TSMC Q3 2026 Earnings: Record Profit as 2nm Chips Reach 8% of Wafer Revenue

Taiwan Semiconductor Manufacturing Co. (TSMC) reported a record third-quarter profit on October 15, 2026. Net income was NT$763.06 billion, up 68.7% from a year earlier. Revenue was US$46.72 billion, up 41.2%. Chips made on its newest 2-nanometer process rose to 8% of wafer revenue, the company said. That was up from 3% in the second quarter, according to its July results.

TSMC builds chips that other companies design, for customers including Nvidia and Apple. The Associated Press describes it as the maker of more than 90% of the world's most advanced chips. AP noted that its results are seen as a barometer of AI development. On the earnings call, chief executive C.C. Wei said demand for its chips is still well above what TSMC can supply.

What TSMC reported for the third quarter

The main figures for the quarter, which ended September 30:

• Revenue of NT$1,494.24 billion, or US$46.72 billion. In US dollars, that was up 41.2% from a year earlier and 16.2% from the second quarter.
• Net income of NT$763.06 billion, up 68.7% from a year earlier.
• Gross margin of 66.4%, down from 67.7% in the second quarter.

Revenue beat the US$44.6 billion to US$45.8 billion range TSMC had forecast in July. It was the company's sixth straight quarter of record profit, CNBC reported. Net income also beat the NT$746.34 billion analysts expected, according to LSEG SmartEstimates cited by CNBC.

TSMC now expects 2026 revenue to grow about 44% in US dollar terms, its earnings presentation shows. In July it had forecast growth of slightly above 40%, according to its second-quarter presentation.

Why the 2-nanometer ramp matters

Names such as 2-nanometer label successive generations of chipmaking technology. TSMC says its 2-nanometer process, called N2, started volume production in the fourth quarter of 2025. It also says N2 uses its first generation of nanosheet transistors, a new transistor design.

In the third quarter, the four most advanced generations made up 79% of wafer revenue:

• 3-nanometer: 33%
• 5-nanometer: 28%
• 7-nanometer: 10%
• 2-nanometer: 8%

The early 2-nanometer ramp was the main reason gross margin fell 1.3 percentage points, chief financial officer Wendell Huang said. His remarks are in a call transcript published by The Motley Fool. Other call remarks below come from that transcript unless another outlet is named.

Wei said N2 is ramping at TSMC's sites in Hsinchu and Kaohsiung. He expects the N2 family's yearly capacity to more than double in 2027, Focus Taiwan reported. He said demand for it comes from both smartphones and AI applications.

TSMC's earnings presentation also breaks revenue down by platform. High-performance computing, which TSMC says enables AI applications from the cloud to devices, grew 22% from the second quarter. It made up 68% of revenue. Smartphones made up 21%.

What TSMC said about AI demand

Wei said the AI market "continues to be very strong," AP reported. He said demand is rising as AI use shifts from chatbots to agentic AI assistants. Wider use of open-source AI models is adding to it, he said. Besides AI accelerators, he named processors for agentic AI and networking chips as growing sources of demand.

TSMC had forecast that its AI accelerator revenue would grow at a compound annual rate in the mid to high 50s percent. That forecast covered 2024 to 2029. Asked for an update, Wei gave no new number. He said growth would probably be higher.

TSMC now sends its own staff to check data center construction and power supply in the US, The Register reported. Wei said the results so far were good. He said TSMC weighs such limits, along with customers' spending and parts supply, in its planning. Taking all of that into account, he said, demand is still higher than supply.

Spending, new fabs and talks in Texas

TSMC kept its 2026 capital budget at US$60 billion to US$64 billion, Focus Taiwan reported. Capital spending in the third quarter was NT$443.21 billion, its earnings presentation shows. Huang said spending from 2026 to 2028 would be significantly higher than in the previous three years. He added that prices for chipmaking tools are rising.

Wei said TSMC has nearly 20 fabs in progress worldwide. They include 13 leading-edge and advanced packaging fabs in Taiwan and five or six overseas. He gave these dates:

• A14, which The Register describes as a 1.4nm process, is on track for risk production in 2027 and volume production in 2028. Wei expects it to become a bigger node than N2.
• The second fab in Arizona is built and its tools are being installed. Volume production is set for the third quarter of 2027, slightly ahead of plan.
• A new 3-nanometer fab in Tainan, Taiwan, is due to start volume production in the first half of 2027. Another there is planned for the first half of 2028, Focus Taiwan reported.
• TSMC's second fab in Japan is due to start volume production of 3-nanometer chips in 2028.

TSMC is also looking beyond Arizona. Wei said it had sent teams to Texas to carry out evaluations, AP reported. He said TSMC is in talks to take part in Elon Musk's planned Terafab chip complex there. Any such plant must be run by TSMC, he said. Musk has said on X that his side would build and run the fab, according to AP. Wei said the talks had not reached a conclusion.

What TSMC is cautious about

Wei said consumer and price-sensitive markets are being hurt by rising component prices and economic uncertainty. For that reason, he said, TSMC is being prudent in its planning for 2027.

TSMC also expects its margins to stay under pressure. Huang said fourth-quarter gross margin should be 66% at the midpoint of guidance. That is 0.4 percentage points lower than the third quarter. He pointed to the 2-nanometer ramp and the cost of overseas fabs. He expects the drag on gross margin from overseas fabs to widen to 3 to 4 percentage points in the next few years.

What comes next

TSMC expects fourth-quarter revenue of US$52.3 billion to US$54.3 billion. At the midpoint, that would be up 14% from the third quarter and 58% from a year earlier, Huang said.

The A14, Arizona, Tainan and Japan dates are company targets and can change. Open questions include whether TSMC reaches a deal in Texas and how far consumer weakness spreads into 2027.

The AI chip roadmap tracker follows TSMC's process milestones alongside chips from Nvidia, AMD and others. For how foundries, memory makers and packaging fit together, see how an AI chip is made.