Six record quarters in a row, and the stock still slipped. TSMC’s record profit landed for the sixth straight quarter, and shares dipped anyway, which tells you what kind of week the AI trade is having.
The Taiwan chipmaker reported third-quarter net income of NT$763.06 billion, up 68.7% from a year ago, according to TSMC’s filing with the SEC. It beat analyst estimates. CNBC put the Wall Street target at NT$746.34 billion.
The numbers behind the TSMC record profit
Revenue hit NT$1.49 trillion, up 50.9% from last year and 17.6% from the prior quarter. In US dollars, that is $46.72 billion. TSMC had told investors to expect $44.6 billion to $45.8 billion, so it sailed past its own bar.
The margins are the part that should make every other manufacturer jealous. Gross margin was 66.4%. Operating margin was 58.7%. Net margin was 51.1%.
In other words, for every dollar of chips sold, about 51 cents landed as profit. That is closer to a software company than a factory.
Cash is piling up too. Free cash flow came in at NT$476.56 billion, up from NT$139.38 billion a year earlier.
AI is doing the heavy lifting behind TSMC’s quarterly profit
So where is the money coming from? Mostly from the machines that run artificial intelligence. High-performance computing made up 68% of revenue, up from 57% a year ago, according to Quartz. Smartphones, which used to be the main event, slipped to 21%.
The most advanced chips drove the quarter. Processors built on 7-nanometer technology and smaller made up 79% of wafer revenue. The 3nm node alone was 33%, and the brand-new 2nm chips already accounted for 8%.
That matters well beyond Taiwan. Reuters calls TSMC a key supplier to Nvidia and Apple. When TSMC says demand is strong, it is telling you what the biggest names in tech are ordering. The same boom helped Taiwan overtake India as the world’s fifth-largest stock market.
So why did the stock slip after the TSMC record profit?
Fair question. A record quarter, a beat on every major line, and the shares still dipped. Per Yahoo Finance, the move came as a broader chip sell-off deepened. Chip stocks had already flinched after Broadcom’s CEO compared AI investors to gamblers in a casino.
There is also a real wrinkle in the report. Gross margin fell 1.3 points from the previous quarter, mainly because ramping up 2nm production costs more at first. And according to the earnings call transcript, margin pressure should continue into the fourth quarter from the 2nm ramp and TSMC’s overseas fabs.
Here’s the thing: when a stock has run this hard, perfect is the minimum. Investors were not looking for a beat. They were looking for a reason to keep paying up.
What TSMC says is next after its sixth record quarter
The company is guiding fourth-quarter revenue of $52.3 billion to $54.3 billion. It expects gross margin of 65% to 67%. Quartz reports TSMC sees full-year 2026 growth of around 44%.
The demand signals are not slowing, either. Reuters reports chip-equipment giant ASML said Wednesday that customers are looking to place orders for 2029 and 2030. That is a long runway for a company whose factories already cannot keep up.
So if AI demand keeps outrunning supply, does a margin dip or a nervous market even matter? TSMC’s next report will start to answer that.
