TSMC profit jumps 68.7% as it forecasts higher sales and weighs Texas expansion

TSMC reported record third-quarter net income of NT$763.06 billion, up 68.7% from a year earlier, and forecast another increase in sales for the final quarter of 2026. The results, released Thursday, October 15, provide a concrete measure of the spending reaching the factories behind the expansion of artificial intelligence.

The Taiwanese chipmaker is also considering a larger U.S. presence through a possible facility in Texas. That assessment is still underway. As new projects move through different stages, the accounts reveal a more complicated picture than the record alone suggests: revenue is growing strongly, but introducing a new generation of chips is temporarily squeezing margins.

Record sales, measured in two currencies

The company generated US$46.72 billion in revenue from July through September, up 41.2% from the same period in 2025. In Taiwan dollars, revenue reached NT$1.494 trillion, an increase of 50.9%. These are two ways of reporting the same sales; the growth rates differ because of the currency used for the comparison.

Earnings per share reached NT$29.43. Compared with the previous quarter, revenue in Taiwan dollars increased 17.6% and net income rose 8%. Reuters reported that profit exceeded the NT$746.3 billion estimate compiled by LSEG SmartEstimate. That comparison shows how the company performed against analysts' expectations; it is not an official forecast of future earnings.

TSMC manufactures semiconductors for other companies. Its position offers a view of a distinct stage in the technology race: once a customer needs to turn a processor design into a physical product, it must secure the manufacturing capacity to make it. TSMC's accounts help track how investment plans translate into orders and deliveries.

AI matters more, but does not account for the whole business

High-performance computing accounted for 68% of quarterly revenue, up from 57% a year earlier. Smartphones contributed another 21%. These are broad commercial categories: treating all high-performance computing revenue as AI sales would overstate what the company's breakdown actually shows.

The technology mix is changing too. Two-nanometer processes generated 8% of wafer revenue, compared with 3% in the previous quarter. Three-nanometer processes contributed 33%. Technologies at seven nanometers and more advanced nodes together accounted for 79% of wafer revenue.

Taiwan's CNA news agency reported growth across high-performance computing, smartphones, the Internet of Things and automotive platforms. That detail helps explain why the story extends beyond a single product. AI-related demand is crucial, but it shares factory capacity with other markets that have different requirements and business cycles.

The cost of bringing a new generation into production

Gross margin was 66.4%, down from 67.7% in the second quarter. Management attributed the decline mainly to the production ramp-up for N2, the two-nanometer generation. Introducing an advanced process can increase sales while putting pressure on profitability during its early deployment.

The year-over-year comparison offers another perspective: gross margin remained 6.9 percentage points above the level recorded in July through September 2025. Both comparisons matter. Margin fell from the previous quarter but improved from a year earlier; reporting only one would give an incomplete picture.

Expansion also requires investment before the costs can be recovered through sales. In its presentation, TSMC reported capital expenditure of NT$443.21 billion for the quarter. Building facilities, installing equipment and stabilizing production are separate steps from announcing additional capacity.

Texas remains under review; Japan and Europe have separate projects

According to Associated Press, TSMC Chairman C. C. Wei confirmed that teams had been sent to Texas to assess an expansion and that talks were taking place about the Terafab project associated with Elon Musk. He did not announce a completed agreement or an operating plant. That distinction matters when assessing how soon the exploration could lead to actual production.

The company already has a manufacturing strategy spanning several regions. Its 2025 annual report describes a first factory in Kumamoto, Japan, that began volume production in late 2024, and a second under construction. It also outlines the Dresden project in Germany, intended for industrial and automotive applications.

These projects are not interchangeable. Their technologies and target markets differ. A European factory focused on industrial uses and an expansion intended for advanced processes serve specific needs within the same supply chain.

The next test is delivering on the forecast

For October through December, TSMC forecasts revenue of US$52.3 billion to US$54.3 billion and gross margin of 65% to 67%. These are management projections subject to risks, not results already achieved. The company also expects full-year revenue in U.S. dollars to grow about 44% in 2026.

The coming quarter will test two commitments at once: filling more orders and maintaining profitability as production of newer processes increases. The record confirms the strength of business already completed. The forecast and assessments of new factories point to the work still ahead.