AI demand pushes TSMC to record revenues and margins
The Taiwanese company TSMC, the world’s largest contract chip manufacturer, traditionally opens the semiconductor industry’s quarterly reporting season. The published financial results exceeded expectations for both the fourth quarter and 2025 as a whole, confirming once again that the boom in artificial intelligence remains a key driver of growth across the entire industry.
In dollar terms, TSMC’s quarterly revenue increased by 25.5% year-on-year to $33.73 billion, while in local currency, the increase amounted to 20.5%, leading to the company’s inclusion on market movers lists in both Taiwan and the United States. The currency factor explains the difference, as about 74% of the company’s quarterly revenue came from North American customers. Hence, the dynamics of the US dollar continue to have a significant impact on the bottom line.
TSMC’s net profit in the fourth quarter increased by 35% to a record $16 billion, exceeding market expectations. The net profit margin for the year increased from 43.1% to 48.3%, while full-year margins rose from 40.5% to 45.1%. Gross margin also increased from 59% to 62.3% in quarterly terms and from 56.1% to 59.9% on a full-year basis. This dynamic confirms that the company is not only increasing volumes but also effectively monetizing demand for advanced technologies.
In the fourth quarter, TSMC processed about 3.96 million silicon wafers in the equivalent of 300 mm, which is 15.9% more than a year earlier. By the end of 2025, the processing volume reached 15 million wafers (+16.3%). The company’s annual revenue exceeded $100 billion for the first time and amounted to more than $122 billion, an increase of 35.9%. At the same time, TSMC incurred record capital expenditures of $40.9 billion for the year, of which $11.51 billion came in the fourth quarter. In 2026, the company plans to increase capital expenditures to $52-56 billion, hoping to maintain revenue growth of more than 30% for the third year in a row.
The revenue structure for technical processes continues to shift towards the most advanced technology nodes. In the fourth quarter, 5nm products accounted for 35% of revenue, 3nm products for 28%, and 7nm products’ share stabilized at 14%. In total, 77% of quarterly revenue came from 7 nm and thinner processes. Throughout 2025, the share of advanced technology increased from 69% to 74%, and 3nm technology increased its revenue contribution from 18% to 24%, becoming one of the main drivers of growth.
From an end-market perspective, the high-performance computing segment, including AI chips, remains key, accounting for 55% of quarterly revenue. Smartphones accounted for 32%, while consumer electronics and the automotive segment showed weak performance. On an annual basis, HPC increased revenue by 48% and accounted for 58% of total revenue, thereby finally securing its status as the main driver of TSMC’s growth.
Geographically, the company’s revenue is increasingly concentrated in North America, with its share rising from 70% to 75% by the end of the year. China reduced its contribution to 9%, Japan to 4%, and Europe, the Middle East, and Africa together to 3%. This concentration directly reflects the geography of demand for AI accelerators, where American technology giants remain the main consumers. One such example is Tesla, reportedly working with TSMC on custom AI chips, as the company increasingly ties its long-term valuation and Tesla stock price to AI and robotics. In the current quarter, TSMC expects revenue in the range of $34.6 billion to $35.8 billion.
Thus, against the backdrop of TSMC’s record performance and the ongoing AI boom, the market is gradually moving beyond the broad-based industry leaders. Specialized startups with access to advanced technology and substantial financing have not yet undermined the leaders’ positions. Still, they are already forming the foundation for tougher competition in the next technological cycle.