TSMC Earnings: Q3 Revenue to Rise 12% in USD, Full-Year Growth Outlook Raised to Over 40%

TSMC (2330-TW)(TSM-US) held its earnings conference today (16th), where Chairman C.C. Wei stated that thanks to robust demand for AI, HPC, and advanced processes, third-quarter revenue is expected to range between $44.6 billion and $45.8 billion. With a midpoint of $45.2 billion, this represents a quarter-on-quarter increase of approximately 12% and a year-on-year rise of about 37%. The company has also raised its full-year outlook for USD-denominated revenue growth to "slightly above 40%", surpassing the previous forecast of "over 30%" and marking the second upward revision this year.

C.C. Wei noted that TSMC, leveraging its leading process technology, differentiated manufacturing capabilities, and broad customer base, currently projects full-year USD revenue growth for 2026 to also be "slightly above 40%". This reflects stronger-than-expected sustained demand for AI-related applications, driving the company to simultaneously expand capital expenditures and production capacity.

TSMC forecasts third-quarter revenue between $44.6 billion and $45.8 billion. Based on the midpoint, this implies a 12% sequential increase and a 37% year-on-year growth. Using an exchange rate of USD 1 to TWD 32, this translates to TWD 1.4272 trillion to TWD 1.4656 trillion. Gross margin is expected at 65–67%, and operating margin at 56–58%, both slightly lower than the previous quarter due to the ramp-up of 2-nanometer production and higher costs at overseas wafer fabs.

C.C. Wei emphasized that market demand for computing power continues to grow, sustaining strong demand for advanced-process chips. He stated that TSMC’s customers and their customers—especially cloud service providers—continue to send very strong demand signals and positive outlooks, reinforcing the company’s high confidence in the multi-year structural growth trend of AI.

Furthermore, the rise of Agentic AI is revitalizing the role of CPUs in AI data centers, Wei noted, leading to increased demand for CPUs alongside AI accelerators. Regardless of whether the market adopts x86, Arm, or RISC-V architectures, most related suppliers are TSMC customers, which will help drive continued expansion in demand for advanced-process chips.

TSMC is currently collaborating closely with CPU and AI chip customers, providing advanced processes and necessary production capacity to help them capture business opportunities in Agentic AI. The company is also proactively deploying capacity based on customers’ multi-year product roadmaps and volume production plans to meet the growing AI and HPC demand over the coming years.

However, with 2-nanometer technology entering rapid volume production ramp-up, TSMC expects the midpoint of its gross margin in Q3 to decline from 67.7% in Q2 to 66%. This is primarily due to higher initial costs associated with 2nm, which are estimated to dilute gross margin by about 3 to 4 percentage points. This impact is expected to be partially offset by strong demand for advanced processes, cost improvements, and capacity optimization.