Why Is Taiwan Semiconductor (TSM) Stock Down After a Record Quarter?

TLDR

• TSM stock closed at $422.25 on Thursday, down 2%, as chip stocks sold off.
• TSMC posted its sixth straight record quarter, with profit up nearly 69% and revenue up about 50%.
• Q4 revenue is guided to $52.3 billion to $54.3 billion, about 58% growth from a year ago.
• The 2026 capital budget stays at $60 billion to $64 billion.
• Needham raised its price target to $560 from $530 and kept a Buy rating.

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Taiwan Semiconductor (TSM) stock closed at $422.25 on Thursday, down $7.75 or 2%. A record quarter followed by a down day is an odd combo.

Taiwan Semiconductor Manufacturing Company Limited, TSM

A sector-wide sell-off weighed on the chipmaker. Nvidia fell about 2% and Broadcom slipped about 1%.

TSMC posted its sixth straight quarter of record profit. Earnings rose nearly 69% to NT$763.1 billion, while revenue climbed about 50% to NT$1.49 trillion.

In U.S. dollars, earnings came to $4.60 per share on $46.72 billion in revenue. FactSet analysts had expected $4.46 per share and $45.67 billion.

Guidance and Demand

TSMC expects fourth-quarter revenue between $52.3 billion and $54.3 billion. That would be about 58% growth from a year ago.

TSMC $TSM Q3’26 EARNINGS HIGHLIGHTS

🔹 Revenue: $46.72B (Est. $44.93B) 🟢; +41.2% YoY
🔹 EPS: $4.60 (Est. $4.48) 🟢; per ADR
🔹 Gross Margin: 66.4% (Est. 66.3%) 🟡
🔹 Oper Margin: 58.7% (Est. 57.7%) 🟢
🔹 Net Income: NT$763.06B (Est. NT$737.9B) 🟢
🔹 Net Profit Margin: 51.1%… pic.twitter.com/YxYKoVi78J

— Wall St Engine (@wallstengine) October 15, 2026

Gross margin was 66.4% in the third quarter, down from 67.7% in the second. The company expects 65% to 67% for the fourth quarter.

CEO C.C. Wei said demand for leading-edge technologies remains “extremely robust.” He pointed to rising use of agentic AI as a key driver.

TSMC expects 44% revenue growth in 2026, slightly above analyst forecasts. Management also sees room for AI accelerator revenue to grow faster than its current mid- to high-50s CAGR guide.

CFO Wendell Huang kept the 2026 capital budget at $60 billion to $64 billion. He said spending from 2026 to 2028 should be much higher than the past three years.

Market Backdrop and Texas Talks

Wednesday’s hotter-than-expected inflation report stoked fears that the Federal Reserve could raise rates again. Analyst Louis Navellier called the tech pullback a distraction from strong results.

Needham analyst Charles Shi raised his price target to $560 from $530 and kept a Buy rating. He called it a beat-and-raise quarter, with gross margin and capex in line.

The stock is up more than 41% this year. It hit record highs earlier this month.

That run followed Elon Musk’s comments about early talks on his Terafab chip project in Texas. TSMC has confirmed it is exploring the state.

Wei said teams are in Texas doing evaluations. He also said TSMC is talking with a customer trying to build a fab, and named Terafab.

TSMC is already expanding in Arizona as part of a multiyear plan to make chips in the U.S. Several locations are under review for new sites.

In pre-market trading Friday, TSM was at $421.20, down 0.32%.