Taiwan Semiconductor Manufacturing (TSM) is expected to post its sixth straight quarter of record profit when it reports on Thursday, October 15. Reuters reported on Monday, October 12, that the LSEG SmartEstimate, drawn from 16 analysts, sees third-quarter net profit rising about 65% to NT$746.3 billion (US$23.4 billion).
Revenue is already out. On October 8, TSMC reported record third-quarter sales of about NT$1.49 trillion (US$46.71 billion), up 50% and above the top of its own US$44.6 billion to US$45.8 billion guidance. TSM shares trade at about $453.
The Profit Forecast Assumes a Step Down
Put the two figures together and the consensus implies a net margin of about 50% for the quarter. That’s a record profit, but a thinner one.
TSMC’s margins have climbed fast. Gross margin rose from 58.62% in the second quarter of 2025 to 67.72% in the second quarter of 2026. Net income margin went from 42.65% to 55.62% over the same stretch.
Analysts don’t expect that peak to return. Consensus estimates keep net margin between about 50% and 51% every quarter through the third quarter of 2027.
Two factors help explain the expected drop. One is a one-off: second-quarter profit included NT$63.20 billion of disposal and mark-to-market gains on Vanguard International Semiconductor shares, after TSMC sold an 8.1% stake in May. The other is the 2nm ramp. When TSMC raised its 2026 capex guidance in July, it said the newest node would dilute second-half gross margin by 3 to 4 percentage points. New nodes start with low yields and high depreciation, so each wafer costs more before volume catches up.
The Spending Is the Bigger Swing
TSMC spent $40.54 billion on capex in 2025, well above the roughly $29 billion to $35 billion a year it spent from 2021 to 2024. Its 2026 guidance of $60 billion to $64 billion is a 48% to 58% jump on that. In July, it raised the range from $52 billion to $56 billion.
That money mostly flows to equipment makers like ASML (ASML), so any change to the range on Thursday reaches well beyond TSMC. Morgan Stanley analyst Charlie Chan expects TSMC to lift full-year revenue growth guidance to the low-to-mid 40% range, from more than 40% now.
Two Ways to Read TSMC’s Thursday Numbers
The bull read rests on what drove the margin gains. Gross margin added more than nine percentage points in a year, and management credited the second-quarter improvement mainly to cost improvements and higher capacity utilization. Unlike the Vanguard gains, those improvements supported operating profitability, giving TSMC a stronger starting point for the 2nm ramp. A third-quarter net margin above the 50.33% consensus would support that read, even if it can’t show exactly how much 2nm cost.
The bear read rests on the stock. Taipei-listed TSMC shares are up 63% this year, behind the Taiwan market’s 69% gain. With another record profit widely expected, the risk is that meeting forecasts may not be enough to lift the stock. Capex running roughly 50% above last year leaves less room for error if AI orders cool.
The record matters less than the margin guide. TSMC steered third-quarter gross margin to 65% to 67%, with the 2nm dilution already baked in. A fourth-quarter guide that holds in that range would show TSMC can absorb the ramp without giving up much ground. One that slips into the low 60s would signal greater margin pressure, making management’s explanation of 2nm costs, overseas expansion and currency effects the key detail for investors.
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