Shares of Taiwan Semiconductor Manufacturing (TSM) rose about 5% premarket on Thursday after the global foundry’s fourth quarter net income jumped 35% year-over-year and forecast revenue growth of close to 30% in U.S. dollar terms in 2026.
TSM — which produces chips for some of the world’s largest tech companies, including Apple (AAPL), Nvidia (NVDA) and AMD (AMD) — saw third quarter 2025 net revenue grow 25.5% year-over-year to $33.73B (NT$1.046T, +20.5%Y/Y).
The company’s net income attributable to shareholders of the company jumped 35% year-over-year to NT$505.74B, beating analysts estimates, according to a report from Bloomberg News.
“In 2025, we observed robust AI-related demand throughout the whole year, while non-AI end-market segments bottomed out and saw a mild recovery,” said CEO C. C. Wei on the earnings call.
“Our business in the fourth quarter was supported by strong demand for our leading-edge process technologies,” said Wendell Huang, senior VP and CFO, TSM.
Huang said on its earnings call that in 2026, it expects its capital budget to be between $52B and $56B as it continues to invest to support its customers’ growth.
The company noted that about 70% to 80% of the 2026 capital budget will be allocated to advanced process technologies.
“In 2025, we spend US$40.9 billion, as compared to US$29.8 billion in 2024, as we begin to raise our level of capital spending in anticipation of the growth that will follow in the future years,” said Huang on the earnings call.
TSM noted that in the last five years alone, its capex totaled $167B and R&D investments totaled $30B.
TSM is accelerating capacity expansion in Taiwan and in Arizona, where Wei said the company is applying for permits to start the construction of a fourth factory and the first advanced packaging plant.
Additional land has been bought in Arizona, he noted.
“Furthermore, we have just completed the purchase of a second large piece of land nearby to support our current expansion plan and provide more flexibility in response to the very strong multi-year AI-related demand. Our plan will enable TSMC to scale up an independent gigafab cluster in Arizona to support the needs of our leading-edge customers in smartphone, AI, and HPC applications,” said Wei on the earnings call.
Outlook
“Entering 2026, we understand there are uncertainties and risks from the potential impact of tariff policies and rising component prices, especially in consumer-related and price-sensitive end-market segments. As such, we will be prudent in our business planning while focusing on the fundamentals of our business to further strengthen our competition position” said Huang on the call.
For the first quarter of 2026, TSM expects revenue to be between $34.6B and US$35.8B, a 4% sequential increase, or a 38% year-over-year increase at the midpoint.
The company expects revenue growth of nearly 30% in 2026, faster than the average analyst estimate, due to demand for AI accelerators, Bloomberg News reported.
“You’re trying to ask us whether AI demand is real or not. I’m also very nervous about it,” Wei said in response to an analyst’s question on the conference call. “We’re investing $52 billion to $56 billion in capex, right? If we don’t do it carefully, that’d be a big disaster for TSMC,” the report added.
SA Analyst Commentary
“I expect TSM to rise on its Q4 data because a) we see a strong double beat, with EPS beating by over 5%, which is relatively strong for Q4s, and b) their margins remain very strong, with a gross margin of 62.3% (an expansion of 3.3% over Q4 2024). Notably, advanced technologies (7nm and below) accounted for ~77% of wafer revenue, based on the statement, so it shows quite strong demand for cutting-edge process nodes (especially 3nm and 5nm),” said Seeking Alpha analyst Oakoff Investments, Investing Group Leader for Beyond the Wall Investing.
Also, another bullish thing is Q1 2026 guidance – despite quite large CAPEX planned, the management doesn’t see margin contraction risks ahead (this tells me that the demand conditions look very supportive and justify heavy investments ahead).
Q4 Revenue by Technology
TSM said 3nm process technology contributed 28% of total wafer revenue in the fourth-quarter, versus 26% in the year ago period, and 24% in the third quarter of 2025.
The 5nm process technology accounted for 35% of total wafer revenue, compared to 34% in the same period a year ago, and 37% in the third quarter of 2025. Meanwhile, 7nm accounted for 14% of total wafer revenue in the third quarter same as a year earlier, and the third quarter of 2025.
Q4 Revenue by Geography
Revenue from China accounted for 9% of the total net revenue in the fourth quarter of 2025, same as in the year-ago period. It was 8% of the total net revenue in the third quarter of 2025.
North America accounted for 74% of total net revenue, compared to 75% a year earlier, and 76% in the third quarter of 2025.
Q4 Revenue by Platform
High Performance Computing, or HPC, represented 55% of net revenue, up from 53% in the fourth quarter of 2024. The company’s smartphone segment represented 32% of net revenue in the fourth quarter of 2025, versus 35% in the year ago period.