Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM) stock rose 0.42% (As on January 16, 11:19:16 AM UTC-4, Source: Google Finance) after the company posted a forecast-smashing 35-per-cent jump in fourth-quarter profit to a record high, predicted robust annual growth and flagged more U.S. manufacturing capacity was in the works. Riding high on what it calls the “AI mega trend,” TSMC said its customers, and their customers, were “providing strong signals” and requesting capacity, forecasting 2026 revenue would rise nearly 30 per cent in U.S. dollar terms. The Taiwanese company, which counts Nvidia and Apple as major customers, announced plans last year to invest US$100-billion in the U.S., on top of US$65-billion pledged for three plants in the state of Arizona, one of which is up and running. The boom in artificial intelligence has helped TSMC, Asia’s most valuable listed company, outshine its rivals. TSMC is speeding up capacity expansion in Taiwan and in Arizona, where chief executive C.C. Wei said the company is applying for permits to begin the construction of a fourth factory and the first advanced packaging plant.
Moreover, TSMC’s capital spending could jump as much as 37 per cent this year to US$56-billion, and will increase “significantly” in 2028 and 2029 given AI demand. Net profit for the last three months of 2025 climbed to T$505.7 billion (US$16-billion), its seventh straight quarter of double-digit growth and well ahead of a T$478.4 billion LSEG SmartEstimate. First-quarter revenue could surge as much as 40 per cent from a year earlier to US$35.8 billion. Gross margin increased by 2.8 percentage points sequentially to 62.3%, primarily due to cost improvement efforts, favorable foreign exchange rate, and the high capacity utilization rate. Thus, operating margin increased sequentially by 3.4 percentage points to 54% overall.
Moreover, 3 nm process technology contributed 28% of wafer revenue in the fourth quarter while 5 nm and 7 nm accounted for 35% and 14% respectively. Advanced technologies defined as 7 nm and below accounted for 77% of wafer revenue on a full year basis. 3 nm revenue contribution came in at 24% of 2025 wafer revenue, 5 nm 36% and 7 nm 14%. Advanced technologies accounted for 74% of total wafer revenue up from 69% in 2024. Moving on to revenue contribution by platform, HPC increased 4% quarter over quarter to account for 55% of the fourth quarter revenue.
The company expects Q1 2026 revenue to range between $34.6 billion and $35.8 billion, with a gross margin of 63-65%. TSMC is also planning significant capital expenditures of $52-$56 billion in 2026, with 70-80% allocated to advanced technologies.