Taiwan Semiconductor Manufacturing Company (NYSE: TSM) shares jumped more than 6% to $346.82 in early morning trade on Thursday after the world’s largest contract chipmaker reported a record fourth-quarter profit, driven by robust demand for artificial intelligence processors and advanced semiconductor manufacturing.
Revenue for the December quarter reached NT$1.046 trillion ($33.73 billion), topping analyst expectations of NT$1.034 trillion, according to LSEG SmartEstimates.
Similarly, net income also beat forecasts, rising to NT$505.74 billion compared with an expected NT$478.37 billion.
Fourth-quarter profit increased 35% year over year, thereby marking TSMC’s strongest fourth-quarter performance on record and its eighth consecutive quarter of annual profit growth.
Consequently, the results reinforced investor confidence in TSMC’s pivotal role in the global AI supply chain. Revenue rose 20.5% from a year earlier, exceeding the NT$1 trillion milestone for the first time, driven primarily by demand for advanced chips used in data centers and AI servers.
Looking ahead, TSMC forecasts revenue for the current quarter between $34.6 billion and $35.8 billion. At the midpoint of this range, the company expects revenue growth of approximately 38% year-over-year, thus underscoring the accelerating contribution of AI-related orders.
AI Momentum Carries Into 2026
Executives indicated that demand for AI-related products remains strong in the current quarter. Chief Financial Officer Wendell Huang said on the earnings call that demand for leading-edge manufacturing remains solid, therefore supporting both revenue growth and margin expansion.
Revenue from advanced computing solutions, including AI and 5G, accounted for 55% of fourth-quarter sales, while smartphones contributed 32%.
In addition, chips manufactured using 7-nanometer processes or smaller represented 77% of wafer revenue in the quarter. For the full year, these advanced chips made up 74% of revenue, up from 69% in 2024, thereby highlighting a clear shift toward more sophisticated technologies.
Technology and Capital Expansion
TSMC has commenced ramping up production of its 2-nanometer technology, following the initiation of mass manufacturing last quarter. The company intends to further scale output over the course of the year.
Additionally, the company expects capital expenditures to rise to $52–$56 billion in 2026, up from $40.9 billion in 2025. Management said the increase reflects investments in new capacity and advanced packaging technologies.
Analyst Views and Potential Risks
Counterpoint Research analyst Jake Lai said AI-driven server demand remains strong and expects further growth in 2026. However, he cautioned that ongoing memory shortages could dampen demand for consumer electronics, including smartphones and PCs.
TSMC Chairman and CEO C.C. Wei acknowledged the memory supply issue but said the company’s focus on premium smartphones helps mitigate its impact. He also pointed to global tariff policies as a potential risk for the year ahead.
Global Expansion and Margin Considerations
TSMC continues to expand its manufacturing footprint in Japan, Europe, and the United States. In particular, Wei confirmed that the company recently acquired additional land in Arizona to support future chip fabrication facilities.
While overseas expansion could help reduce exposure to trade tensions, TSMC warned that plants outside Taiwan are likely to operate with lower margins. Nonetheless, management emphasized that global expansion remains strategically important to serve customers better in key markets.
