The quarter
TSMC reported third-quarter revenue of NT$1,494.24bn and net income of NT$763.06bn on 15 October, with diluted earnings of NT$29.43 a share, or US$4.60 per ADR unit. In dollars, revenue was $46.72bn, up 41.2% on a year earlier and 16.2% on the previous quarter. Net income and earnings per share each rose 68.7% year on year, against a 50.9% rise in revenue in NT dollars — margin expansion on top of volume.
Those margins were 66.4% gross, 58.7% operating and 51.1% net. The revenue figure came in above the top of the company’s own prior guidance range of $44.6bn to $45.8bn.
What is being made
The node mix is the part that matters for anyone building AI accelerators. Two-nanometer parts accounted for 8% of wafer revenue in the quarter, three-nanometer for 33%, five-nanometer for 28% and seven-nanometer for 10%. Advanced technologies — 7nm and below — made up 79% of wafer revenue.
On the earnings call, chief financial officer Wendell Huang said high-performance computing, the segment that contains AI silicon, rose 22% quarter on quarter to 68% of third-quarter revenue. He said the company expects continued strong demand for leading-edge processes in the fourth quarter, including what he called the steep ramp-up of its two-nanometer technology.
The supply line
Chief executive C.C. Wei was blunt about the constraint. Demand, he said, is still far above the company’s capability today to supply, and TSMC is working very hard to narrow the gap. He described the company as stepping up its capital expenditure to support customers’ future growth — Huang put the 2026 budget at $60bn to $64bn — while being prudent in business planning going into 2027.
On capacity, Wei said TSMC expects the annual capacity of its N2 family to more than double in 2027. N2 entered high-volume manufacturing in the fourth quarter of 2025 with good yield and is ramping in multiple phases at both the Hsinchu and Kaohsiung sites. On packaging, which has been the tighter bottleneck for AI parts than wafers themselves, Wei said CoWoS is still the number one choice for customers and that the company is in real-world production of five-times reticle size.
The guidance
For the fourth quarter, TSMC guided to revenue of $52.3bn to $54.3bn, with gross margin of 65% to 67% and operating margin of 56.5% to 58.5%, assuming an exchange rate of NT$31.8 to the dollar. At the midpoint that is roughly a sixth more revenue than the quarter just reported.
What to watch
The 2027 capacity doubling, and whether it changes anything. A foundry that cannot meet demand at 8% two-nanometer and plans to more than double that capacity is describing a shortage it expects to persist through the doubling. The number to watch next quarter is not revenue, which is guided, but the two-nanometer share of wafer revenue — the direct read on how fast the newest node is actually arriving.
