TSMC Q4 2025 Earnings Summary: Record Profitability and AI Demand Drive Strong Outlook
Advanced-Node Leadership and Robust AI Momentum Support Accelerating Growth into 2026
TSMC delivered an exceptional Q4 2025, posting results that exceeded expectations across revenue, margins, and earnings, driven by sustained demand for leading-edge process technologies and accelerating AI-related workloads. Revenue rose to $33.7 billion, up 20% year-over-year and ahead of guidance, while gross margin expanded to 62.3%, surpassing both consensus and management’s prior outlook. Operating margin climbed to 54.0%, reflecting strong operating leverage, high utilization rates, and continued cost improvements. Q4 marked TSMC’s seventh consecutive quarter of double-digit earnings growth, and the company surpassed $100 billion in annual revenue for the first time, reinforcing its position as the critical enabler of global AI and HPC compute demand.
Advanced-node strength remained the central driver, with 3nm, 5nm, and 7nm accounting for 77% of wafer revenue, supported by strong momentum in high-performance computing (HPC) and smartphone platforms. Management emphasized that AI-related demand continues to scale faster than anticipated, with visibility extending well into 2026 and beyond. This momentum, combined with improving utilization and maturing node economics, underpinned a meaningful uplift in profitability and confidence in the company’s forward outlook.
Key Financial Highlights
Revenue: $33.7B (+20.4% YoY; above guidance)
Gross Margin: 62.3% (+280 bps QoQ; +180 bps vs. consensus)
Operating Margin: 54.0% (+300 bps vs. consensus)
EPS: NT$19.50 (+35% YoY; above expectations)
Operating Income: NT$564.9B
Cash & Marketable Securities: ~$98B
2025 Revenue: $122B (+35.9% YoY)
2025 Free Cash Flow: ~TWD 1.0T
2025 CapEx: $40.9B
AI Demand, Advanced Nodes, and Manufacturing Execution
AI-related demand continues to reshape TSMC’s growth profile. High-performance computing revenue rose sequentially and accounted for more than half of quarterly sales, while AI accelerators represented a high-teens percentage of total revenue in 2025. Management raised its long-term AI revenue CAGR outlook to the mid-to-high 50% range through 2029, reflecting expanding adoption across cloud, enterprise, and sovereign AI deployments.
Advanced-node execution remains a key differentiator. N3 economics continue to improve, with management expecting margins to reach the corporate average in 2026. Meanwhile, N2 entered high-volume manufacturing in Q4 2025, with strong demand from both smartphone and HPC customers and a rapid ramp expected in 2026. The introduction of N2P and A16 further extends TSMC’s leadership in power-efficient, high-performance computing, positioning the N2 family as another long-lasting node with broad customer adoption.
Guidance, Capital Strategy, and Global Expansion
TSMC provided strong Q1 2026 guidance, well above Wall Street’s expectations, calling for revenue of $34.6–$35.8B (+38% YoY at the midpoint), gross margin of 63–65%, and operating margin of 54–56%. Management also forecast ~30% revenue growth for full-year 2026, significantly outpacing broader foundry industry growth.
Capital investment will step up materially to support this demand. 2026 CapEx is guided to $52–56B, with 70–80% allocated to advanced nodes, alongside continued investment in advanced packaging and global capacity expansion. While overseas fabs are expected to dilute margins by 2–4% over time, management emphasized productivity gains, cross-node optimization, and disciplined pricing to sustain long-term gross margins of 56%+ through the cycle.
Here’s Our Take
TSMC’s Q4 results reinforce its position as the indispensable backbone of the global AI and HPC ecosystem. The combination of record margins, accelerating advanced-node adoption, and sharply higher forward guidance highlights both near-term momentum and long-term structural strength. AI demand is no longer incremental - it is now a core, multi-year growth engine driving capacity expansion, pricing power, and deepening customer reliance on TSMC’s leading-edge manufacturing capabilities.
While rising capital intensity, overseas expansion, and next-generation node ramps introduce complexity, TSMC’s execution track record, scale advantages, and disciplined operating model continue to set it apart. With industry-leading technology, expanding AI exposure, and improving margin durability, TSMC is well-positioned to deliver sustained profitable growth and remain the critical enabler of next-generation compute for years to come.
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