TSMC Q3 2026: operating income up 14.3% from Q2, net income up 8.0%

TSMC manufactures chips that other companies design. It describes itself as the world’s leading dedicated semiconductor foundry. Chip designers we cover include NVIDIA, Broadcom and AMD. TSMC reports in New Taiwan dollars and gives its guidance in US dollars. In the third quarter of 2026 it booked NT$1,494.24 billion of revenue, or US$46.72 billion, up 41.2% from a year earlier in dollar terms and 16.2% from the second quarter.

The quarter has one clear tension. Revenue came in $0.92 billion above the top of the US$44.6–45.8 billion range TSMC gave in July (our arithmetic), and operating income rose 14.3% from Q2. Net income rose only 8.0%. The gap is not in the operating business. It sits below the operating line, where unusually large second-quarter non-operating income did not repeat. Read the quarter on operating income and the forward guidance, not on the net-income growth rate.

TSMC Q3 2026 results at a glance

	3Q26	2Q26	3Q25
Revenue (US$)	$46.72B	$40.20B	$33.10B
Revenue (NT$)	NT$1,494.24B	NT$1,270.38B	NT$989.92B
Gross margin	66.4%	67.7%	59.5%
Operating margin	58.7%	60.3%	50.6%
Non-operating items	NT$34.59B	NT$95.83B	NT$24.68B
Net income	NT$763.06B	NT$706.56B	NT$452.30B
Net profit margin	51.1%	55.6%	45.7%
Diluted EPS	NT$29.43	NT$27.25	NT$17.44
ROE (annualized)	45.5%	45.9%	37.8%
Wafer shipments (k, 12-inch equiv.)	4,476	4,336	4,085

Net income is net income attributable to shareholders of the parent company. All figures are TIFRS, consolidated. TSMC notes that the 3Q26 figures have not yet been approved by its Board of Directors.

Did TSMC beat its own guidance in Q3 2026?

Yes, on revenue and operating margin. Revenue of US$46.72 billion came in above the top of the US$44.6–45.8 billion range TSMC guided to in its July 16, 2026 6-K, and operating margin of 58.7% was above its 56–58% range; gross margin of 66.4% was within its 65–67% range. Year over year, US-dollar revenue rose 41.2% and diluted EPS 68.7%, as reported in the October 15 release.

TSMC publishes a quarterly revenue range and margin ranges in advance. That gives a benchmark from the company itself:

	3Q26 guidance (July)	3Q26 actual
Revenue	US$44.6–45.8B	US$46.72B
Gross margin	65.0%–67.0%	66.4%
Operating margin	56.0%–58.0%	58.7%
Exchange rate (NT$ per US$)	32.0	31.98

Revenue was about 2.0% above the top of the range (our arithmetic), and operating margin came in 0.7 points above the top of its range. Gross margin landed inside its range, not above it. The average exchange rate was 31.98 against the 32.0 assumed, so against the guidance assumption currency did little to the result. Against Q2’s 31.60, the NT dollar weakened about 1.2%, which is why NT$ revenue grew 17.6% and US$ revenue 16.2%.

Gross margin fell 1.3 points from Q2 while revenue rose 17.6% in NT$. The release does not explain the decline. Operating expenses rose 17.6% to NT$116.43 billion, the same rate as revenue, so they stayed at about 7.8% of revenue in both quarters (our arithmetic). Of the 1.6-point step down in operating margin, from 60.3% to 58.7%, 1.3 points came from gross margin. The remaining 0.3 points came from lower other operating income between gross profit and operating income, which the presentation does not break out (our arithmetic). It did not come from spending.

Why net income grew slower than operating income

NT$ billions	3Q26	2Q26	QoQ
Income from operations	876.45	766.60	+14.3%
Non-operating items	34.59	95.83	−63.9%
Income before tax	911.04	862.43	+5.6%
Net income	763.06	706.56	+8.0%

Non-operating items fell by NT$61.24 billion (our arithmetic). In Q2 they were NT$95.83 billion, more than three times the NT$28.83 billion of the first quarter (our arithmetic), and they made up about 11% of pre-tax income. In Q3 they were about 4% (our arithmetic). The presentation does not break the line down, so this piece does not say what drove the Q2 figure. On these numbers, Q2 net income was the outlier and Q3 is the cleaner read of the operating business.

