TMTPOST -- Shares of Taiwan Semiconductor Manufacturing Co climbed about 5% on Thursday after the world’s largest contract chipmaker reported stronger-than-expected fourth-quarter earnings and revenue, underscoring resilient demand for advanced chips driven by artificial intelligence.

The Taiwan-based company, a key supplier to customers such as Nvidia and Apple, posted non-GAAP earnings of $3.14 per share for the October–December period, beating market expectations. Revenue rose 26% from a year earlier to $33.73 billion, also slightly higher than the previous quarter.

The results reinforced investor confidence in TSMC’s ability to capitalise on surging global demand for high-performance chips used in AI data centres, advanced computing and next-generation consumer electronics.

Demand for cutting-edge manufacturing processes remained the main growth driver. Chips produced using TSMC’s three-nanometre technology accounted for 28% of wafer revenue in the quarter, up from earlier periods as customers ramped up adoption of the company’s most advanced processes. Five-nanometre products contributed 35% of wafer revenue, while seven-nanometre technology accounted for 14%.

Overall, technologies at seven nanometres and below made up 77% of total wafer sales, highlighting the company’s dominant position in leading-edge manufacturing at a time when advanced chips are in short supply globally.

Profitability remained strong. TSMC reported a gross margin of 62.3% for the quarter, with an operating margin of 54% and a net profit margin of 48.3%, reflecting efficient capacity utilisation and favourable product mix.

Looking ahead, the company forecast first-quarter 2026 revenue of between $34.6 billion and $35.8 billion, above market expectations. It also projected a gross margin of 63% to 65% and an operating margin of 54% to 56%, based on current exchange-rate assumptions.

TSMC said it plans to increase capital spending to between $52 billion and $56 billion in 2026, up sharply from around $40 billion last year. The spending will focus on advanced process technologies, specialty technologies and capacity expansion, as the company seeks to meet sustained demand from AI and high-performance computing customers.

The company surpassed $100 billion in annual revenue for the first time in 2025, marking a major milestone and reflecting the structural shift in global chip demand toward advanced manufacturing.

Investors have increasingly viewed TSMC as a primary beneficiary of the AI boom, alongside U.S. chip designers and cloud computing companies. Shares in the company have gained more than 8% so far this year, outpacing broader market benchmarks.

TSMC’s outlook also comes as major technology firms including Microsoft, Meta Platforms and Alphabet continue to ramp up spending on AI infrastructure, boosting demand for advanced logic chips. Analysts say the company’s confidence in expanding capital expenditure signals expectations that AI-related demand will remain strong well beyond the near term.

However, TSMC continues to face geopolitical and operational challenges, including rising costs, supply chain complexity and political tensions between China and the United States. The company has been expanding manufacturing outside Taiwan, including in the United States and Japan, to diversify production and reduce geopolitical risk.

Still, its latest earnings and forward guidance suggest TSMC remains well positioned to maintain its technological lead and capture a growing share of global semiconductor spending as AI adoption accelerates across industries.