Taiwan Semiconductor (TSM) Stock: Q4 Profit Expected to Jump 27% on AI Demand

TLDR

• TSMC is expected to report a 27% jump in Q4 net profit to a record T$475.2 billion ($15.02 billion) driven by AI chip demand
• Fourth-quarter revenue rose 20.45% with full utilization of 3-nanometre capacity fueled by iPhone 17 and AI accelerators
• Analysts now forecast TSMC’s 2026 revenue to grow 25-30% in dollar terms, up from previous estimates of 22-26%
• The AI server accelerator manufacturing market is projected to grow 78% year-over-year in 2026
• Options traders expect a 5.34% stock move following Thursday’s earnings announcement

TSMC reports fourth-quarter earnings on Thursday with analysts forecasting net profit of T$475.2 billion. That would mark an eighth straight quarter of profit growth for the world’s largest advanced chip manufacturer.

Taiwan Semiconductor Manufacturing Company Limited, TSM

The company already posted a 20.45% revenue increase for the quarter at NT$1.05 trillion. Strong demand for AI infrastructure continues to drive results.

Full utilization of TSMC’s 3-nanometre production capacity powered fourth-quarter performance. Apple’s A19 chip for the iPhone 17 series contributed to the growth. AI demand remained strong throughout the period.

Wall Street expects earnings of $2.85 per share. That represents a 30% increase year-over-year. Revenue is forecast at $32.74 billion, up 22% from last year.

The stock gained 44.2% last year. That outperformed Taiwan’s broader market, which rose 25.7%.

Revenue Forecast Jumps on AI Accelerator Demand

Research firm IDC now projects TSMC’s 2026 revenue will grow 25-30% in dollar terms. The firm previously forecast 22-26% growth.

The AI server accelerator market drives the upgraded outlook. That market is expected to grow 78% year-over-year in 2026.

Galen Zeng, senior research manager at IDC, points to next-generation 2-nanometre node technology as a contributor. The explosive growth in AI server accelerators is the main driver.

Futurum Equities notes that AI demand is accelerating. TSMC continues to gain market share at the leading edge where competitors struggle.

Citi analyst Laura Chen placed an “upside 30-day catalyst watch” on the stock. She maintains a Buy rating with a NT$2,450 price target. Chen expects strong demand for advanced process nodes and chip packaging to support growth into early 2026.

Expansion Plans and Margin Concerns

TSMC is investing $165 billion in chip factories in Arizona. U.S. Secretary of Commerce Howard Lutnick said the company plans to invest more in the country.

Some analysts worry faster overseas expansion could affect margins. Shay Boloor of Futurum Equities said overseas fab ramp-ups might dilute margin gains from 2-nanometre technology and pricing.

Bernstein raised its price target to $330 from $290. The firm increased its estimate for TSMC’s chip-on-wafer-on-substrate capacity to 125,000 wafers per month by end of 2026.

That capacity should support Nvidia projects including Blackwell and Rubin platforms. Bernstein expects TSMC revenue to grow 23% in 2026 and 20% in 2027.

Taiwan’s exports to the U.S. face a 20% tariff under President Donald Trump. However, chips are excluded from those tariffs. The full impact on TSMC remains unclear.

Options traders expect a 5.34% move in either direction following the earnings announcement. TSMC’s earnings call is scheduled for 0600 GMT on Thursday.

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