Taiwan Semiconductor Sees Sequential Fourth-Quarter Gross Margin Decline; Issues Upbeat Revenue Outlook

06:53 AM EDT, 10/15/2026 (MT Newswires) -- Taiwan Semiconductor Manufacturing's (TSM) US-listed shares fell early Thursday as the chipmaker's fourth-quarter gross margin outlook indicated a sequential decline at the midpoint, while its revenue guidance came in ahead of market expectations. The company expects its gross margin to come in between 65% and 67% for the ongoing quarter, it said Thursday. The metric came in at 66.4% in the third quarter, down by 130 basis points on a sequential basis, mainly due to margin dilution from the firm's ramp-up of its 2-nanometer technology, Chief Financial Officer Wendell Huang said during a conference call, according to a FactSet transcript. Continued margin dilution from TSMC's 2-nanometer technology ramp-up and dilution from its fabrication plants outside the country are anticipated to weigh on its gross margin in the fourth quarter, with the midpoint of the guidance suggesting a 40-basis-point sequential decline, Huang said. TSMC's shares on the New York Stock Exchange decreased 1.5% in the most recent premarket activity. The semiconductor manufacturer forecasts revenue to be in a range of $52.3 billion to $54.3 billion, representing a 58% annual gain at the midpoint, according to Huang. The current consensus on FactSet is for $50.22 billion. "Moving into (the) fourth quarter 2026, we expect our business to be supported by continued strong demand for our leading-edge process technologies including the steep ramp up of our 2 nanometer technology," Chief Executive C. C. Wei told analysts on the call. The company continues to see "extremely robust" demand for its technologies and now expects 2026 revenue to grow around 44% on a yearly basis in US dollar terms, Wei said, compared with previous expectations in July for a gain of more than 40%. The Street is looking for growth of roughly 42%. Rising component prices and macroeconomic uncertainties are continuing to challenge the consumer and price-sensitive end markets, Wei said on the call. "As such, we are being prudent in our business planning going into 2027 while focusing on the fundamentals of our business to further strengthen our competitive position," the CEO added. For the September quarter, TSMC reported earnings of 147.13 New Taiwan dollars ($4.60) per American depositary receipt unit, up from NT$87.22 a year earlier. The consensus on FactSet was for NT$143.12. Revenue climbed 51% to NT$1.494 trillion, ahead of the Street's view for NT$1.466 trillion. Wei said the artificial intelligence market continues to be strong, with recent developments contributing positively to the technology's long-term demand outlook. "We observed increasing AI demand, fueled by the rising adoption of agentic AI as we transition from chatbots to AI assistants," according to Wei. Earlier in October, GlobalFoundries (GFS) struck a multi-year $2 billion deal to supply silicon interposers to TSMC amid growing demand for AI. The Taiwanese firm reiterated its capital expenditures guidance of $60 billion to $64 billion for 2026, Huang said on the call. Major US semiconductor companies, including Intel (INTC), Advanced Micro Devices (AMD) and Nvidia (NVDA), are set to report their latest quarterly results in the coming weeks.