Taiwan Semiconductor Manufacturing Company (NYSE:TSM) announced its fourth-quarter 2025 financial results, with management citing robust demand for advanced process technologies as a key driver.
Chief Financial Officer Wendell Huang stated that fourth-quarter revenue increased 1.9% sequentially to $33.7 billion in U.S. dollar terms, slightly exceeding prior guidance. Gross margin improved by 2.8 percentage points from the previous quarter to 62.3%, which Huang attributed to cost improvements, favorable foreign exchange rates, and high capacity utilization.
Operating margin rose sequentially by 3.4 percentage points to 54%. Huang reported fourth-quarter earnings per share of TWD 19.5 and a return on equity of 38.8%.
Huang provided a breakdown of wafer revenue by technology node for the quarter: 3nm accounted for 28%, 5nm for 35%, and 7nm for 14%. For the full year 2025, advanced technologies (7nm and below) represented 77% of wafer revenue.
By end-market platform, high-performance computing increased 4% quarter-over-quarter to represent 55% of fourth-quarter revenue, while smartphone revenue rose 11% to 32%.
TSMC ended the quarter with cash and marketable securities totaling $98 billion. The company generated approximately TWD 726 billion in cash from operations during the period. Huang said shareholders received TWD 18 per share in cash dividends for 2025, up from TWD 14 in 2024, and added that shareholders "will receive at least TWD 23 per share in 2026."
For the first quarter of 2026, Huang guided revenue to a range of $34.6 billion to $35.8 billion, implying about 4% sequential growth and 38% year-over-year growth at the midpoint. TSMC expects gross margin of 63% to 65% and operating margin of 54% to 56% for Q1 2026.
The company's 2026 capital budget is expected to increase to $52 billion to $56 billion, with 70% to 80% allocated to advanced process technologies. Huang noted that depreciation is expected to rise by a high-teens percentage year-over-year in 2026, primarily due to the 2nm ramp.
Chairman and CEO C.C. Wei forecast that TSMC's full-year 2026 revenue would increase by close to 30% in U.S. dollar terms. Wei said AI accelerator revenue accounted for a high-teens percentage of total revenue in 2025 and raised the company's forecast for AI accelerator revenue growth to approach a mid- to high-50s% CAGR from 2024 to 2029.
Wei provided updates on manufacturing expansion, stating that N2 entered high-volume manufacturing in the fourth quarter of 2025 at both Hsinchu and Kaohsiung sites with good yield. He said N2P is scheduled for volume production in the second half of 2026, and A16 remains on track for volume production in the second half of 2026.
Regarding overseas operations, Wei said the first fab in Arizona entered high-volume production in the fourth quarter of 2024, with construction of a second fab complete and tool installation planned for 2026. He added that TSMC now expects the second Arizona fab to enter high-volume manufacturing in the second half of 2027.
During the question-and-answer session, Wei said he had spent significant time speaking with customers and cloud service providers to validate AI demand and stated that he believed "AI is real." He also noted that capacity remained "very tight" and emphasized efforts to improve productivity.