TSMC reported third-quarter 2026 results on Thursday, October 15. Revenue: $46.72 billion, up 41.2% from the same quarter a year earlier. Net income reached NT$763.06 billion, NT$29.43 a share - up 68.7%. The company raised its growth guidance for the full year to about 44% in US dollars, and guided fourth-quarter revenue of $52.3 billion to $54.3 billion.
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What was reported
| Q3 2026 | Q3 2025 | Change | |
|---|---|---|---|
| Revenue (billions of dollars) | 46.72 | 33.10 | +41.2% |
| Net revenue (millions of Taiwan dollars) | 1,494,243 | 989,918 | +50.9% |
| Gross margin | 66.4% | 59.5% | +6.9 pts |
| Operating margin | 58.7% | 50.6% | +8.1 pts |
| Net margin* | 51.1% | 45.7% | +5.4 pts |
| Diluted earnings per share (Taiwan dollars) | 29.43 | 17.44 | +68.7% |
| Diluted earnings per ADR (dollars)* | 4.60 | 2.92 | +57.5% |
| Return on equity* | 45.5% | 37.8% | +7.7 pts |
Source: TSMC's press release and investor presentation, October 15, 2026, filed with the SEC on Form 6-K; year-ago figures from the company's releases for that quarter. The figures are consolidated, under TIFRS, and have not yet been approved by the board of directors.
* The change in this row is calculated from the figures in the release and is not stated in it.
TSMC reports in Taiwan dollars, and separately publishes revenue in US dollars at an average exchange rate, 31.98 this quarter. In Taiwan dollars, revenue reached NT$1.494 trillion, up 50.9% from the same quarter a year earlier and 17.6% from the second quarter; in US dollars the increases are 41.2% and 16.2%. The difference between the growth rates comes from the change in the exchange rate.
Against the guidance the company itself gave for the quarter, revenue in dollars came in above the top of the range, $44.6 billion to $45.8 billion. The operating margin, 58.7%, was above the range of 56% to 58%, and the gross margin, 66.4%, landed inside the range of 65% to 67%.
Who leads: high-performance computing
High-performance computing (HPC) made up 68% of revenue, versus 66% in the previous quarter and 57% in the same quarter a year earlier. Revenue from the platform rose 22% from the second quarter. Smartphones fell to 21% of revenue, from 30% a year ago, even though revenue from them rose 10% from the second quarter.
The automotive and IoT platforms each reached 4% of revenue: automotive rose 23% from the previous quarter, and IoT rose 5%. Digital consumer electronics (DCE) made up 1% of revenue and fell 12%, and other platforms made up 2% and fell 10%. All of the breakdown is per the company's presentation.
The release cites, in a quote from CFO Wendell Huang, the strong and continuing demand for the company's leading-edge process technologies, including the steep ramp-up of 2nm. The wording is almost identical to that in the release for the second quarter.
2nm entered the mix
2nm technology made up 8% of wafer revenue, the revenue from selling silicon wafers, versus 3% in the previous quarter. In the same quarter a year earlier it had not yet appeared in the mix. 3nm rose to 33% (30% in the previous quarter, 23% a year ago), 5nm fell to 28% (33% and 37%), and 7nm fell to 10% (11% and 14%). Together, 7nm and below made up 79% of wafer revenue, versus 77% in the previous quarter and 74% a year ago. The mix is rounded to whole numbers, as it appears in the charts in the presentation.
Wafer shipments reached 4.476 million 12-inch-equivalent wafers, up 3.2% from the previous quarter and 9.6% from the same quarter a year earlier. Revenue in Taiwan dollars rose 17.6% and 50.9% over the same periods.
Profitability
Gross margin was 66.4%, versus 59.5% a year ago (up 6.9 points) and 67.7% in the previous quarter (down 1.3 points). Gross profit reached NT$992.38 billion, up 68.6%. Operating margin: 58.7%, versus 50.6% a year ago and 60.3% in the second quarter. Operating income stood at NT$876.45 billion, up 75.0%, while operating expenses rose 32.7% to NT$116.43 billion.
Versus the second quarter, operating income rose 14.3%, pretax income rose 5.6% and net income rose 8.0%. The gap comes from non-operating items: NT$34.59 billion in the current quarter, versus NT$95.83 billion in the second quarter and NT$24.68 billion in the same quarter a year earlier. Because of them, net margin fell to 51.1%, from 55.6%. The release does not flag a one-time item.
Investment and cash flow
Capital expenditures in the quarter stood at NT$443.21 billion, versus NT$496.00 billion in the previous quarter and NT$287.45 billion a year ago. Operating cash flow reached NT$919.77 billion, and free cash flow stood at NT$476.56 billion, versus NT$139.38 billion in the same quarter a year earlier. The capital budget for the full year is not stated in the release or the presentation.
The outlook
For the fourth quarter the company expects revenue of $52.3 billion to $54.3 billion, at an exchange rate of 31.8 Taiwan dollars to the dollar. That is an increase of 11.9% to 16.2% from the third quarter, and of 55.1% to 61.0% from the fourth quarter of 2025, when revenue was $33.73 billion. Gross margin is expected in a range of 65% to 67%, whose midpoint, 66%, is below the 66.4% of the third quarter, and operating margin in a range of 56.5% to 58.5%, versus 58.7%.
For the full year 2026 the company expects revenue growth of about 44% in US dollars, versus "slightly above 40%" given in the second-quarter report, on July 16. According to Reuters, CEO C.C. Wei said on the call with investors that demand for AI continues to be very strong, and that it is strengthening with the adoption of agentic AI.
Versus expectations, and the stock
According to CNBC, citing LSEG SmartEstimate, analysts expected revenue of NT$1.47 trillion and net income of NT$746.34 billion. The actual results, NT$1.494 trillion and NT$763.06 billion, were higher by about 1.6% and about 2.2%.
The report was published in Taiwan before the market opened in New York. The company's ADR, each representing 5 shares, closed on the day of the report at $422.25, down 1.8% from the previous close of $430.00. On October 5 it closed at $485.80, so the close on the day of the report was about 13% below it. According to Reuters, it was a day of sharp declines in the value of chip and AI stocks.
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דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What catches my attention in this report is the gap between revenue and volume. Revenue in Taiwan dollars grew 50.9% in a year, while wafer shipments grew 9.6%. The gap sits on a mix moving toward the advanced technologies, and on one platform, high-performance computing, which is already 68% of revenue.
There are two ways to read this. One, demand is still expanding: the company exceeded the range it gave for revenue and the expectations, raised its full-year guidance from "slightly above 40%" to about 44%, and the midpoint of the fourth-quarter range points to growth of about 58% year over year. Two, the stock fell 1.8% precisely after a report like this, when it was already about 13% below its October 5 close, and the midpoint of the fourth-quarter gross margin range is below the third quarter. Both readings fit the same numbers, and it is hard to separate the market's reaction to the report from its reaction to the sector: Reuters described that day as sharp declines in the value of chip and AI stocks.
What I will follow in the coming quarters is the pace at which 2nm enters the mix, and gross margin, which the company expects at about 66% at the midpoint of the range.
(To be clear: this is my personal opinion only. Nothing here is a recommendation to take any action, and there is no forecast here of the price of any security.)
Ilan Abramov, the author, or anyone on his behalf may hold some of the securities or funds mentioned in this article.
