TSMC (TSM): Q3 profit jumps 68.7% to a record as advanced chips lift sales by half
TSMC, the Taiwanese company that manufactures chips designed by other companies, reported third-quarter profit of NT$763.06bn, up 68.7% from a year earlier, on sales of NT$1,494.24bn. It kept about 66p of every £1 of sales after the direct costs of making chips, and told investors it expects fourth-quarter sales of US$52.3bn to US$54.3bn.
What happened
On Thursday 15 October 2026, Taiwan Semiconductor Manufacturing Company (NYSE: TSM, with its main listing in Taipei) published results for the three months to 30 September 2026. TSMC is a foundry, meaning it makes chips for other companies rather than selling chips under its own name. Consolidated sales were NT$1,494.24bn (New Taiwan dollars), or US$46.72bn, and net income was NT$763.06bn. Profit per share was NT$29.43, equal to US$4.60 for each American depositary receipt (ADR), the share certificate that trades in New York. The company also said the newest 2-nanometre process, a more advanced and more power-efficient way of making chips, made up 8% of its wafer sales in the quarter, up from 3% in the second quarter, according to TrendForce's reading of the release. The figures are reported under Taiwan's version of international accounting rules and, as the release states, had not yet been approved by the company's board.
The numbers, explained
Sales of NT$1,494.24bn were 50.9% higher than the NT$989.92bn of the third quarter of 2025 (1,494.24 divided by 989.92 is 1.509) and 17.6% higher than the NT$1,270.38bn of the second quarter (1,494.24 divided by 1,270.38 is 1.176). Part of the difference between the Taiwan-dollar and US-dollar growth rates is currency: in US dollars, sales rose 41.2% on a year ago and 16.2% on the previous quarter. Net income, the profit left after every cost and tax, was NT$763.06bn against NT$452.30bn a year earlier (up 68.7%: 763.06 divided by 452.30 is 1.687) and NT$706.56bn in the second quarter (up 8.0%). Profit per share rose by the same 68.7%, from NT$17.44 to NT$29.43, so the share count did not change the picture.
Margins show how much of each dollar of sales is kept. Gross profit, sales minus the direct cost of making the chips, was NT$992.38bn, so the gross margin was 66.4% (992.38 divided by 1,494.24), against 59.4% a year ago (588.54 divided by 989.92). Operating profit, after research and administrative costs, was NT$876.45bn, a margin of 58.7%, against 50.6% a year ago. The net margin was 51.1%, against 45.7% a year ago. Compared with the second quarter, however, margins slipped: our working from the filing gives a gross margin of 67.7% last quarter (860.31 divided by 1,270.38), so the margin fell by about 1.3 percentage points even as profit grew 8.0%. Sales grew faster than profit, which is what a lower margin means. The release does not give a reason, so we offer none.
On process mix, wafers (the silicon discs chips are cut from) made on the most advanced processes dominate sales: 3-nanometre was 33% of wafer revenue, 5-nanometre 28%, 7-nanometre 10% and 2-nanometre 8%, so 7-nanometre and smaller together were 79% (33 + 28 + 10 + 8 = 79). A smaller number of nanometres means smaller transistors, the tiny switches inside a chip. The release does not break sales down by customer or product, so this table shows the technology used, not what the chips are used for.
Why it matters
TSMC earns its money by being paid to manufacture chips that its customers design. Its customers, which include makers of phones, computers and data-centre hardware, rely on its factories to turn their designs into physical chips. A 41.2% rise in US-dollar sales in a single year, at a company of this size, shows that demand for its output was still growing strongly over the summer of 2026. A 66.4% gross margin also means only about 34p of each £1 of sales went on the direct cost of production.
The product mix is the part to follow. The newest process, 2-nanometre, moved from 3% to 8% of wafer sales in one quarter, which is an early sign of how quickly customers adopt a new generation once it is ready. Reported fact: these are the company's own numbers for a finished quarter. Analyst views also differ: a Morgan Stanley forecast quoted by TrendForce expected a gross margin of 67.5% and an operating margin of 60.8%, both above the 66.4% and 58.7% that were reported. Those are one firm's estimates, not facts.
What to watch next
TSMC's own forecast for the fourth quarter, which is a company projection and not a result, is sales of US$52.3bn to US$54.3bn, a gross margin of 65% to 67% and an operating margin of 56.5% to 58.5%, assuming 31.8 New Taiwan dollars to one US dollar. The middle of the sales range, US$53.3bn, would be 14.1% above the third quarter's US$46.72bn (53.3 divided by 46.72 is 1.141); the low and high ends are 11.9% and 16.2% above. The forecast margins are below the 66.4% and 58.7% just reported at their midpoints (66% and 57.5%). The actual fourth-quarter figures will not arrive until TSMC reports next, and we could not find a confirmed date in the documents we read.
- Foundry: a company that makes chips designed by other firms
- ADR: a US-traded certificate representing shares in a foreign company
- Gross margin: the share of sales left after the direct cost of making the product
Sources
More on TSMC (TSM) · Semiconductors takes
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