TSMC extends record quarter, profit jumps 35% on robust AI chip demand

Taiwan Semiconductor Manufacturing Company on Thursday reported a 35% increase in fourth-quarter profit, beating estimates and hitting a fresh record as demand for artificial intelligence chips remained strong.

Here are the company’s results versus LSEG SmartEstimates, which are weighted toward forecasts from analysts who are more consistently accurate:

• Revenue: 1.046 trillion new Taiwan dollars ($33.73 billion), vs. NT$1.034 trillion expected
• Net income: NT$505.74 billion, vs. NT$478.37 billion expected

The world’s largest contract chipmaker has now posted year-over-year profit growth for eight consecutive quarters.

Meanwhile, TSMC’s revenue in the December quarter rose by 20.5% from a year ago to surpass NT$1 trillion, also beating forecasts.

In an earnings call, TSMC executives guided revenue for the current quarter to hit between $34.6 billion and $35.8 billion, up 4% sequentially, or up 38% year-over-year at the midpoint. 

“We expect our business to be supported by continued strong demand for our leading edge process technologies,” said TSMC’s Chief Financial Officer Wendell Huang during an earnings call, adding that the company’s profit margins have been increasing.

TSMC, Asia’s largest technology company by market capitalization, has benefited greatly from the proliferation of artificial intelligence, producing advanced AI processors for clients such as Nvidia and AMD. 

The company’s high-performance computing division, which includes artificial intelligence and 5G applications, made up the majority of sales in the October-December quarter at 55%. Demand from smartphones made up 32% of sales.

TSMC said advanced chips measuring 7-nanometer or smaller made up 77% of total wafer revenue during the quarter. For full-year 2025, those chips made up 74% of revenue, up from 69% in 2024.

In semiconductor technology, smaller nanometer sizes indicate more compact transistor designs, allowing faster processing speeds and greater energy efficiency.

The company is looking to further ramp up its cutting-edge 2 nm offerings this year, after rolling out mass production last quarter.

With TSMC further leaning into its advanced products, it said that its capital expenditure was expected to reach between $52 billion and $56 billion in 2026, as compared to $40.9 billion in 2025.

“The demand for AI remains very strong, driving overall chip demand across the entire server industry,” Counterpoint Research senior analyst Jake Lai told CNBC, predicting that 2026 will be another “breakout year” for AI server demand. 

“With TSMC’s ongoing 2nm capacity expansion and new production contributing to revenue, along with continuous expansion of advanced packaging… TSMC is expected to maintain strong performance in 2026,” Lai said. 

However, he added that chip demand tied to consumer electronics such as smartphones and PCs could be affected by the ongoing memory shortage and price hikes.

During the earnings call on Thursday, TSMC Chairman and Chief Executive Officer C.C. Wei acknowledged the memory shortage but argued that TSMC is focused on high-end smartphones, which are less sensitive to the memory prices.

However, Wei flagged global tariff policies as a potential risk factor headed into 2026.

TSMC has been expanding globally in recent years, with major projects underway in Japan, Europe, and Arizona, where it is accelerating capacity expansion.

Chief Executive C.C. Wei said Thursday that the company recently purchased additional land in Arizona to support new facilities. “We are going to expand many fabs over there, and this gigafab cluster can help us to improve the productivity, to lower the cost and to serve our customers in the U.S. better,” he added.

While these expansions could help lessen the impact of global tariffs in markets such as the U.S., the company has also warned that overseas plants will operate at diluted margins compared to those in Taiwan.