TSMC announced its July–September results on October 15, 2026. Revenue was $46.72 billion, 2.0% above the high end of company guidance ($45.8 billion), and net income attributable to shareholders of the parent was NT$763.06 billion, up 68.7% year over year. However, the gross margin of 66.4% stayed within the guidance range (65–67%) for the first time in 2026. To stay within its full-year capital expenditure budget of $60–64 billion, TSMC would need to spend $19.36–23.36 billion in the October–December quarter.
Revenue at or above the high end of guidance for three straight quarters; Q4 guided up 58% year over year
July–September revenue was NT$1,494.24 billion, up 50.9% year over year and 17.6% quarter over quarter. In US dollars, it was $46.72 billion (up 41.2% year over year and 16.2% quarter over quarter). Because growth rates differ by currency, the comparisons with company guidance below are all in US dollars. The average exchange rate was NT$31.98 to the dollar, almost the same as the company's assumption (NT$32.0).
Lining up the three quarters of 2026: January–March revenue was $35.90 billion (high end of guidance: $35.8 billion), April–June was $40.20 billion (high end: $40.2 billion), and July–September was $46.72 billion (high end: $45.8 billion). April–June landed exactly at the high end, while January–March and July–September exceeded it. All three quarters came in at or above the high end, and the $0.92 billion beat in July–September was the largest.
For October–December, the company guides revenue of $52.3–54.3 billion, assuming an exchange rate of NT$31.8 to the dollar. Senior Vice President and CFO Wendell Huang explained that the midpoint implies 14% growth quarter over quarter and 58% year over year. The company also expects full-year 2026 revenue to grow about 44% in US dollars.
For 2025, adding up the quarterly results of $25.53 billion, $30.07 billion, $33.10 billion and $33.73 billion gives $122.43 billion. For January–September 2026, the figures are $35.90 billion, $40.20 billion and $46.72 billion, totaling $122.82 billion.
Adding the midpoint of the October–December guidance ($53.3 billion) to the January–September results puts 2026 revenue at roughly $176.1 billion, up 43.9% from 2025. That matches the company's "about 44%" figure. Calculating with the low and high ends of the guidance gives growth of 43.0%–44.7%, and "about 44%" falls within that range. Note, however, that the quarterly US-dollar figures are converted at each period's average exchange rate, so they may differ in rounding from the company's annual disclosures. The October–December figures are also guidance, not confirmed results.
Demand is concentrated in high-performance computing (HPC). HPC accounted for 68% of revenue, up from 66% in the previous quarter and 57% a year earlier. Smartphones were 21%, down from 30% a year earlier. Quarter-over-quarter growth was 22% for HPC and 10% for smartphones. By process node, 2nm accounted for 8% (3% in the previous quarter) and 3nm for 33%.
Wafer shipments were 4.476 million 12-inch equivalent wafers, up 9.6% year over year. That is far below the 50.9% revenue growth (in NT dollars). Per-wafer prices are not disclosed, so the gap cannot be attributed to price increases. What can be said is that revenue growth far outpaced shipment growth, while the share of 2nm and 3nm rose at the same time.
On AI demand, Chairman and CEO C.C. Wei commented at the briefing. TSMC has projected a compound annual growth rate for AI accelerator revenue (specialized chips for AI training and inference, which in TSMC's definition exclude CPUs) in the "mid-to-high 50s percent" range for 2024–2029. Asked whether it would raise that figure, Wei said demand is "extremely strong, and we see no signs of slowing," and that the growth rate would "probably be higher" (original: "It probably will be higher."). He also said demand far exceeds supply capacity. This was an answer to a question; the company has not formally raised its outlook.
Not every market is moving in the same direction. Wei said consumer and price-sensitive markets face headwinds from rising component prices and macroeconomic uncertainty, and that the company will plan its 2027 business cautiously. Smartphone growth of 10% quarter over quarter is less than half of HPC's 22%, consistent with the shift in revenue mix.
