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Taiwan Semiconductor Q3 Earnings & Revenues Top Estimates, Margins Up
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Key Takeaways
TSMC's Q3 earnings rose 68.7% year over year to $4.60 per ADR, beating estimates by 3.4%.
TSMC's revenues climbed 41.2%, exceeding estimates by 2.4% and guidance on strong sequential growth.
TSMC's 2-nanometer wafer revenues rose to 8%, while gross, operating and net margins fell sequentially.
Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) , or TSMC, reported third-quarter 2026 earnings of $4.60 per ADR unit, which increased 68.7% year over year. The bottom line surpassed the Zacks Consensus Estimate of 3.4%.
Revenues rose 41.2% year over year to $46.72 billion and beat the Zacks Consensus Estimate by 2.4%. Results reflected strong revenue growth, with advanced process technologies accounting for 79% of total wafer revenues.
TSMC’s revenues increased 16.2% sequentially in U.S. dollar terms, reflecting stronger momentum compared with the preceding quarter. In Taiwan dollar terms, revenues jumped 17.6% quarter over quarter.
The top-line performance exceeded management's previous guidance range of $44.6 billion-$45.8 billion. The results also surpassed the roughly 12% sequential growth implied by the midpoint of the earlier guidance.
The 3-nanometer process accounted for 33% of total wafer revenues in the third quarter, increasing from 30% in the preceding quarter. Meanwhile, the 5-nanometer process contributed 28%, declining from 33% in the second quarter.
Taiwan Semiconductor Manufacturing Company Ltd. Price, Consensus and EPS Surprise
The 7-nanometer process represented 10% of wafer revenues compared with 11% in the previous quarter. These contributions demonstrate the evolving distribution of wafer revenues across Taiwan Semiconductor's established advanced manufacturing technologies.
The 2-nanometer process accounted for 8% of total wafer revenues, up from 3% in the second quarter. This five-percentage-point sequential increase marked a significant shift in the contribution from the company's newest manufacturing technology.
Advanced technologies, defined as processes of 7 nanometers and below, remained the dominant component of wafer revenues. The increasing contribution from 2-nanometer manufacturing reflects the ongoing transition toward newer semiconductor production processes.
TSM’s Margins in Detail
TSMC’s gross margin was 66.4%, which expanded 690 basis points (bps) from the year-ago quarter but contracted 130 bps sequentially. The sequential decline coincided with the ongoing ramp-up of the company's 2-nanometer manufacturing technology.
Operating margin of 58.7% expanded 810 bps year over year but contracted 160 bps sequentially. TSM’s net profit margin was 51.1%, which expanded 540 bps year over year but declined 450 bps sequentially.
TSMC’s Financial Position Strengthens in Q3
As of Sept. 30, 2026, Taiwan Semiconductor's cash and marketable securities totaled NT$4 trillion or $126 billion in U.S. dollar terms. Its cash balance increased NT$488 billion sequentially to NT$3.6 trillion.
The company generated approximately NT$920 billion in cash from operations and incurred capital expenditures of NT$443 billion or $13.8 billion. TSMC also distributed NT$156 billion in cash dividends during the third quarter.
TSM Issues Upbeat Q4 and Full-Year Outlook
Management now expects full-year 2026 revenues to increase approximately 44% year over year in U.S. dollar terms. The outlook reflects continued robust demand for leading-edge technologies, supported by the company's strong technology differentiation and broad customer base. The Zacks Consensus Estimate is pegged at $168.19 billion.
For the fourth quarter of 2026, revenues are expected in the range of $52.3-$54.3 billion. The midpoint implies sequential growth of roughly 14% and year-over-year growth of 58%, based on an exchange rate assumption of NT$31.8 per U.S. dollar. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $48.78 billion.
Gross margin is projected between 65% and 67%, while operating margin is expected in the 56.5-58.5% range.
