TSMC posts record third-quarter profit, raises outlook as AI chip demand outstrips supply

Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, reported record third-quarter profit on Thursday and raised its guidance for the current quarter, underscoring how thoroughly the AI boom has outrun the industry's ability to supply chips for it.

TSMC's results, filed with the U.S. Securities and Exchange Commission as a Form 6-K, showed consolidated revenue of roughly $46.7 billion for the quarter ended Sept. 30 — up 41.2% from a year earlier in dollar terms and up 16.2% from the second quarter. Net income came to about $23.6 billion, up 68.7% year-over-year, with diluted earnings of $4.60 per American depositary share. It was TSMC's sixth consecutive quarter of record profit. Gross margin was 66.4%, operating margin 58.7% and net profit margin 51.1%.

TSMC, headquartered in Hsinchu, Taiwan, does not design its own chips; it fabricates them on contract for customers that include Nvidia, Apple, AMD, Qualcomm and Broadcom, and it increasingly produces custom AI accelerators for hyperscale customers such as Google, Amazon, Microsoft, Meta and OpenAI. That position at the center of the chip supply chain is why its results are read as a bellwether for the broader AI buildout: when TSMC's advanced-node fabs run at capacity, it is a direct signal of how much artificial-intelligence infrastructure the rest of the industry is actually able to build in a given quarter.

Guidance tops expectations

TSMC's own July guidance had called for $44.6 billion to $45.8 billion in third-quarter revenue; the company beat that range, and beat the average analyst estimate for net profit tracked by LSEG. For the fourth quarter, it guided to revenue of $52.3 billion to $54.3 billion, above what Wall Street had expected, with gross margin of 65% to 67%. Advanced nodes of 7 nanometers or smaller made up 79% of wafer revenue, and TSMC's newest 2-nanometer process already accounted for 8% of wafer revenue in its early ramp, according to the SEC filing index for the quarter.

Chief Executive C.C. Wei tied the strength directly to artificial intelligence, saying demand for leading-edge technologies "continue[s] to be extremely robust," fueled in part by "the rising adoption of agentic AI." The company reiterated its 2026 capital-spending budget of $60 billion to $64 billion. Chief Financial Officer Wendell Huang said spending in 2026 through 2028 will be "even more significantly higher than the past three years," a sign that TSMC expects demand to keep outrunning supply well beyond this quarter's numbers.

"Demand for leading-edge technologies continues to be extremely robust."

A record quarter, a falling stock

Despite the beat-and-raise, TSMC's results did not lift chip stocks. Nvidia shares fell for a second straight session as a broader sell-off in AI and semiconductor names deepened, a drop that coverage of the report tied to rising interest-rate expectations, questions about how AI infrastructure buildouts are being financed, and fears of a future glut in memory chips — not to any weakness in TSMC's own numbers, which beat across the board. The disconnect illustrates a split that has widened through 2026: TSMC's manufacturing results keep climbing as its customers compete for a finite supply of advanced capacity, even as investors grow warier of how much the broader AI buildout actually costs and who ultimately pays for it.

The race for US capacity

TSMC is in the middle of a major U.S. expansion, built around its Arizona fabs, where it committed an additional $100 billion in July on top of prior pledges, per TSMC's SEC filing history. Wei confirmed Thursday that the company is also evaluating a site in Texas and is in early talks with Terafab, a chip venture linked to Elon Musk, about building a fab there. TSMC shares had already hit record highs earlier in October after Musk confirmed those early-stage discussions. The company's biggest customers — Nvidia, Apple, AMD, Broadcom and Qualcomm, along with hyperscalers including Google, Amazon, Microsoft and Meta building custom AI accelerators — are all effectively racing for allocation of TSMC's advanced-node capacity, a dynamic that has made Arizona, and potentially Texas, the focal points of where that capacity gets built next.

Markets will now watch whether fourth-quarter results meet TSMC's raised guidance, how quickly 2-nanometer output ramps toward the next-generation A16 process, and whether the Terafab talks firm into a formal Texas announcement. The bigger question the quarter reignited rather than settled is whether the industry's current pace of AI capital spending is sustainable — a debate that even a record quarter from the chip industry's biggest supplier was not enough to put to rest.

Six straight records

Thursday's results extend a run that has now lasted a year and a half: TSMC has posted a record profit every quarter since the current AI capital-spending cycle accelerated, even as the stocks of the companies buying its chips have swung sharply on shifting expectations about interest rates and the financing structures behind data-center construction. That divergence between a manufacturer booking record cash flow on firm, long-lead-time orders and a stock market reassessing the risk in its customers' spending plans has become one of the defining tensions of the AI buildout through 2026, and Thursday's reaction, a record quarter met with a falling Nvidia share price, was simply the clearest recent illustration of it.

TSMC's own ADR shares, by contrast, are up more than 41% so far this year as of Wednesday's close, a gain that reflects investors' continued confidence in the company's position even as they grow more skeptical of some of its customers' balance sheets. That gap between how Wall Street treats the chipmaker and how it treats the companies buying its output is itself becoming a story analysts are watching heading into the rest of earnings season.