On Thursday, TSMC announced a remarkable 39.1% surge in its third-quarter profits compared to the previous year, surpassing market predictions and setting a new record. This impressive growth is largely driven by sustained demand for artificial intelligence (AI) chips.

Below is a comparison of the company’s performance against LSEG SmartEstimates:

• Revenue: NT$989.92 billion new Taiwan dollars, vs. NT$977.46 billion expected
• Net income: NT$452.3 billion, vs. NT$417.69 billion 

In the quarter ending in September, TSMC’s revenue climbed 30.3% year-over-year to reach NT$989.92 billion, exceeding expectations. Notably, the company’s net income increased by 13.6% from the previous quarter, marking the second consecutive quarter of profit growth.

As Asia’s largest tech firm by market value, TSMC has thrived amid the AI boom, manufacturing cutting-edge AI processors for tech giants like Nvidia and Apple.

“Recent developments in AI market continue to be very positive,” TSMC CEO C.C. Wei said in an earnings call, adding that increasing adoption of AI models by consumers has led to more demand for compute, and by extension, semiconductor products.

Bolstered by this growth, Wei said that the company had raised its 2025 revenue growth forecast to the mid-30% range. In July, the company had expected full-year revenue growth of about 30%.

In the July-September quarter, TSMC’s high-performance computing division, which encompasses artificial intelligence and 5G applications, made up the majority of third-quarter sales, accounting for 57% of revenues.

TSMC said advanced chips, with sizes 7-nanometer or smaller, accounted for 74% of TSMC’s total wafer revenue in the quarter. 

In semiconductor technology, smaller nanometer sizes signify more compact transistor designs, which lead to greater processing power and efficiency. 

Growth in TSMC’s most advanced chips particularly drove revenue gains in the third quarter, according to Counterpoint Research senior analyst William Li.

“TSMC’s robust earnings are a direct reflection of the strong traction at 3nm as well as high utilization at 4/5nm – both of which are being driven by ongoing orders from AI GPU and HPC customers and premium smartphone platforms,” Li told CNBC in a statement. 

TSMC executives also said Thursday that they were monitoring U.S. tariff developments as Taiwan negotiates for a lower “reciprocal” rate and Washington weighs industry-specific duties on semiconductors. However, TSMC is likely to receive some exemptions. 

“We understand there are uncertainties and risks from the potential impact of tariff policies, especially in consumer-related and price-sensitive market segments,” Wei said, adding that the company would continue to monitor and plan for any impact. 

TSMC has been investing heavily in facilities in the U.S. — spending that could help reduce its exposure to tariff impacts.