Taiwan Semiconductor Manufacturing, the world's largest contract chipmaker, released its fourth-quarter financial report with results that exceeded Wall Street's expectations. Revenue reached $33.7 billion, a 26% increase compared to the same period last year and a 2% sequential rise. Earnings per American depositary receipt came in at $3.14, up 35%.
The company's performance was driven by its advanced process technologies. Revenue from 3-nanometer wafers accounted for 28% of total sales, while 5-nanometer wafers made up 35%. High-performance computing generated 55% of total revenue.
TSMC's margins expanded significantly. Gross profit margin rose to 62.3% from 59% in the prior-year period, operating margin climbed to 54% from 49%, and net profit margin increased to 48% from 43.1%.
Management provided guidance for the first quarter, forecasting revenue between $34.6 billion and $35.8 billion. This represents growth of approximately 38% at the midpoint compared to $25.53 billion in the prior-year quarter.
The company announced plans to significantly increase capital expenditures to between $52 billion and $56 billion. This marks a substantial rise from the $41 billion spent in 2025 and exceeds Wall Street's expectations of $41 billion. The increased spending aims to boost existing production capacity.
Media reports indicate that several high-profile customers, including Nvidia and Broadcom, have requested TSMC to increase production in recent months due to capacity constraints. The shortage of AI-capable chips has been documented and is expected to persist into next year.
Microsoft CFO Amy Hood recently stated that despite rising capital expenditure spending, the company expects to remain capacity constrained through at least the end of its fiscal year. She noted demand exceeding current infrastructure build-out, resulting in lost revenue opportunities for Azure in fiscal first quarter 2026.
Nvidia and Broadcom were among the earliest companies to recognize the potential of artificial intelligence and focused resources to meet growing demand. Their stocks have gained 1,000% and 530%, respectively, as of this writing. Both companies are currently priced at less than 25 times next year's expected sales.
The release of ChatGPT in late 2022 initiated an artificial intelligence boom that continues today. Advances in generative AI have driven adoption across consumer and business applications.