Taiwan Semiconductor Manufacturing Company Limited

Q3’26 results beat guidance; strong demand but margin pressured by 2nm ramp - Revenue: $46.7B, +16.2% QoQ (USD), +17.6% sequentially in TWD/NT terms; above the high end of Q3 guidance. - Gross margin: 66.4%, -1.3pp QoQ mainly from 2nm initial ramp margin dilution. - EPS: TWD 29.43; ROE 45.5%; Operating margin 58.7%. - Technology mix (wafer revenue): 2nm = 8%, 3nm = 33%, 5nm = 28%, 7nm = 10%; 7nm and below = 79% (advanced dominance).

Q4’26 outlook: continued revenue growth with slight margin step-down - Revenue forecast: $52.3B–$54.3B (midpoint implied ~+14% QoQ, +58% YoY). - Gross margin guidance: 65%–67%; Operating margin 56.5%–58.5% (suggests continued margin dilution vs Q3). - Key profitability drivers highlighted: 2nm ramp dilution + overseas-fab dilution, partially offset by cost improvements (productivity gains, capacity optimization).

AI demand remains the core opportunity; management believes structural strength persists despite bottlenecks - AI setup: C.C. emphasized AI demand is “extremely robust” and strengthened by agentic AI adoption (chatbot → AI assistance) and open-source model uptake, which should increase total compute/leading-edge silicon demand. - Supply-chain/bottleneck concerns acknowledged (data center power availability, HBM/advanced packaging/networking component constraints, and even laser/tooling constraints), but company stance is that demand still exceeds supply and they are working to narrow the gap through capacity expansion and coordination with customers/suppliers. - AI CAGR “update” was not numerically changed on the call; when asked about the prior mid/high-50s% AI accelerator CAGR view (2024–2029), management said demand is extremely strong and likely higher, but avoided updating an explicit number.