TSMC posts record Q4 profit on AI chip boom, flags strong revenue growth

Taiwan Semiconductor Manufacturing Company on Thursday reported a sharp rise in fourth-quarter profit, beating market expectations and setting a fresh record as demand for artificial intelligence chips continued to surge globally.

The world’s largest contract chipmaker said net income rose 35% from a year earlier, marking its eighth consecutive quarter of year-on-year profit growth.

Revenue for the October-December period climbed 20.5% to exceed NT$1 trillion for the first time, underlining the strength of orders from major technology clients.

Results beat expectations across the board

TSMC reported fourth-quarter revenue of NT$1.046 trillion, above the NT$1.034 trillion forecast by LSEG SmartEstimates.

Net income came in at NT$505.74 billion, compared with expectations of NT$478.37 billion.

The company, Asia’s most valuable listed firm with a market capitalisation of around $1.4 trillion, said customers were providing strong signals of future demand and were directly approaching the company to secure production capacity.

TSMC’s valuation is now more than twice that of its closest regional rival, Samsung Electronics.

AI and advanced chips dominate sales

TSMC has emerged as one of the biggest beneficiaries of the global artificial intelligence boom, manufacturing advanced processors for clients such as Nvidia and AMD.

Its high-performance computing division, which includes AI and 5G-related chips, accounted for the majority of revenue in the December quarter.

Advanced chips measuring 7 nanometers or smaller made up 77% of total wafer revenue during the quarter.

For the full year 2025, such chips accounted for 74% of revenue, up from 69% in 2024.

Smaller nanometer sizes allow for faster processing speeds and improved energy efficiency, making them essential for AI workloads.

Strong outlook and higher spending plans

Looking ahead, TSMC said first-quarter revenue could rise as much as 40% from a year earlier to $35.8 billion.

It also expects to raise capital spending in 2026 by as much as 37% to $56 billion, reflecting confidence in sustained demand for advanced manufacturing technologies.

Analysts remain optimistic.

Counterpoint Research senior analyst Jake Lai said demand for AI remains very strong and is driving chip demand across the entire server industry.

He added that ongoing 2-nanometer capacity expansion and growth in advanced packaging should help TSMC maintain strong performance into 2026.

However, Lai cautioned that demand linked to consumer electronics such as smartphones and PCs could be affected by memory shortages and rising prices.

Trade uncertainty lingers despite strong profits

The results come against a backdrop of uncertainty surrounding US trade policy, including President Donald Trump’s threats of tariffs on semiconductors.

While this has yet to dent profits driven by AI demand, it remains a risk for the industry.

Taiwan signalled on Thursday that a tariff deal with the United States could be reached soon.

Although Taiwan’s exports to the US face a 20% tariff, semiconductor shipments are currently excluded.

TSMC continues to expand its US footprint, having announced $100 billion in planned investments last year, on top of $65 billion pledged for three plants in Arizona.

One facility is already operational, and US Commerce Secretary Howard Lutnick said recently that further investment is expected.

TSMC shares listed in Taipei rose 44% last year and are up about 9% so far this year, comfortably outperforming the broader market.

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