Taiwan Semiconductor Manufacturing Company Limited Q3 2026 Earnings Recap

TSMC shares fell 4.0% after earnings, with the likely pressure coming from expected margin dilution: fourth-quarter gross margin is guided lower, and management said overseas-fab dilution could widen to 3%–4% in the next few years. The near-term revenue outlook is strong, but management also flagged challenged consumer and price-sensitive markets and said it is being prudent in planning for 2027.

Key Takeaways

• Third-quarter revenue rose 16.2% sequentially to $46.7 billion, above the high end of guidance; EPS was TWD 29.43.
• Gross margin fell 130 basis points sequentially to 66.4%, primarily due to the initial 2 nm ramp.
• Fourth-quarter revenue is guided to $52.3–$54.3 billion, but gross margin is expected to decline 40 basis points to 66% at the midpoint, reflecting continued 2 nm and overseas-fab dilution.
• Overseas-fab gross-margin dilution is now expected to be closer to 2%; management expects it to widen to 3%–4% in the next few years as more U.S. fabs ramp.
• HPC grew 22% sequentially and represented 68% of third-quarter revenue; DCE declined 12% and represented 1%.