TSMC's Record-Breaking Quarter Shows It's Still Running Hot on AI Demand

The AI frenzy shows no signs of slowing—and TSMC has emerged as one of its biggest winners. The world’s leading chip foundry reported record-breaking quarterly results on Thursday, driven by surging global AI investments and the upcoming launch of the iPhone 17. Revenue and net income both hit all-time highs, while its gross margin approached the 60% mark. With OpenAI’s trillion-dollar compute contracts signed in recent months, TSMC is poised to benefit even more from the ongoing AI gold rush.

Record-breaking results

For the third quarter, TSMC reported net revenue of $33.1 billion, up 41% year-over-year in U.S. dollar terms (30% in NT$), and 10% quarter-over-quarter, beating the company’s own top-end guidance of $33 billion. Net income reached $15.1 billion, representing a 50% increase year-over-year (39% in NT$).

Under the twin engines of iPhone 17 demand and AI acceleration, TSMC’s gross margin rose to 59.5%, up 0.9 percentage points sequentially and 1.7 points year-over-year. As tech giants continue to shift toward cutting-edge semiconductor nodes, TSMC enjoys exceptional pricing power and industry dominance.

3nm, 5nm, and 7nm Nodes Hold Steady at 74% of Revenue

TSMC’s 3nm chips accounted for 23% of total revenue, down one point from the previous quarter—likely due to the iPhone 17’s September launch, which only partially contributed to the quarter’s results. Meanwhile, Android OEMs have been restocking aggressively, while strong AI chip demand has tightened overall supply.

The momentum in 5nm chips, particularly for AI workloads, continued unabated. This segment contributed 37% of total revenue, up one point sequentially, as global tech giants pour billions into AI infrastructure, driving demand for NVIDIA and AMD GPUs.

The 7nm node contributed another 14%, keeping advanced nodes (3nm + 5nm + 7nm) stable at 74% of total revenue, unchanged from Q2.

Smartphones rebound as HPC moderates

By platform, high-performance computing (HPC) chips accounted for 57% of revenue, down three points from Q2, while smartphone chips rose three points to 30%, boosted by new launches from Apple and Xiaomi in September. IoT and automotive chips maintained a steady 5% contribution each.

North America’s share rises; U.S. growth to accelerate

Regionally, North America contributed 76% of TSMC’s revenue, up one point from the prior quarter. China’s share slipped to 8%, while Asia-Pacific and Japan were unchanged. With U.S. tech giants like Microsoft and OpenAI ramping up AI data center investments—and OpenAI’s trillion-dollar compute order still to be fully reflected—TSMC’s U.S. revenue share is expected to rise significantly in the coming quarters.

Q4 Outlook: Slower Growth, Higher Capex, 2nm on Track

Looking ahead, TSMC guided for Q4 revenue of $32.2–33.4 billion, implying 22% year-over-year growth but a 1% sequential decline. Gross margin is expected to remain high, between 59% and 61%. Full-year revenue growth is now projected at around 35%, up from the prior 30% estimate. Still, the quarter-on-quarter slowdown—after several quarters of double-digit sequential gains—may disappoint investors seeking sustained AI-fueled momentum.

TSMC also raised its full-year capex to $40–42 billion (previously $38–42 billion), indicating continued heavy investment in leading-edge nodes. The company confirmed that 2nm production will begin later this quarter, reinforcing its technological lead.

TSMC’s results were once again stellar, though much of the optimism may already be priced into the stock after its recent rally. Notably, OpenAI’s trillion-dollar compute deal has yet to be reflected in management’s guidance—a flat sequential forecast may feel underwhelming to investors betting on an AI-driven growth surge. Still, with AI demand accelerating and TSMC maintaining an almost monopolistic hold on advanced chip manufacturing, the company remains a long-term winner in the global AI buildout.