Our Take
TSMC delivered solid third-quarter results, with both earnings and revenues surpassing estimates. The performance was marked by robust year-over-year revenue growth and an increasing contribution from advanced process technologies. The 2-nanometer process gained traction, while 3-nanometer technology remained the largest contributor to wafer revenues, highlighting the company's evolving technology mix. However, sequential contractions in gross, operating and net profit margins warrant attention.
TSM’s Zacks Rank & Other Key Picks
Currently, TSMC carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader Computer and Technology sector are Micron Technology (MU - Free Report) , Richardson Electronics, Ltd. (RELL - Free Report) and Ciena (CIEN - Free Report) .
Micron Technology, sporting a Zacks Rank #1 (Strong Buy), reported a fourth-quarter fiscal 2026 EPS of $33.42, which beat the Zacks Consensus Estimate by 5.73%. Revenues of $54.23 billion surpassed the Zacks Consensus Estimate by 6.33%. You can see the complete list of today’s Zacks #1 Rank stocks here.
MU has an earnings yield of 18.7% compared with the industry’s 4.5% yield. The company surpassed earnings estimates in each of the trailing four quarters, the average surprise being 21%.
Richardson Electronics, sporting a Zacks Rank #1, posted a first-quarter fiscal 2027 EPS of 27 cents, exceeding the Zacks Consensus Estimate by 200%. Revenues of $64.92 million beat the Zacks Consensus Estimate by 10.07%.
RELL has an estimated fiscal 2027 earnings growth rate of 62.5% compared with the industry’s 46.2% growth. The company’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 110%.
Ciena, sporting a Zacks Rank #1, reported third-quarter fiscal 2026 EPS of $2.11, which topped the Zacks Consensus Estimate by 21.26%. Revenues of $1.67 billion surpassed the consensus mark by 1.44%.
CIEN has an estimated fiscal 2026 earnings growth rate of 171.2% compared with the industry’s 35.3% growth. The company’s earnings beat estimates in each of the trailing four quarters and matched on one occasion, the average surprise being 17.55%.
View the Zacks #1 Rank List
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Taiwan Semiconductor Q3 Earnings & Revenues Top Estimates, Margins Up
Key Takeaways
Taiwan Semiconductor Manufacturing Company Ltd. (TSM - Free Report) , or TSMC, reported third-quarter 2026 earnings of $4.60 per ADR unit, which increased 68.7% year over year. The bottom line surpassed the Zacks Consensus Estimate of 3.4%.
Revenues rose 41.2% year over year to $46.72 billion and beat the Zacks Consensus Estimate by 2.4%. Results reflected strong revenue growth, with advanced process technologies accounting for 79% of total wafer revenues.
TSM's Sequential Revenue Growth Exceeds Expectations
TSMC’s revenues increased 16.2% sequentially in U.S. dollar terms, reflecting stronger momentum compared with the preceding quarter. In Taiwan dollar terms, revenues jumped 17.6% quarter over quarter.
The top-line performance exceeded management's previous guidance range of $44.6 billion-$45.8 billion. The results also surpassed the roughly 12% sequential growth implied by the midpoint of the earlier guidance.
Taiwan Semiconductor's Advanced Nodes Drive Wafer Mix
The 3-nanometer process accounted for 33% of total wafer revenues in the third quarter, increasing from 30% in the preceding quarter. Meanwhile, the 5-nanometer process contributed 28%, declining from 33% in the second quarter.
Taiwan Semiconductor Manufacturing Company Ltd. Price, Consensus and EPS Surprise
Taiwan Semiconductor Manufacturing Company Ltd. price-consensus-eps-surprise-chart | Taiwan Semiconductor Manufacturing Company Ltd. Quote
The 7-nanometer process represented 10% of wafer revenues compared with 11% in the previous quarter. These contributions demonstrate the evolving distribution of wafer revenues across Taiwan Semiconductor's established advanced manufacturing technologies.
The 2-nanometer process accounted for 8% of total wafer revenues, up from 3% in the second quarter. This five-percentage-point sequential increase marked a significant shift in the contribution from the company's newest manufacturing technology.
