- Net profit jumps 69% to T$763.1 billion in Q3, beats forecasts
- TSMC planning cautiously for 2027 amid macroeconomic uncertainties
- Expects Q4 revenue of $52.3 billion to $54.3 billion versus $33.73 billion a year earlier
- TSMC a major beneficiary of AI boom
TAIPEI, Oct 15 (Reuters) - TSMC, the world's largest manufacturer of advanced chips, struck a note of caution for 2027 on Thursday due to macroeconomic uncertainties, tempering an otherwise upbeat outlook after reporting a sixth consecutive record quarterly profit on robust AI-driven demand.
While Taiwan Semiconductor Manufacturing Co (TSMC) said demand was "extremely robust" and it sees no sign of a slowdown in what it calls the AI mega trend, the company was being cautious in its business planning.
"Looking ahead, we continue to observe consumer and price-sensitive end-markets segments are being challenged due to the impact of rising component prices and macroeconomic uncertainties," Chief Executive C.C. Wei said on an earnings call. "As such, we are being prudent in our business planning going into 2027."
However, it reiterated that demand far exceeds its supply capacity, with the expectation that its 2026 full-year revenue grows by about 44%, up from a previous forecast of greater than 40% last quarter.
The company also said the emergence of agentic AI central processing units and continued demand for networking chips would drive future silicon demand.
STOCK SHOCK
TSMC's results come amid concerns that the AI investment surge is losing momentum. On Wednesday, ASML, the world's largest maker of tools used to make AI chips and advanced semiconductors, provided an upbeat outlook.
TSMC, a key supplier to Nvidia and Apple, said it expects fourth-quarter revenue to rise by as much as 61% from a year earlier to $52.3 billion to $54.3 billion. It maintained its capital spending expectation for 2026 at $60 billion to $64 billion.
TSMC's Taipei-listed shares closed down 2% ahead of the earnings release, in line with a broader tech sell-off amid worries that more interest rate hikes from the US Federal Reserve could pummel shares of AI stocks that are sensitive to higher borrowing costs.
Shares of South Korean rivals Samsung Electronics and SK Hynix slid more than 10%.
Gary Tan, portfolio manager at Allspring Global Investments, which owns TSMC stock, said the company's remarks reflected the caution expressed by many semiconductor companies during recent earnings releases and investor days.
"The key risk is that TSMC's caution translates into broader earnings downgrades across a value chain accustomed to sustained upward revisions, but for now, this looks like sensible expectation management rather than a change in the sector's long-term fundamentals," he added.
Analysts say demand for TSMC's AI chipmaking capacity, as well as its advanced chip packaging technology, CoWoS, remains strong.
That has catapulted Asia's most valuable company to new heights. Its market capitalisation is almost double that of Samsung Electronics at around $2 trillion.
TSMC said net profit in the July-to-September quarter hit T$763.1 billion ($23.59 billion), up 69% from a year earlier and beating a T$746.3 billion LSEG SmartEstimate compiled from 16 analysts.
The result was TSMC's highest-ever quarterly net income, as well as its 11th consecutive quarter of profit growth.
Last week, it reported a 50% year-on-year rise in third-quarter revenue, beating market forecasts and hitting a new record.
TEXAS EVALUATION
TSMC is investing $265 billion to build chip factories in the US state of Arizona, including an additional $100 billion that was unveiled in July.
It said its second fab in Arizona has completed construction, with mass production scheduled to begin in the third quarter of 2027, ahead of schedule.
In September, Reuters reported that TSMC was evaluating a potential investment in Texas.
Wei said the company was studying expansion opportunities outside Arizona as major US customers have asked TSMC to increase its local manufacturing capacity, adding that the US government has been supportive.
"Texas is one," Wei said. "We sent teams to Texas to do all the evaluation."
Tesla CEO Elon Musk also said last week that his companies would build and operate the Terafab AI chip complex, with TSMC potentially subleasing a part of it.
Wei said TSMC had discussions with Terafab, but stressed that any fab collaboration would have to be operated by TSMC.
ASML said on Wednesday customers were already looking to place orders for 2029 and 2030, easing concerns that the AI investment boom was losing momentum.
TSMC's Taipei-listed shares have gained 57% so far this year, in line with a 62% rise for the broader Taiwanese market.
($1 = 32.3450 Taiwan dollars)
Reporting by Wen-Yee Lee and Ben Blanchard; Additional reporting by Ankur Banerjee in Singapore; Editing by Thomas Derpinghaus
Source: Reuters