TSMC earnings: profit up 69%, yet the shares fell 2%

TSMC, the Taiwanese contract chipmaker, earned NT$763.06bn in the third quarter, 68.7% more than a year earlier, it said on Thursday. Revenue rose 50.9% to NT$1,494.24bn, or $46.72bn, and earnings per share came to NT$29.43, or $4.60 per American depositary share, the company’s earnings release shows. It expects sales of $52.3bn to $54.3bn in the fourth quarter.

The shares fell anyway. TSMC closed at NT$2,440 in Taipei on Thursday, down 2.0% on the day, Taiwan Stock Exchange data show. That leaves them 5.6% below their close of NT$2,585 on 6 October, and the stock fell or stood still on each of the six trading days since.

The TSMC earnings arrive in the middle of a sell-off in chip stocks. As we reported earlier today, the Philadelphia semiconductor index lost 11.6% in six days, and 4.3% on Wednesday alone, after a hot US inflation report. TSMC’s results show that the business behind those shares is still growing fast; the share price shows that this was not enough to stop the selling.

TSMC beat its own forecast

In July, TSMC told investors to expect third-quarter revenue of $44.6bn to $45.8bn, a gross margin of 65% to 67% and an operating margin of 56% to 58%, its guidance table shows. It beat the top of the revenue range by about $0.9bn. The gross margin came in at 66.4%, inside the range, and the operating margin at 58.7%, above it. The net profit margin was 51.1%: TSMC keeps more than half of each dollar of sales as profit.

Against the second quarter, revenue rose 17.6% in Taiwan dollars and 16.2% in US dollars. Net income rose 8.0%. Profit grew more slowly than sales because margins slipped from the second quarter, when the gross margin was 67.7% and the operating margin 60.3%. In US dollars, sales were 41.2% higher than a year earlier; the gap with the 50.9% rise in Taiwan dollars reflects the exchange rate.

The margins turn into large sums. Applied to sales of $46.72bn, an operating margin of 58.7% means operating profit of about $27.4bn in the quarter, and a net margin of 51.1% means net profit of about $23.9bn, by our calculation. Over the 92 days of the quarter, that is roughly $260m of profit a day.

TSMC quarterly revenue, $bn. Source: TSMC earnings release, 15 October 2026, and guidance table. Fourth quarter is the midpoint of TSMC's forecast range.

2Q 2026	40.2
3Q 2026	46.7
4Q 2026	53.3 (forecast midpoint)

Source: TSMC earnings release, 15 October 2026, and guidance table. Fourth quarter is the midpoint of TSMC's forecast range.The Macro Notebook

Where the money comes from

TSMC’s newest factories carry the business. Chips made on 7-nanometre and finer processes, which the company calls advanced technologies, brought in 79% of wafer revenue in the quarter. The 3-nanometre process alone made up 33%, 5-nanometre 28% and 7-nanometre 10%. The newest, 2-nanometre process already accounted for 8%.

The company says demand for them drove the quarter. “Our business in the third quarter was supported by strong demand for our leading-edge process technologies,” said Wendell Huang, the chief financial officer. He expects the fourth quarter to be supported by the same demand, “including the steep ramp-up of our 2-nanometer technology”.

The fourth-quarter forecast

The guidance for the fourth quarter implies another big step. The midpoint of the range, $53.3bn, would be 14% more than the third quarter’s $46.72bn. TSMC expects a gross margin of 65% to 67% and an operating margin of 56.5% to 58.5%, roughly where they were in the third quarter. The forecast assumes an exchange rate of 31.8 Taiwan dollars to the US dollar.

TSMC held its earnings call at 14:00 Taiwan time on Thursday. A day earlier, ASML, which makes the machines TSMC uses for its most advanced chips, reported record sales and said chipmakers want more machines than it can build in 2027 and 2028, as we reported on 14 October. Together the two reports describe an industry still adding capacity as fast as it can.

What to watch

For investors the question is less about demand than about price: what chip shares are worth if interest rates stay high for longer. Thursday’s fall suggests that strong results do not answer that question. They do show that the profits behind the shares are still rising. The next markers are TSMC’s October sales report, due in November, and the third-quarter results of the big AI chip buyers in the weeks ahead.