Taiwan Semiconductor Manufacturing Co. reported a record quarterly profit and forecast fourth-quarter revenue well above analyst estimates, a sign that demand for the advanced chips behind artificial intelligence is still building as the company ramps up its newest 2-nanometer process.

Net income for the July-September quarter rose 68.7% from a year earlier to NT$763.06 billion, the world's leading contract chipmaker said on Oct. 15. Revenue climbed 50.9% to NT$1.49 trillion. In dollar terms, revenue was US$46.72 billion, up 41.2%, and diluted earnings per share came to NT$29.43, or US$4.60 per American depositary receipt.

Both measures beat expectations. Analysts had forecast earnings of US$4.45 per ADR and revenue of US$45.62 billion, according to Earnings Whisper. The profit cleared the NT$706.56 billion mark that would set a new quarterly record, and extended TSMC's run of earnings growth to six straight quarters, TrendForce said, citing Reuters.

Leading-Edge Nodes Do the Heavy Lifting

TSMC's most advanced processes now generate nearly four-fifths of its wafer sales. Chips made at 7 nanometers or finer accounted for 79% of wafer revenue in the quarter, the company said. The 3-nanometer node contributed 33%, 5-nanometer 28% and 7-nanometer 10%.

The newest node is scaling quickly. The 2-nanometer process made up 8% of wafer revenue, up from 3% in the previous quarter, according to TrendForce.

Profitability stayed exceptionally high. Gross margin was 66.4%, operating margin 58.7% and net margin 51.1%, meaning TSMC kept about 51 cents of every revenue dollar as profit.

Chief Financial Officer Wendell Huang said in the earnings release that the quarter was supported by strong demand for leading-edge technologies. He said the fourth quarter would benefit from continued strong demand and the “steep ramp-up of our 2-nanometer technology.”

Before the results, JPMorgan's head of Taiwan research, Gokul Hariharan, expected third-quarter gross margin to approach the top of TSMC's guidance, helped by high utilization of 3- and 5-nanometer lines and foundry price increases, TrendForce reported, citing Commercial Times. TrendForce said those factors should cushion margin pressure from the 2-nanometer ramp and overseas factory expansion.

Guidance Points to Another Record

For the October-December quarter, TSMC forecast revenue of US$52.3 billion to US$54.3 billion. The midpoint implies sequential growth of about 14% and sits well above the US$48.78 billion consensus that Earnings Whisper had tracked.

The company guided gross margin of 65% to 67% and operating margin of 56.5% to 58.5%, assuming an exchange rate of NT$31.8 to the U.S. dollar. The midpoint of the gross margin range is slightly below the third quarter's 66.4%, while the company's CFO pointed to a steep 2-nanometer ramp in the fourth quarter.

Scale helps explain why investors treat TSMC's results as a barometer for the whole AI hardware chain. In 2025, the company deployed 305 distinct process technologies and made 12,682 products for 534 customers, according to its earnings release.

TSMC's growth is visible in Taiwan's wider economic data. The island's export orders reached a record US$114.21 billion in September, up 62.4% from a year earlier, the Ministry of Economic Affairs said on Oct. 20. Orders for electronic products rose 71% to US$47.42 billion, which the ministry attributed to AI demand for chip manufacturing, memory chips and chip design, Focus Taiwan reported.

Factory output is keeping pace. Industrial production rose 19.17% in September, the 31st consecutive monthly gain, and 12-inch wafer foundries led the growth in electronics output, the ministry said on Oct. 23.

What to Watch

TSMC publishes revenue figures monthly, giving investors an early read on whether the fourth-quarter forecast is on track.

The pace of the 2-nanometer ramp, and its effect on margins, is the main variable for the rest of the year. A gross margin near the top of the 65% to 67% range would suggest price increases and high utilization at older advanced nodes are absorbing the cost of the new process, as TrendForce anticipated.

For the broader market, the fourth-quarter forecast is a test of how long AI infrastructure spending can sustain growth at this pace. TSMC's guidance points to another record quarter if the company delivers.