Gross margin is the only metric that landed within guidance: a comparison of the three quarters of 2026
The July–September gross margin was 66.4%, down 1.3 points from the previous quarter and up 6.9 points from a year earlier. This is the first time in 2026 that it fell within the company's guidance range. The table below lines up the results and company guidance from each quarter's investor relations page.
| Metric (actual / company guidance) | Jan–Mar | Apr–Jun | Jul–Sep |
|---|---|---|---|
| Revenue | $35.90B / $34.6B–$35.8B | $40.20B / $39.0B–$40.2B | $46.72B / $44.6B–$45.8B |
| Gross margin | 66.2% / 63–65% | 67.7% / 65.5–67.5% | 66.4% / 65–67% |
| Operating margin | 58.1% / 54–56% | 60.3% / 56.5–58.5% | 58.7% / 56–58% |
In all three quarters of 2026, US-dollar revenue was at or above the high end of guidance. Gross margin exceeded the high end in January–March and April–June, but in July–September it stayed within the 65–67% range at 66.4%. The gap to the high end of gross margin narrowed from +1.2 points in January–March to +0.2 points in April–June and -0.6 points in July–September. The gaps to the high end of revenue were +$0.10 billion, 0 and +$0.92 billion. In July–September, when the revenue beat was largest, the gross margin's gap to the high end was the smallest, turning negative for the first time in 2026.
Operating margin exceeded the high end in all three quarters. But the gap has shrunk: +2.1 points in January–March, +1.8 points in April–June and +0.7 points in July–September.
Because the company's guidance assumptions on exchange rates and product mix differ each quarter, the size of the beat cannot be read directly as the strength of demand. The exchange rate assumptions were NT$31.6 for January–March, NT$31.7 for April–June and NT$32.0 for July–September, and the difference from actual rates was within NT$0.1 in all three quarters, so exchange rates alone cannot explain the differences in the size of the beats.
The picture also changes depending on whether you benchmark against the high end. The July–September guidance (65–67%) given with the April–June results was lower than the previous quarter's actual of 67.7%. The actual 66.4% was 0.4 points above the guidance midpoint of 66%. The company attributes the 1.3-point quarter-over-quarter decline mainly to the early volume ramp of N2, but it did not separately explain why the margin stayed within the guidance range.
July–September net income rose 8.0% quarter over quarter, less than the 17.6% growth in revenue. Operating income rose 14.3% quarter over quarter to NT$876.45 billion, while operating margin fell 1.6 points. Besides the 1.3-point decline in gross margin, the earthquake insurance income recorded in the previous quarter dropped out, and other operating income and expenses decreased.
Non-operating income fell from NT$95.83 billion in April–June to NT$34.59 billion in July–September. The previous quarter included gains on the sale and revaluation of Vanguard International Semiconductor (VIS) shares, which did not recur this time. As a result, pretax income grew only 5.6% quarter over quarter. The effective tax rate fell from 18.1% in the previous quarter to 16.2%, bringing net income growth back up to 8.0%. Net margin was 51.1%, and diluted earnings per share (EPS) were NT$29.43 ($4.60 per American depositary receipt (ADR) unit).
How long will N2 and overseas fabs keep weighing on gross margin?
For October–December, the company guides gross margin of 65–67%. The 66% midpoint is 0.4 points below July–September's 66.4%. Operating margin guidance is 56.5–58.5%.
The CFO cited two headwinds: the rapid volume ramp of N2 and overseas fabs. He also said productivity gains and cross-node capacity optimization would offset part of the impact. In both cases, the costs of new processes and fabs come first and pull down the company-wide gross margin.
N2 entered volume production in October–December 2025. The 2nm share of wafer revenue rose to 8% in July–September (3% in the previous quarter), and the company expects N2-family annual capacity to more than double in 2027. If both the revenue share and capacity of a generation still in its ramp phase keep growing, this headwind will likely persist for the time being. The impact of N2 alone was not given as a number at the briefing.
