TSMC delivered strong signals during this earnings call. Management’s view on AI demand has shifted from previous optimism to conviction, responding to the market with significantly raised CapEx and revenue CAGR guidance. C.C. Wei explicitly stated that AI demand is not only real but “Endless.” To alleviate capacity bottlenecks, the 2026 CapEx budget has jumped to the $52-56 billion range, with total CapEx over the next three years set to significantly exceed the sum of the past three years.
4Q25 Results & 1Q26/2026 Outlook
4Q25 Results: 4Q25 USD revenue reached $33.73B (+1.9% QoQ / +25.5% YoY), slightly beating the upper end of prior guidance ($32.2B-$33.4B), primarily driven by robust demand for advanced nodes. Gross margin arrived at 62.3% (+2.8 ppts QoQ), significantly beating the guidance range (59.0%-61.0%). The better-than-expected performance was mainly attributed to cost improvements, favorable FX, and high UTR.
1Q26 Guidance: 1Q26 USD revenue is estimated to be between $34.6B-$35.8B, representing 4% QoQ growth at the mid-point and a 38% YoY increase, indicating continued growth driven by AI-related demand. The gross margin guidance range is 63%-65%, with operating profit margin guidance at 54%-56%.
For 2026, overall corporate UTR is expected to increase slightly; N3 gross margin is projected to surpass the corporate average within 2026. Concurrently, the company will improve production efficiency to yield more wafers, optimizing capacity to support N3/N5/N7 demand and maximize profitability. Initial ramp-up of overseas capacity is expected to dilute gross margin by 2-3%, with the impact expanding to 3-4% as scale increases. N2 will begin to impact gross margin in 2H26, expected to result in a 2-3 percentage point dilution for the full year of 2026.
