Taiwan Semiconductor Manufacturing Co. reported a record third-quarter profit on Thursday, beating analyst estimates as global demand for artificial intelligence chips showed no sign of cooling. It was the sixth straight quarter of record net profit for the world's largest contract chipmaker, with earnings up 68.7% on a year earlier.
Net income reached NT$763.1 billion, ahead of the NT$746.34 billion forecast by analysts polled by LSEG. Revenue came in at NT$1.49 trillion, or roughly $46.36 billion, against expectations of NT$1.47 trillion. The operating margin of 58.7% cleared the top of the company's own guidance range, underlining the pricing power TSMC commands while AI keeps demand running hot.
The outlook was just as bullish. TSMC guided fourth-quarter revenue to between $52.3 billion and $54.3 billion, which at the midpoint points to a 14% rise on the previous quarter and a 58% jump year on year. The company expects capital spending from 2026 to 2028 to run significantly higher than the previous three years as it builds out capacity to keep pace with orders.
Advanced technologies, meaning 7-nanometer and finer, made up 79% of total wafer revenue. The 3-nanometer process was the single biggest contributor at 33%, ahead of 5- and 7-nanometer chips, and the firm expects its coming 2-nanometer ramp-up to support fourth-quarter business. By end market, high-performance computing led with 68% of revenue and smartphones followed at 21%, while automotive was the fastest-growing segment quarter on quarter at 23%.
The sustained demand, TSMC said, is being driven by the spread of agentic AI and open-source models, alongside appetite for AI accelerators and networking chips. Free cash flow surged to NT$476.56 billion, up from NT$139.38 billion a year earlier.
Sravan Kundojjala, an analyst at SemiAnalysis, told CNBC that the stronger-than-expected figures and upgraded full-year outlook show how demand for advanced chips continues to outstrip production capacity, with the elevated spending reflecting confidence in sustained growth. He also noted TSMC's measured approach to expansion, pointing out that the company is checking whether customers have the financing and supporting components to actually deploy the AI systems they order, and that demand still outpaces supply even after those checks.
On its US footprint, TSMC said it had finished building its second Arizona fab and is now installing equipment, with mass production expected in the third quarter of 2027, slightly ahead of schedule. Its board approved an NT$7.00 cash dividend for the second quarter. The chipmaker is also reported to be weighing an investment in Texas as it looks to broaden its American presence beyond Arizona.
