Q3 dollar-denominated revenue rose 41.2% year-on-year; 2nm wafer revenue contribution reaches 8%.
Full-year capital expenditure (CAPEX) maintained at $60 billion–$64 billion; U.S. ADRs declined 1.80% on the earnings release date.
TSMC is raising its annual growth outlook and expanding 2nm production capacity to capitalize on strong demand for advanced semiconductor processes. While revenue contributions from High-Performance Computing (HPC) and new process nodes are rising, the costs associated with initial mass production are exerting pressure on profit margins. TSMC’s American Depositary Receipts (ADRs) closed lower on the U.S. stock market on the day the earnings were announced.
According to the Economic Daily News of Taiwan on the 15th, TSMC Chairman C.C. Wei stated during the Q3 earnings call that the company expects dollar-denominated annual revenue to grow by approximately 44% compared to last year. This is an upward revision from the "slightly above 40% growth" guidance provided in the previous quarter.
TSMC reported Q3 revenue of $46.72 billion, an increase of 41.2% year-on-year and 16.2% quarter-on-quarter. Net profit reached NT$763.06 billion, up 68.7% from the same period last year, with diluted earnings per share (EPS) of NT$29.43.
By business segment, HPC revenue surged 22% sequentially, accounting for 68% of total revenue. In terms of process nodes, the revenue share from 2nm wafers increased from 3% in Q2 to 8% in Q3. The 3nm process accounted for 33% of revenue, while advanced processes of 7nm or finer collectively made up 79% of total wafer revenue.
The company also unveiled capacity expansion plans. The Economic Daily News reported that TSMC expects to more than double the annual production capacity of its 2nm family by 2027 compared to this year. Additionally, the company plans to construct a new 3nm fab in Tainan, Taiwan, with mass production targeted for the first half of 2028.
According to Taiwan’s Central News Agency, TSMC has maintained its capital expenditure budget for this year at the $60 billion to $64 billion range, as outlined in July. The company expects CAPEX for the 2026–2028 period to be significantly higher than in the previous three-year cycle.
The costs associated with capacity expansion were reflected in profitability metrics. The gross margin for Q3 stood at 66.4%, down 1.3 percentage points from the previous quarter. In its management report, TSMC identified the costs related to the initial mass production of the 2nm process as the primary driver for this contraction, though the figure remains 6.9 percentage points higher than the same period last year.
TSMC provided a gross margin guidance of 65–67% for Q4. Revenue is projected to fall between $52.3 billion and $54.3 billion. Based on the midpoint of $53.3 billion, this represents a roughly 14.1% increase from Q3. The company anticipates that demand for advanced processes and expanded 2nm production will continue to support revenue growth in the final quarter.
Market reaction in the U.S. remained mixed despite the strong growth momentum. On October 15 (local time), TSMC ADRs (Ticker: TSM) closed at $422.25 on the New York Stock Exchange, down $7.75 (1.80%) from the previous trading day. The broader semiconductor sector also showed weakness, with the Philadelphia Semiconductor Index falling 0.88%, marking its seventh consecutive day of declines.
