TSMC Earnings: Its 2026 Outlook Now Implies About 44% Growth

By Stock Titan Editorial Team Published October 15, 2026, 04:33 AM EDT

TSMC’s third quarter in numbers

Taiwan Semiconductor Manufacturing Company, the contract manufacturer that builds chips designed by other companies and whose shares trade in New York as the TSM American depositary receipt, reported results for the three months to September 30, 2026 on Thursday, October 15, Taipei time. Sales rose 41.2% from a year earlier in US dollars and 16.2% from the second quarter, and profit grew faster than sales, according to the company’s third quarter earnings release and management report.

The two growth rates differ because the Taiwan dollar was weaker this year (31.98 to the US dollar on average in the quarter against 29.91 a year earlier), which makes every dollar of sales count for more in Taiwan dollars. Its newest manufacturing process, called 2-nanometer, made 8% of wafer revenue after 3% in the second quarter. For the fourth quarter TSMC expects sales of US$52.3 billion to US$54.3 billion, a gross margin of 65% to 67% and an operating margin of 56.5% to 58.5%. Chief financial officer Wendell Huang said in the release that TSMC expects “continued strong demand for our leading-edge process technologies, including the steep ramp-up of our 2-nanometer technology.”

Sales beat TSMC’s own July forecast

The quarter beat TSMC’s own July forecast by US$0.92 billion at the top of the range, the most in dollars of the last eight quarters, though not the most in percentage terms. In July the company had told investors to expect US$44.6 billion to US$45.8 billion, as its second quarter release shows, and it delivered US$46.72 billion, 2.0% above the top and 3.4% above the middle of that range.

Show the data

Category	Change
Q4 2024	-$0.02B
Q1 2025	-$0.27B
Q2 2025	+$0.87B
Q3 2025	+$0.10B
Q4 2025	+$0.33B
Q1 2026	+$0.10B
Q2 2026	$0.00B
Q3 2026	+$0.92B

A result above the company’s own range is a different test from a beat of analysts’ estimates, because the range is TSMC’s own plan for the quarter. Over the last two years it has finished above the top five times, exactly at the top once and inside the range twice, and it never fell below the bottom. In dollars, this quarter cleared the top by the widest margin of the eight. Measured as a percentage, the second quarter of 2025 was larger (US$30.07 billion against a top of US$29.2 billion, 3.0% above), so our reading is that this was a strong beat in a run of beats, the pattern of a company whose sales keep running ahead of the plan it set three months earlier.

The exchange rate did not drive the gap this time. TSMC assumed 32.0 Taiwan dollars to the US dollar when it set the range and the quarter averaged 31.98. Operating margin also finished above its range (58.7% against 56.0% to 58.0%), while gross margin landed inside it (66.4% against 65.0% to 67.0%).

TSMC’s new forecast implies faster growth in 2026

Measured over the whole year, TSMC’s growth is getting faster; measured from one quarter to the next, it is strong but not clearly faster. TSMC had already raised its own full-year forecast earlier in the year. In January, chairman and chief executive C.C. Wei told analysts TSMC would “forecast our full year revenue to increase by close to 30%, in US dollar terms,” according to the January call transcript. In July he said TSMC now expected “full-year 2026 revenue growth to be slightly above 40% year over year in US dollar terms,” per the July call transcript.

The fourth quarter range now implies more. Adding the first three quarters of 2026 (US$35.90 billion, US$40.20 billion and US$46.72 billion) to the fourth quarter range gives a year of US$175.1 billion to US$177.1 billion, against US$122.43 billion for the four quarters of 2025 added the same way. That is growth of 43.0% to 44.7%, about 44% at the middle, by our arithmetic.

Done the same way, 2025 grew 35.9% on the US$90.07 billion of 2024’s four quarters (the second quarter 2024 presentation and the presentations in the chart below give each quarter), so the implied pace for 2026 is faster than last year’s. The first nine months of 2026 (US$122.82 billion) already brought in more than the whole of 2025. We did not have a transcript of the October 15 call when we wrote this, so whether TSMC put its own new number on the year is not reflected here.

Show the data

Category	Growth from a year earlier	Note
Q4 2024	37.0%
Q1 2025	35.3%
Q2 2025	44.4%
Q3 2025	40.8%
Q4 2025	25.5%	Sales rose only 1.9% from the quarter before, a soft base for 2026
Q1 2026	40.6%
Q2 2026	33.7%
Q3 2026	41.2%
Q4 2026 forecast	58.0%	Middle of TSMC’s US$52.3B to US$54.3B range against US$33.73B, our arithmetic

The year-over-year view looks steeper than the quarter-to-quarter one, and the difference is worth seeing clearly. Against a year earlier, the fourth quarter forecast works out to growth of 55.1% to 61.0% (58.0% at the middle), well above the 41.2% of the third quarter and above any quarter in the chart. Part of that is a soft comparison, since the fourth quarter of 2025 grew only 1.9% from the quarter before it. From one quarter to the next the picture is steadier: sales rose 6.4%, 12.0% and 16.2% in the first three quarters of 2026, and the fourth quarter forecast means 11.9% to 16.2%, or 14.1% at the middle, a touch slower than the third quarter if the middle holds.

