TSMC Posts Record Profit: Can Strong Guidance Spark a Share Price Recovery?

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2026/10/15 07:33

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TSMC Posts Record Profit: Can Strong Guidance Spark a Share Price Recovery? image 0

Record Earnings Meet a 12% Share Price Pullback

On October 15, TSMC reported third-quarter 2026 revenue of $46.72 billion, up 41.2% year over year, while net profit surged 68.7% to NT$763.06 billion, marking its sixth consecutive quarter of record earnings and beating market expectations by approximately 2.2%. Despite the strong results, shares had already undergone a significant correction. TSMC's US-listed ADRs (TSM) closed at $430 on October 14, down 3.4% for the session and 11.8% below their October 5 peak of $487.47. With concerns over AI investment returns and interest rate expectations weighing on technology valuations, investors are now watching whether the earnings release can attract renewed buying interest.

2nm Expansion Fuels Growth as Ramp-Up Costs Pressure Margins

The drivers behind TSMC's earnings growth remain clear. Revenue from its High-Performance Computing (HPC) platform increased 22% quarter over quarter, accounting for 68% of total revenue, compared with 57% a year earlier. The revenue contribution from 2nm technology rose from 3% to 8% of wafer revenue, while 3nm reached 33%. Advanced technologies at 7nm and below collectively represented 79% of wafer revenue. The increasing contribution from advanced nodes demonstrates how AI and other high-end computing demand is translating into actual production and deliveries.

However, gross margin declined from 67.7% in the previous quarter to 66.4%, primarily reflecting initial ramp-up costs associated with 2nm production. Operating margin reached 58.7%, exceeding the upper end of the previous 58% guidance range and highlighting the resilience of underlying profitability. Net profit increased 8% sequentially, partly reflecting a higher comparison base created by one-off investment gains in the second quarter, rather than a broad deterioration in operating performance.

For the fourth quarter, TSMC guided revenue to $52.3 billion–$54.3 billion, with the midpoint of $53.3 billion implying approximately 14.1% sequential growth and 58% year-over-year growth. Gross margin guidance stands at 65%–67%, with the midpoint slightly below the third-quarter result. Full-year capital expenditure guidance remains unchanged at $60 billion–$64 billion. Revenue growth is expected to remain strong, while the pace of new capacity ramp-ups, manufacturing yields, and utilization rates will determine when margins can resume expanding.

Shares Break Key Moving Averages as $430 Becomes a Battleground

The technical picture has yet to confirm a recovery. Since reaching $487.47 on October 5, TSM has retreated to $430 as of October 14. Trading volume reached approximately 15.17 million shares that day, around 1.6 times the preceding 20-session average, indicating increased selling pressure during the correction. The stock has fallen below both its 20-day moving average near $454 and its 50-day moving average around $434, signaling a weakening short-term trend.

Initial support lies near $428, followed by $420 and the potential demand zone around $413–$418 established in mid-September. On the upside, $434–$445 encompasses the 50-day moving average and a previous trading platform, while $454–$458 represents the 20-day moving average and a recent price concentration area, forming the next resistance zone if the rebound gains momentum.

A Break Above $445 Could Extend the Rebound, While $428 Remains Critical

The first important post-earnings signal will be whether TSM can reclaim and hold the $434–$445 range. A sustained breakout, supported by buying volume and a successful retest, could open the way toward $454–$458. Conversely, if shares encounter renewed selling pressure near $445 and subsequently fall back below $434, the rebound may remain a temporary technical recovery.

A decisive break below $428, followed by an unsuccessful attempt to reclaim that level, could expose the $413–$420 support zone. Beyond technical risks, continued margin dilution from the 2nm ramp-up, potential adjustments to AI customers' capital spending, and higher interest rates weighing on semiconductor valuations could also limit the sustainability of any recovery.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

If AI capital expenditure slows down, a sudden halt in computing power construction will severely impact the supply chain while lowering market expectations for demand in electricity, commodities, and high-end hardware. This not only leads to a correction of overvalued assets, but also undermines growth expectations and inflation premiums, ultimately benefiting bonds. This logic is highly similar to the macroeconomic landscape during the bursting of the internet bubble in 2000, when the Nasdaq collapsed and the yield on 10-year US Treasury bonds dropped from a high of 6.5% to the 4% range.

华尔街见闻•2026/10/15 08:29