Advanced technologies, defined as processes of 7 nanometers and below, remained the dominant component of wafer revenues. The increasing contribution from 2-nanometer manufacturing reflects the ongoing transition toward newer semiconductor production processes.
TSM’s Margins in Detail
TSMC’s gross margin was 66.4%, which expanded 690 basis points (bps) from the year-ago quarter but contracted 130 bps sequentially. The sequential decline coincided with the ongoing ramp-up of the company's 2-nanometer manufacturing technology.
Operating margin of 58.7% expanded 810 bps year over year but contracted 160 bps sequentially. TSM’s net profit margin was 51.1%, which expanded 540 bps year over year but declined 450 bps sequentially.
TSMC’s Financial Position Strengthens in Q3
As of Sept. 30, 2026, Taiwan Semiconductor's cash and marketable securities totaled NT$4 trillion or $126 billion in U.S. dollar terms. Its cash balance increased NT$488 billion sequentially to NT$3.6 trillion.
The company generated approximately NT$920 billion in cash from operations and incurred capital expenditures of NT$443 billion or $13.8 billion. TSMC also distributed NT$156 billion in cash dividends during the third quarter.
TSM Issues Upbeat Q4 and Full-Year Outlook
Management now expects full-year 2026 revenues to increase approximately 44% year over year in U.S. dollar terms. The outlook reflects continued robust demand for leading-edge technologies, supported by the company's strong technology differentiation and broad customer base. The Zacks Consensus Estimate is pegged at $168.19 billion.
For the fourth quarter of 2026, revenues are expected in the range of $52.3-$54.3 billion. The midpoint implies sequential growth of roughly 14% and year-over-year growth of 58%, based on an exchange rate assumption of NT$31.8 per U.S. dollar. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $48.78 billion.
Gross margin is projected between 65% and 67%, while operating margin is expected in the 56.5-58.5% range.
Our Take
TSMC delivered solid third-quarter results, with both earnings and revenues surpassing estimates. The performance was marked by robust year-over-year revenue growth and an increasing contribution from advanced process technologies. The 2-nanometer process gained traction, while 3-nanometer technology remained the largest contributor to wafer revenues, highlighting the company's evolving technology mix. However, sequential contractions in gross, operating and net profit margins warrant attention.
TSM’s Zacks Rank & Other Key Picks
Currently, TSMC carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader Computer and Technology sector are Micron Technology (MU - Free Report) , Richardson Electronics, Ltd. (RELL - Free Report) and Ciena (CIEN - Free Report) .
Micron Technology, sporting a Zacks Rank #1 (Strong Buy), reported a fourth-quarter fiscal 2026 EPS of $33.42, which beat the Zacks Consensus Estimate by 5.73%. Revenues of $54.23 billion surpassed the Zacks Consensus Estimate by 6.33%. You can see the complete list of today’s Zacks #1 Rank stocks here.
MU has an earnings yield of 18.7% compared with the industry’s 4.5% yield. The company surpassed earnings estimates in each of the trailing four quarters, the average surprise being 21%.
Richardson Electronics, sporting a Zacks Rank #1, posted a first-quarter fiscal 2027 EPS of 27 cents, exceeding the Zacks Consensus Estimate by 200%. Revenues of $64.92 million beat the Zacks Consensus Estimate by 10.07%.
RELL has an estimated fiscal 2027 earnings growth rate of 62.5% compared with the industry’s 46.2% growth. The company’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 110%.
Ciena, sporting a Zacks Rank #1, reported third-quarter fiscal 2026 EPS of $2.11, which topped the Zacks Consensus Estimate by 21.26%. Revenues of $1.67 billion surpassed the consensus mark by 1.44%.
CIEN has an estimated fiscal 2026 earnings growth rate of 171.2% compared with the industry’s 35.3% growth. The company’s earnings beat estimates in each of the trailing four quarters and matched on one occasion, the average surprise being 17.55%.