Another way to see what is driving the growth is to divide sales by the wafers TSMC shipped. Sales rose 41.2% in US dollars from a year earlier while shipments rose 9.6%, so revenue per wafer shipped went from about US$8,100 to about US$10,440, an increase of roughly 29% by our arithmetic. The measure is rough, because TSMC’s sales also include services such as chip packaging, but sales growing about four times as fast as wafer shipments fits a richer mix of products. TSMC’s reports do not split how much of the gap comes from wafer prices, newer processes or packaging.

High performance computing is now 68% of sales

TSMC depends on this one group more than in any of the five third quarters we compared. Out of every US$100 TSMC took in during the third quarter, US$68 came from high performance computing, US$21 from smartphones and the rest from internet-of-things devices, cars and consumer electronics, according to the management report. A year earlier HPC was 57% and phones 30%.

Show the data

Part	Value	Squares
High performance computing	$68	68
Smartphone	$21	21
Internet of things	$4	4
Automotive	$4	4
Consumer electronics and others	$3	3

HPC is a wider group than AI. TSMC’s 2025 annual report on Form 20-F lists AI accelerators among its HPC products alongside personal computer processors, server processors, consumer graphics chips and high-speed networking chips. TSMC does not split the group, and the only AI share of revenue it has published is a yearly one: in January, C.C. Wei said that “revenue from AI accelerators accounted for high-teens percent of our total revenue in 2025,” a year in which HPC was 58% of revenue (January call transcript). On those two numbers, accelerators were somewhere under a third of HPC sales in 2025, by our reading.

On the same call Wei said TSMC expected AI accelerator revenue to grow at close to a mid-to-high-fifties percent yearly rate from 2024 to 2029. Part of the rest of the HPC group rides on the same data center spending. In July, Wei said that agentic AI, software that carries out tasks on its own, “is leading to a resurgence in the role of CPUs in AI data centers, which drives more silicon demand in addition to AI accelerators.”

Show the data

Category	Value
Q3 2022	39%
Q3 2023	42%
Q3 2024	51%
Q3 2025	57%
Q3 2026	68%

The climb has been fast. In the third quarter of 2022, HPC was 39% of sales and phones 41%, according to that quarter’s management report. The third quarter share then went to 42% in 2023 and 51% in 2024 (2023 report, 2024 report), then 57% and now 68%.

Measured in Taiwan dollars, as the management reports state it, HPC sales also rose 20% from the quarter before in each of the first two quarters of 2026 (first quarter report, second quarter report) and 22% in the third, after rising only 4% in the fourth quarter of 2025 (fourth quarter 2025 report). Three quarters in a row at that pace is a clear sign in TSMC’s own numbers that this part of the business has not leveled off.

The customers are concentrated too. Customers based in North America paid for 79% of third quarter sales, up from 76% a year earlier, while customers based in China fell to 5% from 8%.

Nearly all the extra sales came from one business

HPC supplied nearly all of the growth. Sales grew by US$13.62 billion from the third quarter of 2025 to the third quarter of 2026. Multiplying each quarter’s sales by the HPC share gives about US$18.9 billion of HPC sales a year earlier and about US$31.8 billion now, a rise of about US$12.9 billion, or roughly 95 cents of every extra dollar, by our calculation.

Show the data

Step	Value
Q3 2025 sales	$33.10B
HPC	+$12.90B
Smartphone	-$0.12B
Everything else	+$0.84B
Q3 2026 sales	$46.72B

Smartphone chips, TSMC’s largest business as recently as the third quarter of 2022, brought in about US$9.8 billion in the quarter, close to the US$9.9 billion of a year earlier on the same arithmetic. Everything else together added a bit under US$1 billion. TSMC rounds the shares to whole percentages, so each of these amounts can be off by a few hundred million dollars, and the HPC part of the increase lies somewhere between about 92% and 98% of it, while the smartphone change could be anything from a fall of about US$0.5 billion to a rise of about US$0.3 billion.

The phone business is not shrinking in any dramatic way; it stopped adding much while HPC added almost everything. In July, C.C. Wei said TSMC saw “consumer and the price-sensitive end-market segment are being challenged due to the impact of rising component prices and macroeconomics uncertainties,” and phone chip sales that were flat on a year earlier, though up 10% from the second quarter, fit a business holding steady more than growing.

The margin leveled off, as TSMC had planned

TSMC’s profit margin stopped climbing this quarter, and the company had said in July that it would. Gross margin, the share of sales left after the direct cost of making the chips, fell to 66.4% from 67.7% in the second quarter. The management report puts it down “primarily” to “the margin dilution from the initial ramp-up of N2 technology,” TSMC’s name for its 2-nanometer process. In July chief financial officer Wendell Huang had said TSMC expected the 2-nanometer ramp “to dilute our gross margin by about 3 to 4 percentage points in the second half of the year,” and the July forecast for the quarter had already put gross margin at 65% to 67%, so the 66.4% result is in line with that plan.

