TSMC’s Record Growth Now Comes With a $60 Billion Capacity Bet

Taiwan Semiconductor Manufacturing delivered a sixth consecutive record profit quarter and raised its full-year growth outlook, yet the shares retreated after the report. The tension is not hard to find: demand remains exceptional, while the cost of serving it is becoming more visible.

Third-quarter earnings per American depositary share were reported at $4.60, ahead of the $4.46 consensus cited in the original report. Revenue reached $46.7 billion, and management lifted its 2026 growth expectation to about 44%. Fourth-quarter guidance of $52.3 billion to $54.3 billion would imply roughly 58% year-over-year growth at the midpoint.

Advanced chips are carrying the expansion. Nodes at 7 nanometers and below accounted for 79% of wafer revenue in the prior year, and management says demand for artificial intelligence processors remains above available supply. That supports continued spending by major customers, but it also forces TSMC to add capacity before every future order is certain.

The company plans $60 billion to $64 billion of capital expenditure in 2026. At the same time, its 2-nanometer production ramp and overseas factories are reducing near-term profitability. Gross margin slipped to 66.4% from 67.7% in the prior quarter, according to the original report. Management expects overseas fabs to lower gross margin by about two percentage points this year, with a larger drag later.

Those costs are not evidence that demand has weakened. They show the price of expanding the manufacturing system that supports it. The more important risk is a mismatch between long-lived factory investment and customer spending if hyperscalers slow their AI budgets. Consumer and price-sensitive markets also remain softer than the leading-edge AI segment.

TSMC’s official quarterly materials confirm that advanced-node demand and capacity planning remain central to its outlook. Investors should watch whether gross margin stays within guidance while 2-nanometer yields improve. If margins stabilize as new capacity fills, the current spending cycle can extend earnings growth. If margin dilution deepens despite record revenue, the market may treat the capacity plan as a heavier claim on future cash.

The share-price decline after a strong quarter therefore looks less like doubt about today’s orders and more like a debate over returns on tomorrow’s factories.