TSMC Beats Q3 Earnings and Revenue Estimates as AI Chip Demand Drives 41% Sales Growth

Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) delivered strong third-quarter profit on Thursday, beating estimates as surging demand for AI chips pushed revenue sharply higher.

TSMC reported third-quarter revenue of $46.72 billion, representing a 41.2% increase from the same period last year, above the analyst estimate of $45.62 billion. The company also reported earnings of $4.60 per ADR unit, beating expectations of $4.45 per ADR unit. Revenue rose 16.2% from the previous quarter.

The world’s largest contract chipmaker reported a 66.4% gross margin, a 58.7% operating margin and a 51.1% net profit margin.

Advanced technologies, defined as 7-nanometer (nm) and more advanced technologies, accounted for 79% of total wafer revenue during the quarter, according to the company.

In the third quarter, 2-nanometer technology generated 8% of wafer revenue. The company’s 3-nm, 5-nm and 7-nm technologies contributed 33%, 28% and 10%, respectively.

TSMC Capex Faces AI Demand Test

With the Q3 results, TSMC extended its record profit streak to six quarters. World Trade Securities CEO Nicholas Mugalli said capital expenditure is the key figure to watch in TSMC’s earnings, adding that the company could offer an early hint about spending plans during Thursday’s earnings call, even though it typically discloses the figure in January.

Mugalli said the AI chip boom is constrained by manufacturing capacity, with TSMC and its equipment suppliers struggling to scale production fast enough to meet demand.

Semiconductor veteran Steve Williams told Benzinga that TSMC’s $60 billion-$64 billion capital expenditure plan, announced in July, may not be enough to meet AI demand. He said advanced packaging, which integrates processors and high-bandwidth memory into AI accelerators, remains the key bottleneck. Although TSMC allocates 10%-20% of its capex to advanced packaging, testing and related areas, Williams said the company is unlikely to eliminate the constraint in the near term.

Meanwhile, a report last month stated that TSMC is planning to raise foundry prices by 3% to 6% starting January 2027, with larger hikes for advanced processes. According to the report, TSMC’s demand visibility extends to 2030, while tightening capacity is also pushing up prices for mature and specialty chips. Its 8-inch fabs are reportedly operating above 100% utilization, with 45 nm-and-below processes fully booked.

Benzinga’s Edge Rankings place TSM in the 97th percentile for quality and the 85th percentile for growth, reflecting its strong performance in both areas. Benzinga’s screener allows you to compare TSMC’s performance with its peers.  

Price Action: Year-to-date, TSMC’s shares have surged 41.50%, as per Benzinga Pro. The stock was 1.73% lower at $422.55 after hours.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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