Before that, gross margin had risen four quarters in a row, from 58.6% in the second quarter of 2025 to 67.7%, and the fourth quarter forecast of 65% to 67% points to roughly the same level in the months ahead. Operating margin did better than planned at 58.7%. Profit still grew faster than sales: operating income was NT$876.45 billion, up 75.0% from a year earlier.

Even after the dip, few large companies keep as much of each sales dollar. Among the 90 companies in StockTitan’s financial data whose latest stored quarter ended between March 31 and September 30, 2026, brought in at least US$10 billion of revenue and carries an operating income figure, three had an operating margin above TSMC’s 58.7%: Micron at 80.7%, Nvidia at 66.2% and Visa at 64.4% (from an earlier quarter, ended March 31). Next below TSMC came Broadcom at 53.9%. The quarters do not line up exactly and TSMC reports under Taiwan’s accounting rules while most of the others use US rules, so the ranking is a rough guide to scale more than a precise league table.

TSMC is still spending to keep up

TSMC is spending far more on factories than it did a year or two ago. Capital spending, the money that goes into new fabs and equipment, was US$13.84 billion in the third quarter and US$40.64 billion for the first nine months of 2026, according to the management report, close to the US$40.9 billion TSMC spent in all of 2025 and well above the US$29.8 billion of 2024 (January call transcript). As a share of sales it is about where it was, roughly a third in both periods by our arithmetic.

In July, Wendell Huang said TSMC had raised its 2026 capital budget to “between USD60 billion and USD64 billion,” up from the US$52 billion to US$56 billion it gave in January, citing “the continued strong structural demand from our customers, including the newly emerging agentic AI market” (July call transcript). Asked about the increase on the same call, Wei said demand “continues to increase” and that “now we buy the tools with inflation price,” so part of the bigger budget buys equipment at higher prices.

If that July budget still holds, TSMC has US$19.4 billion to US$23.4 billion left to spend in the fourth quarter, by our arithmetic, well above the US$13.84 billion of the third quarter. We could not check whether the budget changed on October 15.

TSMC pays for this from its own business: in the third quarter its operations brought in NT$919.77 billion of cash against NT$443.21 billion of capital spending, which left NT$476.56 billion of free cash flow, according to the management report. The spending matters well beyond Taiwan, because the machines come from suppliers such as ASML, which said in its third quarter release on October 14 that its customers “continue to increase their short- and medium-term equipment demand forecasts with us,” as we covered in our article on ASML’s third quarter.

Signals that would show demand cooling

The earliest sign will be TSMC’s monthly sales report, which it files with the US Securities and Exchange Commission as a Form 6-K. The September report put that month at NT$511.86 billion, 0.6% below August. To reach its fourth quarter range at its assumed rate of 31.8 Taiwan dollars to the US dollar, TSMC needs average sales of about NT$554 billion to NT$576 billion a month across the quarter, 8% to 12% above September, by our arithmetic. The October report is the next one to watch; a weak October would raise the pace needed in November and December, and on its own could reflect the timing of shipments as much as demand.

Beyond that, TSMC’s own reports would prompt a closer look at demand through HPC sales growing far less than the 20% or so (in Taiwan dollars) of each quarter this year, results landing inside or below TSMC’s forecast ranges after a long run at or above the top, or the yearly growth forecast being cut instead of raised. Any of these could also come from limits on supply, since Wei said in July that “our packaging capacity is so tight that now it limits my customers' growth,” so slower growth would need a look at capacity before it is read as weaker demand.

A gross margin well below the 65% to 67% range would also matter, though a dip from the 2-nanometer ramp is already expected. None of these readings says anything certain about the future; they are the places where a change would show first.

For more on how the September figure fit the AI chip picture, see our earlier article on TSMC’s and Samsung’s October 8 numbers, and for why a beat of company guidance differs from a beat of analyst estimates, see our guide to guidance and consensus.

How we counted

All sales figures are TSMC’s own, in US dollars, from its quarterly releases and earnings presentations filed with the SEC, its management reports and its call transcripts (the third quarter 2026 release, every management report and both transcripts through archived copies of TSMC’s investor pages). The quarter-to-quarter HPC growth rates are TSMC’s own, in Taiwan dollars.

The forecast record compares each quarter’s result with the range TSMC gave three months earlier, for the eight quarters from the fourth quarter of 2024 to the third quarter of 2026. The 2026 full-year range adds TSMC’s three reported quarters to the low and high ends of its fourth quarter forecast and compares the total with the sum of its four 2025 quarters. The HPC amounts multiply each quarter’s US dollar sales by TSMC’s rounded HPC share, and revenue per wafer divides US dollar sales by TSMC’s 12-inch equivalent wafer shipments. Every calculation is ours, and none is a TSMC forecast.

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