Taiwan Semiconductor Manufacturing Company Limited

Third-quarter 2026 revenue increased 17.6% sequentially in NT dollars and 16.2% sequentially in U.S. dollars to $46.7 billion, above the high end of guidance. Gross margin was 66.4%, down 1.3 percentage points sequentially; operating margin was 58.7%; EPS was TWD 29.43; ROE was 45.5%. On a platform basis, HPC was 68% of revenue, smartphone 21%, IoT 4%, automotive 4%, and DCE 1%. On technology mix, 2 nm was 8% of wafer revenue, 3 nm 33%, 5 nm 28%, and 7 nm 10%; advanced technologies (7 nm and below) were 79% of wafer revenue. Cash and marketable securities were TWD 4 trillion, or $126 billion; cash from operations was about TWD 920 billion, CapEx was TWD 443 billion, and cash dividends were TWD 156 billion. Fourth-quarter 2026 revenue is expected to be between $52.3 billion and $54.3 billion, implying about 14% sequential growth and 58% year-over-year growth at the midpoint. Q4 gross margin is guided to 65%-67% and operating margin to 56.5%-58.5%. Management reiterated full-year 2026 CapEx of $60 billion-$64 billion and said full-year 2026 revenue growth should be around 44% year over year in U.S. dollar terms.

C.C. Wei described demand as extremely robust, especially for leading-edge process technologies, and said the company sees no sign of AI slowing. He emphasized that TSMC is planning conservatively for 2027 because consumer and price-sensitive segments are being pressured by higher component prices and macro uncertainty, but he remains highly constructive on long-term AI demand, including agentic AI, AI accelerators, networking chips, and agentic AI CPUs. He also highlighted aggressive global capacity expansion, including nearly 20 fabs in progress, N2 ramping successfully, A14 on track for 2027 risk production and 2028 volume production, and a plan to keep capturing as much business as possible across nodes and geographies.

Wendell Huang highlighted strong third-quarter execution: revenue rose 16.2% sequentially in U.S. dollars to $46.7 billion, EPS reached TWD 29.43, and gross margin was 66.4%, down 130 basis points mainly because of the 2 nm ramp. He said Q4 gross margin should be 65%-67% and that the midpoint decline reflects continued 2 nm dilution plus overseas fabs, partially offset by productivity and capacity optimization. He also pointed to solid balance-sheet and cash-flow metrics, including TWD 4 trillion in cash and marketable securities, about TWD 920 billion in operating cash flow, TWD 443 billion in CapEx, and TWD 156 billion in dividends, and reiterated 2026 CapEx of $60 billion-$64 billion.

Analysts focused on whether AI demand could outpace supply constraints such as power, HBM, packaging, and networking bottlenecks, and management said its planning process explicitly incorporates CSP build-outs, power supply, financials, and component availability. On AI growth, Wei said the prior mid-to-high-50s CAGR for AI accelerators remains a narrow definition and that the actual growth would probably be higher, while noting the company still uses the original narrow metric and does not include all AI-related CPUs in that figure. Questions also covered overseas expansion and pricing; management said U.S. expansion beyond Arizona is being evaluated, including Texas, that any fab would be run by TSMC, and that pricing depends on segment, location, and technology rather than being a blanket change to every customer contract.