Today's event is being webcast live through TSMC's website at www.tsmc.com, where you can also download the earnings release materials. Wendell Huang, will summarize our operations in the fourth quarter 2025, followed by our guidance for the first quarter 2026. Wendell Huang for the summary of operations and the current quarter guidance. My presentation will start with financial highlights for the fourth quarter of 2025 and a recap of full year 2025 after that.
Fourth quarter revenue increased 5.7% sequentially in NT$ supported by strong demand for our leading-edge process technologies. dollar terms, revenue increased 1.9% sequentially to $33.7 billion, slightly ahead of our fourth quarter guidance. Gross margin increased by 2.8 percentage points sequentially to 62.3%, primarily due to cost improvement efforts, favorable foreign exchange rate, and the high capacity utilization rate. The operating expenses accounted for 8.4% of net revenue compared to 8.9% in third quarter of 2025 due to operating leverage.
Thus, operating margin increased sequentially by 3.4 percentage points to 54% overall. 3 nm process technology contributed 28% of wafer revenue in the fourth quarter while 5 nm and 7 nm accounted for 35% and 14% respectively. Advanced technologies defined as 7 nm and below accounted for 77% of wafer revenue on a full year basis. 3 nm revenue contribution came in at 24% of 2025 wafer revenue, 5 nm 36% and 7 nm 14%.
| Metric | Period | Current guidance |
|---|---|---|
| Revenue | Q1 2026 | $34.6B-$35.8B (+4% QoQ / +38% YoY at midpoint) |
| Gross margin | Q1 2026 | 63%-65% (+170 bps at midpoint) |
| Operating margin | Q1 2026 | 54%-56% |
| Effective tax rate | FY 2026 | 17%-18% (higher) |
| Full-year revenue growth | FY 2026 | close to 30% (USD) |
| Capital budget | FY 2026 | $52B-$56B (higher) |
| Metric | YoY | Note |
|---|---|---|
| Full-year revenue | +35.9% (USD) | Reached $122B on strong demand for leading-edge process technologies, outperforming the foundry industry. |
| HPC platform revenue | +48% | Driven by AI accelerator demand; HPC was 58% of full-year revenue. |
| Automotive revenue | +34% | Recovery in the automotive end market. |
| IoT revenue | +15% | Growth across the IoT platform in 2025. |
| Smartphone revenue | +11% | Growth supported by leading-edge adoption in high-end smartphones. |
| Full-year EPS | +46.4% | Reached TWD 66.25 on revenue growth and operating leverage. |
| Full-year gross margin | +3.8 pts | Rose to 59.9% on higher utilization and cost improvement, partially offset by unfavorable FX and overseas fab dilution. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| AI demand and long-term CAGR | Strong AI demand; mid-40s% AI accelerator CAGR | AI accelerator CAGR raised to mid-to-high 50s%; overall CAGR approaching 25%; AI accelerator high-teens % of 2025 revenue | Increasing |
| CapEx step-up | $40.9B spent in 2025 (up from $29.8B in 2024) | 2026 budget $52B-$56B; next three years significantly higher than prior $101B | Increasing |
| N2 / A16 ramp | On track for volume production | N2 in high-volume manufacturing since Q4 2025 with good yield; N2P and A16 volume production in H2 2026 | Increasing |
| Arizona / overseas expansion | Speeding up Arizona; ~30% of 2nm+ capacity targeted in US | Fab 2 tool-in in 2026 with HVM pulled forward to H2 2027; fab 3 under construction, fab 4 permitting; second land purchased | Expanding |
| Foundry competition | — | Acknowledges a formidable US IDM competitor but confident, citing 2-3 year build plus 1-2 year ramp lead times | Stable |
| Memory prices / non-AI demand | Non-AI bottomed with mild recovery | Rising memory prices pressure price-sensitive PC/smartphone units; high-end demand still healthy | Mixed |