Taiwan Semiconductor (TSM) Stock Slips 2% Despite Sixth Straight Record Quarter
Key Takeaways
- •TSMC reported its sixth straight quarter of record profit, with earnings up nearly 69% to NT$763.1 billion and revenue rising about 50% to NT$1.49 trillion, both exceeding Wall Street estimates.
- •Despite the strong results, TSM shares dropped 2% to $422.25 as a hotter-than-expected inflation report raised fears of additional Federal Reserve rate hikes and triggered a semiconductor-wide sell-off.
- •TSMC guided fourth-quarter revenue to a range of $52.3 billion to $54.3 billion, implying roughly 58% year-over-year growth, and expects gross margins of 65% to 67%.
- •The company maintained its 2026 capital budget at $60 billion to $64 billion, with CFO Wendell Huang indicating spending from 2026 to 2028 should be much higher than over the past three years.
- •CEO C.C. Wei said TSMC teams are evaluating Texas locations for a fab project for a customer he identified as Terafab, linked to Elon Musk, complementing the company's ongoing Arizona expansion.
Taiwan Semiconductor Manufacturing Company (TSM) closed at $422.25 on Thursday, down $7.75, or 2%, despite reporting its sixth consecutive quarter of record results. The decline tracked a broad sell-off across semiconductor stocks, with Nvidia falling about 2% and Broadcom slipping roughly 1% in the same session. The pullback came even though quarterly revenue and earnings per share both came in ahead of Wall Street estimates compiled by FactSet.
The down session stood in contrast to the operating results disclosed by the world's largest contract chipmaker, a company whose quarterly numbers are closely watched across the chip industry as a gauge of demand for advanced silicon.
Record Results
TSMC posted its sixth straight quarter of record profit. Earnings rose nearly 69% to NT$763.1 billion, while revenue climbed about 50% to NT$1.49 trillion. In U.S. dollar terms, earnings came to $4.60 per share on $46.72 billion in revenue, ahead of FactSet analyst expectations of $4.46 per share and $45.67 billion. Net profit margin for the quarter stood at 51.1%.
Third-quarter highlights shared by Wall St Engine on X:
TSMC $TSM Q3’26 EARNINGS HIGHLIGHTS 🔹 Revenue: $46.72B (Est. $44.93B) 🟢; +41.2% YoY 🔹 EPS: $4.60 (Est. $4.48) 🟢; per ADR 🔹 Gross Margin: 66.4% (Est. 66.3%) 🟡 🔹 Oper Margin: 58.7% (Est. 57.7%) 🟢 🔹 Net Income: NT$763.06B (Est. NT$737.9B) 🟢 🔹 Net Profit Margin: 51.1%… pic.twitter.com/YxYKoVi78J
— Wall St Engine (@wallstengine) October 15, 2026
Guidance and Demand
TSMC expects fourth-quarter revenue to come in between $52.3 billion and $54.3 billion. If achieved, that would represent growth of roughly 58% from a year earlier. Gross margin came in at 66.4% in the third quarter, down from 67.7% in the second, and the company expects a range of 65% to 67% for the fourth quarter.
Chief Executive C.C. Wei said demand for leading-edge technologies remains “extremely robust,” pointing to the rising use of agentic AI as a key driver. TSMC expects revenue to grow 44% in 2026, slightly above analyst forecasts. Management also indicated there is room for AI accelerator revenue to grow faster than its current mid- to high-50s percent CAGR guidance.
Chief Financial Officer Wendell Huang kept the company's 2026 capital budget at $60 billion to $64 billion. He said spending from 2026 to 2028 should be much higher than over the past three years. Budgets of that scale fund the fabs and advanced production capacity on which chip customers depend, which is why the multiyear spending path tends to draw as much attention as any single quarter's results.
Together, the fourth-quarter revenue range, the gross-margin outlook, and the capital-spending plan give the industry clear checkpoints for the coming quarters: whether revenue lands within guidance, where margins inside the 65% to 67% band, and how quickly the capex ramp takes shape.
Market Backdrop and Texas Talks
Wednesday's hotter-than-expected inflation report stoked fears that the Federal Reserve could raise interest rates again, weighing on technology shares across the market. Rate expectations are a key input for technology valuations, which helps explain how a single macro report dragged down semiconductor names even as companies reported strong results. Analyst Louis Navellier characterized the tech pullback as a distraction from the strong results companies were reporting.
Needham analyst Charles Shi raised his price target on TSM to $560 from $530 and kept a Buy rating on the shares. He described the report as a beat-and-raise quarter, with gross margin and capital expenditure in line with expectations.
Despite Thursday's dip, the stock is up more than 41% this year and hit record highs earlier this month. That run followed Elon Musk's comments about early-stage talks on his Terafab chip project in Texas. TSMC has confirmed it is exploring locations in the state.
Wei said teams from the company are in Texas doing evaluations. He added that TSMC is talking with a customer seeking to build a fab, and he named Terafab as the project. TSMC is already expanding in Arizona as part of a multiyear plan to manufacture chips in the United States, and several locations remain under review for new sites — a process whose progress readers can follow alongside the company's financial guidance in the quarters ahead.
In pre-market trading on Friday, TSM was quoted at $421.20, down 0.32%.
This article originally appeared on CoinCentral.
