TSMC's Q3 2026: Revenue Came In Above the Range, and the Margin Fell Less Than the Midpoint
TSMC reported results on October 15, 2026. Revenue was US$46.72 billion, above the top of the US$44.6–45.8 billion guidance range. The gross margin was 66.4%, inside the guided range.
What we said to watch
In our earlier article on TSMC, the measure to watch was the gross margin, read against the reasons TSMC names in advance. TSMC guided the third-quarter 2026 gross margin to 65–67%. The midpoint, 66%, was 1.7 percentage points below the second quarter's 67.7%. A margin that fell further than TSMC's stated reasons explain would point to emptier fabs or weaker pricing.
What came out
TSMC reported results on October 15, 2026, for the quarter ended September 30. Revenue was US$46.72 billion, above the top of the US$44.6–45.8 billion guidance range. The gross margin was 66.4%, inside the guided range.
Table 1 — TSMC, second and third quarters of 2026
| Measure | Q2 2026 | Q3 2026 |
|---|---|---|
| Revenue (US$ billion) | 40.20 | 46.72 |
| Gross margin | 67.7% | 66.4% |
| Gross margin, same quarter of 2025 | 58.6% | 59.5% |
| Operating margin | 60.3% | 58.7% |
| 7nm and smaller, share of wafer revenue | 77% | 79% |
| 2nm, share of wafer revenue | 3% | 8% |
| High-performance computing, share of revenue | 66% | 68% |
| Smartphones, share of revenue | 22% | 21% |
Revenue rose 41.2% from a year earlier in US dollar terms. The operating margin of 58.7% was above the guided range of 56–58%.
The September revenue test from the earlier article also came out above the range. Reaching the third-quarter guidance needed about NT$445–483 billion in September. On October 8, TSMC reported September revenue of NT$511.86 billion (about US$16.0 billion). The quarter's average exchange rate was NT$31.98 to the US dollar, close to the NT$32 TSMC assumed in its guidance.
What changed
The gross margin fell less than the guidance midpoint implied. The margin fell 1.3 points from the second quarter, against the 1.7 points implied by the guidance midpoint. TSMC's management report said the decline was "primarily due to the margin dilution from the initial ramp-up of N2 technology." N2 is its 2-nanometer process. By the test in the earlier article, the third-quarter margin does not point to emptier fabs or weaker pricing. TSMC did not say why the margin fell less than the midpoint implied.
TSMC now expects overseas fabs to lower its 2026 gross margin by less than the low end of its July range. In July, Wendell Huang, the chief financial officer, put the dilution from overseas fabs at "2% to 3% in the early stages," widening to 3% to 4% later. In October he said TSMC now expects the dilution "to be closer to 2% for the full year 2026." He still expects the dilution to widen to 3% to 4% in the next few years.
The full-year revenue forecast went up. In July, C.C. Wei, the chief executive, expected 2026 revenue growth "slightly above 40%" in US dollar terms. In October he said TSMC now expects "around 44%."
A larger share of revenue came from the newest node and from high-performance computing. The 2-nanometer share of wafer revenue rose from 3% to 8%. In Taiwan dollar terms, high-performance computing revenue rose 22% from the second quarter, and smartphone revenue rose 10%.
Unchanged: the 2026 capital budget of US$60–64 billion, which Huang reiterated in October.
What to watch next
- Fourth-quarter gross margin, against the reasons given. TSMC guided 65–67%, a midpoint of 66%, or 0.4 points below the third quarter. In October, Huang named continued 2-nanometer dilution from a "steep ramp-up" and dilution from overseas fabs, partly offset by cost and productivity improvements. A fall larger than 0.4 points with no new reason named would point to emptier fabs or weaker pricing.
- Monthly revenue against the fourth-quarter range. Guidance is US$52.3–54.3 billion. At the NT$31.8 rate TSMC assumed, the range is about NT$1,663–1,727 billion for the quarter, or about NT$554–576 billion a month. September revenue was NT$511.86 billion. October revenue is due November 10 and November revenue December 10.
- The exchange rate against NT$31.8. The fourth-quarter guidance assumes a stronger Taiwan dollar than the NT$32 assumed for the third quarter. A Taiwan dollar stronger than NT$31.8 turns the same dollar sales into fewer Taiwan dollars. A stronger Taiwan dollar also lowers the gross margin. On October 14, 2026, the day before the results, the rate was about NT$32.07.
- The 2027 capital budget. In October, Huang said TSMC expects spending in 2026–2028 to be "even more significantly higher than the past three years."
Video: TSMC Explained: The Company That Makes Everyone's Chips, the video version of our earlier article on TSMC.
Why does a new process lower the margin before it raises it? The book explains why a new plant's costs come before the revenue that pays for them: Earnings Driver.
Sources: TSMC Q3 2026 earnings release, management report and earnings call transcript (October 15, 2026); TSMC Q2 2026 earnings release, management report and earnings call transcript (July 16, 2026); TSMC September 2026 revenue report (October 8, 2026); TSMC financial calendar. Exchange rate: CNA, October 14, 2026. TSMC documents at investor.tsmc.com.
For sources that work for any company — filings, earnings calendars, consensus estimates — see Where to find the numbers.
Educational only, not investment advice. Figures as of the periods noted.
