TSMC Q3 Revenue Jumps 41% as Zacks Upgrades to Strong Buy

Taiwan Semiconductor Manufacturing Company reported a third-quarter earnings beat and raised its guidance on October 15, prompting Zacks Investment Research to assign the chipmaker a Zacks Rank #1 (Strong Buy). The company’s strong upward earnings revisions coincide with a broader market push by technology and semiconductor stocks to regain momentum ahead of major earnings reports from Meta and Tesla.

TSMC’s financial results showed significant expansion, with third-quarter earnings growing by 58% on a 41% increase in revenue. The company noted that 3-nanometer chip shipments accounted for 33% of total wafer revenue, up from 23% in the same period the previous year. More advanced 2-nanometer chips, which entered volume production in the fourth quarter of 2025, represented 8% of revenue in the third quarter, rising from 3% in the second quarter. Advanced technologies, defined by TSMC as 7-nanometer and beyond, comprised 79% of total wafer revenue, an increase from 74% in the year-ago period.

Management cited continued strong demand for leading-edge process technologies, including the steep ramp-up of its 2-nanometer technology, when upping its guidance. The company previously stated it expects to grow revenue by 30% in 2026 as part of a compound annual growth rate of approximately 25% between 2024 and 2029. Analysts project TSMC revenue to grow by 41% in 2026 and another 33% in 2027, reaching $228 billion. Earnings are projected to grow by 59% in 2026 and 29% in 2027, doubling the 2025 total of $10.65 per share to $21.85 per share in 2027.

Zacks Investment Research highlights that TSMC physically manufactures almost all advanced semiconductors for Nvidia and most other AI giants. The foundry reportedly captures 60% of the global chip foundry market and 90% of advanced semiconductor manufacturing. Customers such as Apple, AMD, and Qualcomm rely on TSMC for its scale and expertise, noting that the company does not compete against them in chip design. To address geopolitical concerns, TSMC is expanding its manufacturing footprint outside of Taiwan into the United States, Japan, and other regions.

The broader market context remains bullish according to Zacks data. Nearly every Zacks sector is expected to report year-over-year growth in the third quarter. Total third-quarter earnings for the S&P 500 are projected to jump 24.6% on 11.8% revenue expansion. For the full year 2026, S&P 500 earnings are expected to grow by 28.8% on higher sales of 9.8%. Margins are projected to reach 15.3% in 2026 and 18% in 2028, surpassing the previous peak of 13.2% set in 2021.

TSMC stock has slipped approximately 14% from its early October records but is currently finding technical support near its 50-day moving average. The stock trades at a multiple of 19.8 times forward 12-month earnings, which represents a discount to its highs. Zacks notes an average price target that implies 29% upside potential. Over the last year, TSM stock has outperformed the entire Magnificent Seven group, outpacing five of the seven companies in the past decade while lagging only Tesla and Nvidia.