones to data center servers, and the company's quarterly results are followed closely across the semiconductor supply chain.
#TSMC Third-Quarter Revenue Climbs 50.9% to NT$1,494.24 Billion
Consolidated revenue reached NT$1,494.24 billion in the third quarter, up 50.9% from NT$989.92 billion a year earlier. TSMC prepared all figures under TIFRS, Taiwan's version of international financial reporting standards, on a consolidated basis.
Diluted earnings per share rose 68.7% to NT$29.43, compared with NT$17.44 in the third quarter of 2025. Each American depositary receipt unit, the form in which TSMC shares trade on the New York Stock Exchange, earned US$4.60.
Measured in US dollars, third-quarter revenue was $46.72 billion, up 41.2% year over year. The gap between growth in New Taiwan dollars and growth in US dollars reflects exchange rate movements between the two currencies over the period.
Compared with the second quarter of 2026, revenue rose 17.6% in New Taiwan dollars and 16.2% in US dollars. The sequential increase followed second-quarter revenue of NT$1,270.38 billion.
Net income rose 8% from the second quarter, a slower pace than revenue growth over the same period. Income before tax increased 5.6% quarter over quarter to NT$911.04 billion, and net profit margin for the third quarter was 51.1%.
#Chips Made at 7 Nanometers and Below Account for 79% of TSMC Wafer Revenue
TSMC groups its manufacturing by process size, measured in nanometers. Smaller numbers refer to newer processes that place more transistors on each chip. The company defines 7-nanometer and smaller processes as advanced technologies, and these made up 79% of wafer revenue in the quarter.
The 3-nanometer process was the largest single contributor, accounting for 33% of total wafer revenue. It was followed by the 5-nanometer process at 28% and the 7-nanometer process at 10%.
The 2-nanometer process, TSMC's newest, accounted for 8% of total wafer revenue in the third quarter. The company identified this process as a source of growth heading into the final quarter of the year.
Gross margin, the share of revenue left after direct production costs, was 66.4% in the quarter. Gross profit rose 68.6% from a year earlier to NT$992.38 billion.
Operating margin was 58.7%. Income from operations, which subtracts operating expenses such as research and administration, increased 75% year over year to NT$876.45 billion.
"Our business in the third quarter was supported by strong demand for our leading-edge process technologies," Wendell Huang, Senior VP and Chief Financial Officer, TSMC, said in the earnings release. Leading-edge, in TSMC's usage, refers to its most advanced manufacturing processes.
In advanced contract chipmaking, TSMC competes directly with the foundry business of Samsung Electronics and with Intel's foundry unit. Both offer advanced manufacturing processes to outside chip designers, placing them in the same direct category as TSMC.
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#TSMC Guides Fourth-Quarter Revenue Between US$52.3 Billion and US$54.3 Billion
TSMC said it expects fourth-quarter revenue of between US$52.3 billion and US$54.3 billion. The midpoint of that range, US$53.3 billion, would be about 14% higher than third-quarter US dollar revenue of $46.72 billion.
The company expects gross margin of between 65% and 67%, based on an assumed exchange rate of 31.8 New Taiwan dollars per US dollar. That range brackets the 66.4% gross margin reported for the third quarter.
Operating margin is forecast at 56.5% to 58.5%, using the same exchange rate assumption. The top of that range sits slightly below the 58.7% operating margin the company reported for the third quarter.
Huang said TSMC expects its fourth-quarter business "to be supported by continued strong demand for our leading-edge process technologies, including the steep ramp-up of our 2-nanometer technology." A ramp-up refers to the period in which a new process moves from early output to higher-volume production.
The company noted that its third-quarter figures have not been approved by its Board of Directors. Its margin forecasts depend on the stated exchange rate assumption, so movements in the New Taiwan dollar against the US dollar could affect reported results.
Management expects continued demand for its most advanced processes and the 2-nanometer ramp-up to support fourth-quarter revenue of up to US$54.3 billion, though currency movements, the pace of new production, and broader chip demand remain key risks to that outlook.