The same effect shows in the net profit margin, which fell to 51.1% from 55.6% even though operating margin fell only 1.6 points. Against a year earlier, every line grew strongly: revenue up 50.9% in NT$, operating income up 75.0% and net income and EPS each up 68.7%.

The technology mix: 2-nanometer reaches 8%

Share of wafer revenue	3Q26	2Q26
2nm	8%	3%
3nm	33%	30%
5nm	28%	33%
7nm	10%	11%
7nm and below	79%	77%

The two newest nodes, 2nm and 3nm, together went from 33% of wafer revenue to 41% in one quarter (our arithmetic), while 5nm’s share fell from 33% to 28%. In its statement, CFO Wendell Huang again pointed to “the steep ramp-up of our 2-nanometer technology”, the same words the July release used about the third quarter, this time as a support for the fourth. These are shares of wafer revenue, not of total revenue, and TSMC does not disclose the wafer-revenue total, so this piece does not convert them into dollar amounts.

Wafer shipments rose only 3.2% from Q2 while NT$ revenue rose 17.6%. Total revenue divided by 12-inch-equivalent wafers shipped rose about 14%, from roughly NT$293,000 to NT$334,000 per wafer (our arithmetic). Total revenue includes more than wafers, so treat this as a rough indicator of mix shift toward pricier nodes, not as a reported price.

By platform, high-performance computing (HPC) was 68% of revenue, up from 66% in Q2, and grew 22% from the second quarter. Smartphone was 21% and grew 10%. Automotive grew 23% at 4% of revenue, and IoT grew 5% at 4%. Digital consumer electronics (DCE) fell 12% and Others fell 10%.

Cash flow: capex down from Q2, free cash flow up 66%

NT$ billions	3Q26	2Q26	3Q25
Cash from operating activities	919.77	783.36	426.83
Capital expenditures	(443.21)	(496.00)	(287.45)
Free cash flow	476.56	287.36	139.38
Cash dividends	(155.59)	(155.59)	(116.70)

TSMC defines free cash flow as cash from operating activities minus capital expenditures. Q3 free cash flow was up about 66% from Q2 and about 3.4 times the year-ago figure (our arithmetic). Capex fell to about 30% of revenue from about 39% in Q2 (our arithmetic). One quarter of lower capex says little about the year, because spending is lumpy. For the first nine months, capex was about NT$1,290 billion and free cash flow about NT$1,112 billion (our arithmetic, summing the three quarterly figures).

The balance sheet grew stronger. Cash and marketable securities were NT$4,016.98 billion, up about NT$499 billion from June 30. Long-term interest-bearing debt fell to NT$818.38 billion. Cash exceeded long-term interest-bearing debt by about NT$3,199 billion (our arithmetic; the figure ignores other liabilities). Total shareholders’ equity was NT$7,043.23 billion, and inventory days fell to 82 from 87. In August the board approved a NT$7.00 cash dividend for the second quarter, payable on January 7, 2027.

The outlook: Q4 guided above Q3, 2026 raised to ~44%

	4Q26 guidance
Revenue	US$52.3–54.3B
Gross margin	65%–67%
Operating margin	56.5%–58.5%
Exchange-rate assumption	NT$31.8 per US$

The midpoint of US$53.3 billion would be about 14% above Q3 (our arithmetic). The full range runs from about 12% to 16%. The margin guide is unchanged on gross margin and half a point higher at both ends on operating margin compared with the Q3 guide.

For the full year, TSMC now expects 2026 revenue to grow by around 44% in US dollar terms. In July it said slightly above 40%. The first three quarters add up to about US$122.8 billion of revenue (our arithmetic). The company’s September revenue report showed January–September revenue of NT$3,898.73 billion, up 41.1% in NT$ terms.

What to watch in Q4

• 2-nanometer share. It went from 3% to 8% of wafer revenue in one quarter. The Q4 figure will show how far the “steep ramp-up” management described has carried.
• Gross margin during the ramp. Gross margin fell 1.3 points in Q3 and is guided at 65–67% again. Whether it holds near the top of that range while 2nm grows is the main margin test.
• Non-operating income. Q2’s NT$95.83 billion inflated net income growth; Q3’s NT$34.59 billion deflated it. Read net income alongside operating income until the line settles.
• Capex vs free cash flow. Capex fell from Q2 to Q3. The full-year capex figure, and whether free cash flow keeps outgrowing it, will show how much of Q3’s cash surge was timing.
• The US$52.3–54.3 billion range. TSMC landed above the top of its revenue range in Q3. The Q4 result against this range is the cleanest test of the raised full-year outlook.

