The world's largest foundry, Taiwan Semiconductor Manufacturing Company (TSMC), reported better-than-expected results for the third quarter of this year, driven by increased demand for artificial intelligence (AI) semiconductors. The company's quarterly profit has set a record for six consecutive quarters. The revenue forecast for the fourth quarter also exceeded market expectations, raising hopes for a continued boom in AI semiconductors.
According to U.S. media outlet CNBC, TSMC announced on October 15 that its third-quarter profit reached NT$763.1 billion (approximately $31.6 billion), a 68.7% increase compared to the same period last year. This figure also represents an 8.0% increase from the previous quarter's profit of NT$706.5 billion. During the same period, revenue rose to NT$1.4943 trillion, marking an approximate 50% increase year-on-year.
Both revenue and profit figures surpassed market expectations compiled by financial information provider LSEG, which estimated revenue at NT$1.470 trillion and profit at NT$746.34 billion.
Profitability also improved, with the operating profit margin for the third quarter reaching 58.7%, exceeding the company's upper forecast of 58%. CNBC analyzed that the increase in AI semiconductor demand has allowed TSMC to gain pricing power.
Notably, the revenue share from advanced semiconductor processes has expanded. The 3-nanometer (nm) process accounted for the largest share at 33%, followed by the 5-nanometer and 7-nanometer processes. This increase in demand for high-performance semiconductors is believed to have supported TSMC's strong performance.
In response to the growing demand for AI semiconductors, TSMC is accelerating its capacity expansion. The company is expected to invest a record NT$640 billion in capital expenditures this year. Capital expenditures refer to funds allocated for expanding production facilities and equipment, serving as an indicator of semiconductor companies' demand outlook and capacity expansion plans.
The market anticipates that capital expenditures will increase further next year. Goldman Sachs projects TSMC's capital expenditures for 2027 to reach $85 billion, while UBS estimates it at $90 billion, significantly exceeding Bloomberg's average market forecast of $75 billion.
The outlook for future performance also surpassed market expectations. TSMC forecasts that its fourth-quarter revenue could reach a maximum of $54.3 billion (approximately NT$72.93 trillion). If this forecast holds, the company's total annual revenue is expected to increase by about 44% compared to the previous year, supporting expectations that demand for AI semiconductors will remain strong for the time being.
This outlook comes amid growing concerns about the profitability and funding capabilities of AI-related companies. Recently, significant capital is required to build AI data centers, raising questions about the ability to recoup investment costs. CoreWeave, an AI cloud company and customer of NVIDIA, has seen its stock and bond prices plummet amid these concerns.
TSMC's performance is considered a key indicator of global AI demand. Major technology companies, including NVIDIA, AMD, and Alphabet, the parent company of Google, rely on TSMC to manufacture their custom-designed advanced semiconductors. TSMC's results and investment plans are viewed as indicators of how the growth of the AI industry translates into actual semiconductor demand.
* This article has been translated by AI.
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