TSMC Posts a Sixth Straight Record Profit and Lifts Its Outlook, but Says Any Texas Fab Making Its Chips Must Be Run by TSMC
Net profit jumped 69% to NT$763 billion and TSMC lifted 2026 growth to about 44%, while CEO C.C. Wei said the Terafab project in Texas has to be run by TSMC, setting up a clash with Elon Musk's plans.
Taiwan Semiconductor Manufacturing (TSM) reported its sixth straight record quarterly profit on Thursday and raised its 2026 outlook, with CEO C.C. Wei saying demand for advanced chips remains extremely strong. The company also confirmed it is in talks about Elon Musk's Terafab project in Texas, but said any fab producing its chips has to be run by TSMC, a position at odds with Musk's stated plan to build and operate the site himself.
The quarter
| Measure | Q3 2026 | Context |
|---|---|---|
| Revenue (US dollars) | $46.72B | Estimates $45.4B–$45.7B; up 41.2% from a year earlier |
| Revenue (NT dollars) | NT$1.494T | Up 50.9% from a year earlier |
| Net income | NT$763.06B | About $23.6B; up 68.7%; estimate NT$746.3B |
| EPS per ADR | $4.60 | Estimates $4.42–$4.46; $2.92 a year ago |
| Gross margin | 66.4% | 67.7% in Q2; 59.5% a year ago |
| Operating margin | 58.7% | Above the 56%–58% guidance range |
| High-performance computing share | 68% | 66% in Q2; 57% a year ago |
Revenue beat estimates and the operating margin came in above guidance. Gross margin slipped 1.3 percentage points from the second quarter, which TSMC attributed mainly to the start of 2-nanometer production. Chips made on 2nm were 8% of wafer revenue, up from 3% in Q2, while 3nm made up 33% and 5nm 28%. Chips at 7nm and below were 79% of wafer revenue.
Guidance and spending
| Item | Outlook | Context |
|---|---|---|
| Q4 revenue | $52.3B–$54.3B | About 14% above Q3 at the midpoint |
| Q4 gross margin | 65%–67% | Q3 was 66.4% |
| Q4 operating margin | 56.5%–58.5% | Q3 was 58.7% |
| 2026 revenue growth | About 44% | In US dollar terms |
| 2026 capital spending | $60B–$64B | Reaffirmed; Q3 capex was $13.8B |
TSMC expects 2026 revenue to grow about 44% in U.S. dollars and said capital spending from 2026 through 2028 will be significantly higher than in the previous three years. CFO Wendell Huang said tool price inflation is real. Higher-cost overseas factories are expected to reduce companywide gross margin by about 2 percentage points this year, widening to 3 to 4 points later in the five-year period as U.S. fabs ramp up, and Huang expects the fourth-quarter gross margin midpoint to fall about 0.4 points.
The Terafab question
Asked about Terafab, Wei said TSMC is evaluating Texas and has talked with the customer behind the project. "We are still in discussion, let me say that," he said, adding that "the fab has to be run by TSMC," according to a transcript summary from Investing.com. No investment agreement or construction timeline has been announced.
That collides with what Musk posted on October 7: "No, we will build and run the fab," with TSMC at most subleasing part of it. Terafab is planned for Grimes County, Texas, with Tesla and SpaceX building it and Intel contributing its 14A process. The first phase is estimated at about $16.8 billion and total investment could reach $119 billion, according to Cleanroom Technology. For now, the operating arrangement is unresolved.
TSMC's U.S. expansion is already large. It has committed $265 billion to Arizona, including $100 billion added in July. The second Arizona fab has finished construction and is scheduled to begin volume production in the third quarter of 2027, slightly ahead of the earlier schedule. Wei said the Arizona build-out responds to demand from a large number of U.S. customers.
AI demand and caution on 2027
Wei said the industry is moving from chatbots toward agentic AI, with demand extending beyond GPUs to CPUs and networking chips, and that demand for advanced processes "remains extremely strong." The company is still being cautious about 2027. Rising component prices and economic uncertainty are squeezing consumer and price-sensitive markets, and management said it is "being prudent in our business planning going into 2027," according to the call summaries we reviewed.
The stock
TSM's U.S.-listed shares closed Wednesday at $430, down 3.4%, during the broader chip selloff covered in our midday recap, and traded near $421 after hours, according to Investing.com. We did not have a post-earnings quote at the time of writing, so check live prices. The results follow ASML's report that customer demand will outrun its capacity through 2028.
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