Quick answers

What were TSMC’s Q3 2026 earnings?

TSMC earned NT$763.06 billion, or NT$29.43 per diluted share (US$4.60 per ADR unit), in the third quarter of 2026, up 68.7% from a year earlier and 8.0% from the second quarter. Revenue was NT$1,494.24 billion, or US$46.72 billion.

Did TSMC beat its guidance in Q3 2026?

Against its own July guidance, yes on revenue and operating margin. Revenue of US$46.72 billion was above the US$44.6–45.8 billion range, and operating margin of 58.7% was above the 56–58% range. Gross margin of 66.4% was inside its 65–67% range. This compares the results with the company’s own guidance only.

What is TSMC’s Q4 2026 guidance?

Revenue of US$52.3 billion to US$54.3 billion, gross margin of 65% to 67% and operating margin of 56.5% to 58.5%, at an assumed NT$31.8 per US dollar. TSMC also expects 2026 revenue to grow by around 44% in US dollar terms.

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Sources and method. Every company figure is TSMC’s own disclosure, read directly from SEC EDGAR and linked above. The headline revenue, income from operations, income before tax, net income, EPS (including US$4.60 per ADR unit), year-over-year and quarter-over-quarter changes, margins, technology shares of wafer revenue, the Board-approval note, Wendell Huang’s statement and the fourth-quarter guidance come from Exhibit 99.1 to the Form 6-K filed 2026-10-15 (accession 0001046179-26-000726) for the quarter ended 2026-09-30. The guidance-vs-actual comparison, operating expenses, non-operating items, ROE, wafer shipments, exchange rates, revenue by platform and platform growth rates, balance sheet, inventory days, cash flows, the NT$7.00 dividend and the “around 44%” full-year outlook come from Exhibit 99.2, the conference presentation in the same filing; the platform figures and the 2nm/3nm/5nm/7nm shares were read from its charts. The July “slightly above 40%” outlook, the second-quarter technology and platform shares and the first-quarter US-dollar revenue, non-operating items and cash flows come from the second-quarter presentation (Form 6-K, Exhibit 99.2, filed 2026-07-16). The July CFO statement and the third-quarter guidance come from the second-quarter release (Form 6-K, Exhibit 99.1, filed 2026-07-16). January–September revenue comes from the September 2026 revenue report (Form 6-K filed 2026-10-08). The results were filed with the SEC at 06:40 ET on 2026-10-15, before the US market opened.

No consensus estimate is included. Whether the quarter beat or missed is judged only against the company’s own previously issued guidance (Form 6-K, Exhibit 99.1, filed 2026-07-16) and against the year-ago quarter. This piece makes no claim about the share-price reaction.

Our arithmetic, labelled as such: the $0.92 billion and ~2.0% excess over the top of the revenue guide; the 0.7-point operating-margin excess; the ~7.8% operating-expense share of revenue and the 1.3-point and 0.3-point split of the operating-margin decline; the ~1.2% NT-dollar weakening against Q2; the “more than three times” ratio of Q2 to Q1 non-operating items; the NT$61.24 billion fall in non-operating items and their ~11% and ~4% shares of pre-tax income; the 33%-to-41% combined 2nm+3nm share; revenue per wafer shipped (~NT$293,000 to ~NT$334,000, ~14%); free cash flow growth (~66% QoQ, ~3.4 times YoY); capex as ~30% and ~39% of revenue; nine-month capex (~NT$1,290 billion) and free cash flow (~NT$1,112 billion); the ~NT$499 billion increase in cash; cash minus long-term interest-bearing debt (~NT$3,199 billion); the US$53.3 billion guidance midpoint and its ~12%–16% range over Q3; and the ~US$122.8 billion nine-month US-dollar revenue. These are approximations, not reported numbers. The interpretation (that Q2 non-operating income was the outlier, that operating income is the better read of the quarter, and what the per-wafer figure may indicate about mix) is our analysis, not a company statement or a forecast.

Related chip results: Broadcom Q3 FY2026, NVIDIA Q2 FY2027, AMD Q2 2026 and Marvell Q2 FY2027.

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