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TSMC's Record Q3 Earnings & Upbeat Outlook Put These ETFs in Focus
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Key Takeaways
TSMC posts record Q3 profit as AI chip demand fuels growth.
Q4 revenue outlook tops estimates, signaling sustained AI momentum.
SPWO, JHAI and ADVE offer significant exposure to TSMC stock.
Taiwan Semiconductor Manufacturing Co. (TSM - Free Report) reported record third-quarter earnings that exceeded analyst expectations, as robust global demand for artificial intelligence (AI) chips continued to drive growth at the world's largest contract chipmaker.
TSMC Beats Q3 Earnings Estimates
TSMC's third-quarter revenues of NT$1.49 trillion ($46.36 billion) topped the Zacks Consensus Estimate of $45.62 billion. TSMC reported third-quarter 2026 earnings per share (EPS) of $4.60, ahead of the Zacks Consensus Estimate of $4.45.
TSMC's net profit climbed 68.7% year over year, marking its sixth consecutive quarter of record earnings, per CNBC. Its operating margin reached 58.7%, surpassing the upper end of the company's guidance range of 58%. The strong margin performance highlights TSMC's pricing power amid surging demand for advanced semiconductors.
Strong Q4 Outlook Signals Sustained AI Momentum
TSMC expects fourth-quarter revenues of $52.3 billion to $54.3 billion. At the midpoint, the forecast implies a 14% sequential increase and a 58% jump from the year-ago quarter, according to the company's earnings call. The forecast beats the Zacks Consensus Estimate of $48.78 billion.
The chipmaker also expects capital expenditure during 2026-2028 to be significantly higher than in the preceding three years as it expands capacity to meet rising customer demand.
The company expects fourth-quarter growth to be supported by continued demand for its advanced manufacturing technologies, including the ramp-up of its 2-nanometer process.
Advanced Chips and AI Drive Revenue Mix
Advanced technologies, defined as 7-nanometer and more advanced processes, accounted for 79% of TSMC's total wafer revenue in the third quarter.
Among individual process technologies, 3-nanometer chips generated the largest share of revenue at 33%, followed by 5-nanometer and 7-nanometer chips.
High-performance computing was TSMC's largest revenue-generating platform, contributing 68% of total revenue.
TSMC said demand for AI chips remains strong, thanks to the expanding adoption of agentic AI and open-source AI models. These developments could broaden AI adoption and increase demand for advanced semiconductors.
The company also highlighted growing demand for AI accelerators, processors used in agentic AI applications and networking. It expects semiconductors to play an increasingly important role in the global AI supply chain.
Free Cash Flow Surges as U.S. Expansion Advances
TSMC's free cash flow rose sharply to NT$476.56 billion in the third quarter, compared with NT$139.38 billion a year earlier, reflecting a substantial improvement in cash generation.
On the manufacturing front, the company said it had completed construction of its second fabrication plant in Arizona and was installing equipment. Mass production is expected to begin in the third quarter of 2027, slightly ahead of the previous schedule.
TSMC's board also approved a cash dividend of NT$7 per share for the second quarter.
TSMC ETFs in Focus
Overall, TSMC's record profitability, robust revenue outlook and plans for increased capital expenditure underscore its confidence in the long-term growth of AI-related semiconductor demand.
Apart from the TSMC stock itself, investors can play it in ETF form. The TSMC-heavy ETFs include SP Funds S&P World (ex-US) ETF (SPWO - Free Report) (TSMC’s weight 20%), Janus Henderson Global Artificial Intelligence ETF (JHAI - Free Report) (about 15% exposure) and Matthews Asia Dividend Active ETF (ADVE - Free Report) (about 14% focus).
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TSMC's Record Q3 Earnings & Upbeat Outlook Put These ETFs in Focus
Key Takeaways
Taiwan Semiconductor Manufacturing Co. (TSM - Free Report) reported record third-quarter earnings that exceeded analyst expectations, as robust global demand for artificial intelligence (AI) chips continued to drive growth at the world's largest contract chipmaker.
TSMC Beats Q3 Earnings Estimates
TSMC's third-quarter revenues of NT$1.49 trillion ($46.36 billion) topped the Zacks Consensus Estimate of $45.62 billion. TSMC reported third-quarter 2026 earnings per share (EPS) of $4.60, ahead of the Zacks Consensus Estimate of $4.45.
TSMC's net profit climbed 68.7% year over year, marking its sixth consecutive quarter of record earnings, per CNBC. Its operating margin reached 58.7%, surpassing the upper end of the company's guidance range of 58%. The strong margin performance highlights TSMC's pricing power amid surging demand for advanced semiconductors.
Strong Q4 Outlook Signals Sustained AI Momentum
TSMC expects fourth-quarter revenues of $52.3 billion to $54.3 billion. At the midpoint, the forecast implies a 14% sequential increase and a 58% jump from the year-ago quarter, according to the company's earnings call. The forecast beats the Zacks Consensus Estimate of $48.78 billion.
The chipmaker also expects capital expenditure during 2026-2028 to be significantly higher than in the preceding three years as it expands capacity to meet rising customer demand.
The company expects fourth-quarter growth to be supported by continued demand for its advanced manufacturing technologies, including the ramp-up of its 2-nanometer process.
Advanced Chips and AI Drive Revenue Mix
Advanced technologies, defined as 7-nanometer and more advanced processes, accounted for 79% of TSMC's total wafer revenue in the third quarter.
Among individual process technologies, 3-nanometer chips generated the largest share of revenue at 33%, followed by 5-nanometer and 7-nanometer chips.
High-performance computing was TSMC's largest revenue-generating platform, contributing 68% of total revenue.
TSMC said demand for AI chips remains strong, thanks to the expanding adoption of agentic AI and open-source AI models. These developments could broaden AI adoption and increase demand for advanced semiconductors.
The company also highlighted growing demand for AI accelerators, processors used in agentic AI applications and networking. It expects semiconductors to play an increasingly important role in the global AI supply chain.
Free Cash Flow Surges as U.S. Expansion Advances
TSMC's free cash flow rose sharply to NT$476.56 billion in the third quarter, compared with NT$139.38 billion a year earlier, reflecting a substantial improvement in cash generation.
On the manufacturing front, the company said it had completed construction of its second fabrication plant in Arizona and was installing equipment. Mass production is expected to begin in the third quarter of 2027, slightly ahead of the previous schedule.
TSMC's board also approved a cash dividend of NT$7 per share for the second quarter.
TSMC ETFs in Focus
Overall, TSMC's record profitability, robust revenue outlook and plans for increased capital expenditure underscore its confidence in the long-term growth of AI-related semiconductor demand.
Apart from the TSMC stock itself, investors can play it in ETF form. The TSMC-heavy ETFs include SP Funds S&P World (ex-US) ETF (SPWO - Free Report) (TSMC’s weight 20%), Janus Henderson Global Artificial Intelligence ETF (JHAI - Free Report) (about 15% exposure) and Matthews Asia Dividend Active ETF (ADVE - Free Report) (about 14% focus).