> ## Content Index > Fetch the complete content index at: https://www.thealphaagentic.com/llms.txt > Use this file to discover other available public pages before exploring further. # TSMC Tops Its Own Forecast as AI Demand Holds Up, but 2nm Ramp Trims Margins - URL: https://www.thealphaagentic.com/tsmc-q3-2026-results/ - Published: 2026-10-18T07:20:59.000Z - Updated: 2026-10-18T07:20:59.000Z - Description: TSMC's Q3 revenue topped its own guidance on strong AI demand, while the 2nm ramp and overseas fabs weigh on gross margin. - Author: Eli Yang - Tags: News, Chips & Semis, Deals & Earnings, AI, #Import 2026-10-17 15:34 Taiwan Semiconductor Manufacturing Co. (NYSE: TSM; TWSE: 2330) reported third-quarter revenue of US$46.72 billion on Oct. 15\. That came in above the top of the company's own guidance range of US$44.6 billion to US$45.8 billion, according to its [earnings release](https://pr.tsmc.com/english/news/3346?ref=thealphaagentic.com), [investor relations page](https://investor.tsmc.com/english/quarterly-results/2026/q3?ref=thealphaagentic.com) and [SEC-filed presentation](https://www.sec.gov/Archives/edgar/data/1046179/000104617926000726/a3q26presentatione.htm?ref=thealphaagentic.com). TSMC reports before most big-tech companies, so investors often read its results as an early check on AI demand. The main caveat is margins. Gross margin fell 1.3 percentage points from the second quarter, which Chief Financial Officer Wendell Huang said on the [earnings call](https://investor.tsmc.com/english/encrypt/files/encrypt%5Ffile/reports/2026-10/eba4fac72873bf546b669bd2b5d973df5c93215d/TSMC%203Q26%20Transcript.pdf?ref=thealphaagentic.com) was "primarily due to margin dilution from 2-nanometer ramp." ## The numbers Per the release, revenue rose 41.2% from a year earlier in U.S. dollars and 50.9% in New Taiwan dollars, to NT$1,494.24 billion. Net income rose 68.7% to NT$763.06 billion. Diluted earnings per share were NT$29.43, or US$4.60 per ADR unit. Gross margin was 66.4% and operating margin was 58.7%. Huang said high-performance computing (HPC), which includes AI chips, grew 22% sequentially to 68% of revenue. The release said 2-nanometer chips were 8% of wafer revenue. ## What management said about AI "The AI market continues to be very strong," CEO C.C. Wei said on the call. Asked about TSMC's prior forecast of mid- to high-50% annual AI accelerator growth from 2024 to 2029, Wei said the company "did not see any sign of slowdown whether it's high 50% CAGR, it doesn't matter, it probably will be higher." He also said demand "is still far above our capability today to supply." TSMC now expects full-year 2026 revenue to grow about 44% in U.S. dollar terms, Wei said. Huang said the company is keeping its 2026 capital budget at US$60 billion to US$64 billion. He said capex from 2026 to 2028 "is expected to be significantly higher than the past three years." Wei added a note of caution: TSMC is "being prudent in our business planning going into 2027," citing pressure on consumer markets. ## Margins and overseas fabs For the fourth quarter, TSMC guided revenue of US$52.3 billion to US$54.3 billion. Huang said that works out to a 14% sequential increase and 58% year-over-year growth at the midpoint. Gross margin guidance is 65% to 67%. Huang said the 66% midpoint is 40 basis points below the third quarter's 66.4%, mainly because of the 2nm ramp and overseas fabs. Huang said overseas fabs should cut gross margin by "closer to 2%" for full-year 2026, widening to 3% to 4% in the next few years. Wei said Arizona's second fab will begin volume production in the third quarter of 2027, "slightly ahead of our previous schedule." ## Market context The results arrived during a week of heavy selling in AI and chip stocks. [CNBC reported](https://www.cnbc.com/2026/10/16/cnbc-daily-open-ai-inflation-coreweave-.html?ref=thealphaagentic.com) that credit stress at CoreWeave (NASDAQ: CRWV) and concerns over AI financing weighed on the sector, and that [memory-linked names fell](https://www.cnbc.com/2026/10/13/sk-hynix-softbank-samsung-electronics-shares-tech-stocks-fall.html?ref=thealphaagentic.com) on competition worries. [Reuters reported](https://www.streetinsider.com/Reuters/TSMC+prudent+going+into+2027+after+posting+sixth+straight+quarter+of+record+profit/27188147.html?ref=thealphaagentic.com) TSMC's Taipei shares closed lower before the release. ## The Alpha Take TSMC's quarter cuts against the idea that AI chip demand is cracking. It beat its own forecast, guided higher and said demand is still far above what it can supply. The pressure is on cost instead: the 2nm ramp and overseas fabs are trimming margins, and capex is set to rise sharply through 2028\. That shifts the question for investors from whether AI chips are selling to who is paying for the buildout, which is exactly where this week's selloff in CoreWeave and AI financing has focused. ## What to watch - **Oct. 21:** Meta (NASDAQ: META) ([per the company](https://investor.atmeta.com/investor-news/press-release-details/2026/Meta-to-Announce-Third-Quarter-2026-Results/default.aspx?ref=thealphaagentic.com)) and IBM (NYSE: IBM) ([per the company](https://newsroom.ibm.com/2026-10-07-ibm-to-announce-third-quarter-2026-financial-results?ref=thealphaagentic.com)) report. Lam Research (NASDAQ: LRCX) ([per the company](https://investor.lamresearch.com/2026-09-30-Lam-Research-Corporation-Announces-September-Quarter-Financial-Conference-Call?ref=thealphaagentic.com)) and Texas Instruments (NASDAQ: TXN) ([per the company](https://www.ti.com/about-ti/newsroom/news-releases/2026/2026-10-01-texas-instruments-to-webcast-q3-2026-earnings-conference-call.html?ref=thealphaagentic.com)) also report that day. - **Oct. 28 (Seoul time):** SK Hynix (KRX: 000660) results, [per its SEC filing](https://www.sec.gov/Archives/edgar/data/2120882/000119312526420934/d413172d6k.htm?ref=thealphaagentic.com) (Oct. 27 evening, U.S. Eastern time). - **TSMC:** whether fourth-quarter revenue and margin land within guidance as 2nm ramps, and any 2027 capex figure.