TSMC posts record quarter: net profit jumps 35% as AI demand holds

Taiwan Semiconductor Manufacturing Company (TSMC) reported a landmark fourth quarter, with net income rising 35% year-on-year to NT$505.74 billion and consolidated revenue reaching NT$1,046.09 billion — the company’s highest quarterly net profit on record.

On a U.S. dollar basis, Q4 revenue was $33.73 billion, up 25.5% year-on-year; gross margin stood at 62.3% and operating margin at 54.0%. Advanced nodes (7nm and below) accounted for 77% of total wafer revenue, underlining the shift toward leading-edge process technologies that serve high-performance computing and AI accelerator markets.

Management said strong signals from customers underpin demand, prompting a 2026 capital expenditure outlook of $52–56 billion and first-quarter 2026 revenue guidance between $34.6 billion and $35.8 billion. Market reaction extended to TSMC’s supply chain, with equipment suppliers and key design partners responding positively to the results and the upgraded investment plan.

In the broader context, the results reinforce the AI-driven upcycle for semiconductors and accelerate discussions about onshore capacity expansion, notably TSMC’s U.S. fabs and Phoenix/Arizona investments that aim to balance supply resilience with geopolitical considerations. The company’s capacity commitments are being watched closely as a barometer of continued hyperscaler and GPU demand.

Analysts see the quarter as confirmation that AI and HPC are now primary growth engines for the foundry, but they caution about customer concentration and the risk of overcapacity if end-market demand softens. Near-term focus will be on TSMC’s yield performance on next-generation nodes and execution of its elevated capex plan, which together will determine whether current momentum sustains into 2026.