TSMC reported a record third-quarter profit Thursday, beating analyst estimates as global demand for AI chips continued to surge.

The Taiwanese chipmaker posted net income of NT$763.1 billion, topping the NT$746.34 billion expected by analysts, according to LSEG SmartEstimates. Revenue reached NT$1.49 trillion ($46.36 billion), slightly above the NT$1.47 trillion forecast. Net profit jumped 68.7% from a year earlier, marking a sixth consecutive quarter of record earnings.

The company's operating margin came in at 58.7%, above the top end of its guidance range of 58%, reflecting its pricing power amid the AI boom.

TSMC forecast fourth-quarter revenue between $52.3 billion and $54.3 billion, which at the midpoint represents a 14% sequential increase and a 58% jump from a year earlier. The chipmaker also said capital expenditure from 2026 to 2028 will be significantly higher than the previous three years as it invests to meet growing customer demand.

SemiAnalysis analyst Sravan Kundojjala told CNBC that the stronger-than-expected results and upgraded full-year revenue outlook show demand for advanced chips continues to outpace production capacity. He noted TSMC is carefully assessing whether customers have the financing and supporting components needed to deploy AI systems before expanding capacity. "Even after those checks, TSMC says demand remains well above its supply capacity," he said.

Advanced technologies, defined as 7-nanometer and below, accounted for 79% of total wafer revenue. The 3-nanometer process made up the largest share at 33%, followed by 5- and 7-nanometer chips. By platform, high-performance computing contributed 68% of revenue, smartphones 21%, and automotive was the fastest-growing segment with 23% quarter-on-quarter growth.

TSMC said AI chip demand remains strong, driven by growing adoption of agentic AI and open-source AI models. Free cash flow surged to NT$476.56 billion from NT$139.38 billion a year earlier. The company also said construction of its second Arizona fab is complete, with equipment installation underway and mass production expected in the third quarter of 2027, slightly ahead of schedule. The board approved a NT$7.00 cash dividend for the second quarter.

Source: CNBC