Taiwan Semiconductor Manufacturing Company reported fourth-quarter revenues of $19.2 billion, up 25.5% year-over-year, while non-GAAP net income rose 40% to $16 billion. The beat on both top and bottom lines was driven by strong adoption of 5-nanometer and 3-nanometer process nodes for AI data-center GPUs. Gross margin expanded by 3 percentage points to 55.8%, reflecting higher utilization in its state-of-the-art fabs and improved pricing power for leading-edge customers.

TSMC unveiled a capex budget of $56 billion for 2026, the largest in its history and up 20% from the prior year. Management cited sustained demand from cloud service providers and AI chip designers, forecasting that spending on advanced packaging and 2-nanometer R&D will account for nearly 30% of total investment. This commitment underpins the company’s expectation of at least 15% annual revenue growth over the next three years.

While TSMC’s two-tiered pricing model has boosted revenues on high-end orders, it has drawn pushback from some smartphone customers who are seeing wafer costs rise by as much as 12% per node generation. Additionally, capacity for 3-nanometer output remains tight, with utilization above 95%, potentially capping near-term growth if additional fab expansions cannot come online quickly enough.

CEO C.C. Wei reiterated confidence in a multi-year AI megatrend, noting that conversations with leading cloud operators suggest AI workloads will more than double in the next 24 months. With projected annual revenues exceeding $85 billion by 2027 and gross margins sustaining above 55%, TSMC is positioned to maintain its leadership in semiconductor foundry services and capitalize on the shift to AI-optimized silicon.