The next generation, A14, also has a roadmap with risk production in 2027 and volume production in 2028. Risk production is a stage in which a small number of products are run before volume production to check yield and process.
The CFO explained that overseas fab costs remain high, but that with the company's overall scale expansion and cost improvements, the dilution to gross margin is currently expected to be close to 2%. He also said it would widen to 3–4 points over the next several years as more fabs in the US come online. Asked about timing by an analyst, he said the assumption of 3–4 points in the latter part of the five-year period is unchanged.
At the second fab in Arizona, building construction is complete and tool move-in is under way. Volume production is scheduled to begin in July–September 2027, slightly ahead of the previous plan. Japan's second fab will also use 3nm, with volume production planned for 2028.
Japan accounts for just 3% of revenue by customer location (4% in the previous quarter), but the Japan second fab counts as one of the overseas fabs. On August 11, 2026, TSMC disclosed that it had agreed to establish a joint venture with Sony Semiconductor Solutions for next-generation image sensors.
The overall fab plan spans about 20 facilities worldwide. In Taiwan, 13 fabs for advanced processes and advanced packaging are in progress, along with 5–6 overseas. Asked about the profitability outlook, Wei answered, "there is no ceiling for TSMC's profitability, but a dramatic increase will not happen overnight either."
$19.36–23.36 billion: working backward to the capex needed in October–December
Capital expenditure in 2026 was $11.10 billion in January–March, $15.70 billion in April–June and $13.84 billion in July–September, for a January–September total of $40.64 billion. The full-year budget was left unchanged at this briefing. To reach the full-year capex budget of $60–64 billion, subtracting the $40.64 billion spent through September means spending $19.36–23.36 billion in October–December alone.
The low end is $60 billion − $40.64 billion = $19.36 billion, and the high end is $64 billion − $40.64 billion = $23.36 billion, which is 1.40–1.69 times July–September's actual $13.84 billion. Because the annual budget is given as a range, the remaining required amount is also a range. The company has not given an October–December capex figure, and if actual spending falls short of the low end of the budget or payments are timed differently, actual investment could fall outside this range.
No figures have been given for 2027 and beyond. Huang said capex in 2026–2028 would significantly exceed that of the past three years, but that it is "a bit too early" to give amounts for 2027 onward.
July–September free cash flow was NT$476.56 billion (NT$139.38 billion a year earlier), and cash and marketable securities were NT$4,016.98 billion. Both are disclosed in NT dollars, so they are not directly compared with the required amounts in US dollars.
Three things to check on October–December gross margin and investment
Revenue exceeded the high end of guidance, and the October–December outlook of 58% year-over-year growth shows no sign of a demand slowdown in the July–September figures. What changed is on the profit side: gross margin fell 1.3 points from the previous quarter. Investment did not increase in this disclosure, and working backward from the unchanged budget implies spending more than 1.4 times July–September's level in October–December.
The first thing to check is where October–December gross margin lands within the company's 65–67% guidance. A result below the 65% low end would mean the drag from N2 and overseas fabs was stronger than the company expected. The second is where October–December capex falls within $19.36–23.36 billion. Below the low end would mean budget spending is running behind plan, while above the high end would exceed the $64 billion budget. The third is capex for 2027 and beyond, which the CFO called "a bit too early" to discuss; what level "significantly exceeds the past three years" means will be determined by that figure.
Wei said the company will do its utmost to narrow the gap between demand and supply. Under the company's plan, N2-family annual capacity will more than double in 2027, and the second Arizona fab will enter volume production in July–September 2027. The CFO expects the drag from overseas fabs to widen to 3–4 points over the next several years, with productivity gains and cross-node capacity optimization offsetting part of it. How effective that offset is will first be tested by whether October–December gross margin comes in above or below the guidance midpoint of 66%.