Across its global footprint of roughly 20 fabs under construction, TSMC completed building its second Arizona plant for third quarter 2027 mass production ahead of schedule and will bring 3nm technology to its second fab in Kumamoto, Japan, in 2028. However, the steep ramp-up of 2nm chips, which rose from 3% to 8% of wafer revenue in the third quarter, trimmed gross margin by 1.3 percentage points sequentially to 66.4%. Management projected fourth quarter gross margin of 65% to 67%, with overseas fab expansion diluting full-year 2026 gross margin by 2% and by 3% to 4% in later years.
The stock drop followed TSMC's sixth consecutive quarter of record net profit, which rose 68.7% year over year to NT$763.1 billion ($23.7 billion) on revenue of $46.72 billion and earnings of $4.60 per ADR. The company guided fourth quarter revenue to $52.3 billion to $54.3 billion, above the $50.5 billion consensus estimate, as CEO C.C. Wei said AI demand shows no sign of slowing, accelerator revenue growth will likely top its prior mid-to-high 50% compound annual target through 2029, and there is "no ceiling" on TSMC's profitability.