Financial Highlights - Third quarter revenue increased 10.1% sequentially to $33.1 billion, slightly exceeding guidance, driven by strong demand for leading-edge process technologies [3][10] - Gross margin rose 0.9 percentage points sequentially to 59.5%, attributed to cost improvements and higher capacity utilization, despite foreign exchange challenges [3][6] - Operating margin increased 1.0 percentage point sequentially to 50.6% [3] - Earnings per share (EPS) was 17.44 NT, up 39% year over year, with a return on equity (ROE) of 37.8% [3] Business Line Performance - Revenue contribution from 3-nanometer process technology was 23%, while 5-nanometer and 7-nanometer accounted for 37% and 14% respectively [4] - High-Performance Computing (HPC) remained flat at 57% of revenue, while smartphone revenue increased 19% to 30%, IoT grew 20% to 5%, and automotive rose 18% to 5% [4] - Data Center Equipment (DCE) revenue decreased 20% to 1% [4] Market Data - The company ended the third quarter with cash and marketable securities of 2.8 trillion NT ($90 billion) [4] - Current liabilities decreased by 101 billion NT, mainly due to a reduction in accrued liabilities [4] Company Strategy and Industry Competition - TSMC is narrowing its 2025 capital expenditures (CAPEX) guidance to between $40 billion and $42 billion, with 70% allocated for advanced process technologies [9] - The company expects gross margin dilution from overseas fabs to be between 1% to 2% for the full year 2025, improved from previous estimates [7] - TSMC aims to leverage its manufacturing technology leadership and large-scale production to remain competitive [8] Management Commentary on Operating Environment and Future Outlook - Management noted strong AI-related demand and a mild recovery in non-AI segments, projecting full-year 2025 revenue growth of close to mid-30% year over year in U.S. dollar terms [10][11] - The company remains cautious about potential tariff impacts on consumer-related markets but is committed to investing in future megatrends [11] - TSMC is focused on technology leadership, manufacturing excellence, and customer trust to strengthen its competitive position [11] Other Important Information - TSMC is expanding its global manufacturing footprint, with significant progress in Arizona and plans for additional fabs in Japan and Germany [16][17] - The company is preparing for the ramp-up of its 2-nanometer technology, with volume production expected later this quarter [18] Q&A Session Summary Question: AI Demand Growth - Management confirmed that AI demand is stronger than previously anticipated, with an expected CAGR in the mid-40% range for AI accelerators [21][24] Question: CAPEX Outlook - Management indicated that CAPEX will correlate with business opportunities, and they will continue to invest as long as growth opportunities exist [26][27] Question: CoWoS Capacity - Management is working to increase CoWoS capacity to meet demand but did not provide specific numbers for 2026 [30] Question: Competition and Foundry 2.0 - TSMC is focusing on system performance and advanced packaging as part of its Foundry 2.0 strategy to enhance competitiveness [74][76] Question: Smartphone Prebuilt Concerns - Management expressed no concerns about prebuilt inventory levels, indicating they are healthy and seasonal [79]

Financial Highlights - In Q3 2025, revenue increased by 10.1% sequentially to $33.1 billion, slightly exceeding guidance [6][10] - Gross margin rose by 0.9 percentage points sequentially to 59.5%, driven by cost improvements and higher capacity utilization [6][11] - Operating margin increased by 1.0 percentage point sequentially to 50.6% [6] - EPS was up 39% year-over-year, and ROE stood at 37.8% [6] Business Line Performance - Three nanometer process technology contributed 23% of wafer revenue, while five nanometer and seven nanometer accounted for 37% and 14% respectively [7] - Advanced technologies (seven nanometer and below) represented 74% of wafer revenue [7] - Revenue from the smartphone segment increased by 19% to account for 30% of total revenue [7] - HPC remained flat at 57%, while IoT and automotive segments grew by 20% and 18% respectively [7] Market Data - Cash and marketable securities totaled NT$2.8 trillion (approximately $90 billion) at the end of Q3 2025 [8] - Current liabilities decreased by NT$101 billion quarter-over-quarter [8] - Accounts receivable turnover days increased by 2 days to 25 days, while days of inventory decreased by 2 days to 74 days [8] Company Strategy and Industry Competition - TSMC plans to narrow its 2025 CapEx guidance to between $40 billion and $42 billion, with 70% allocated for advanced process technologies [13][14] - The company aims to leverage its manufacturing technology leadership and large-scale production to remain competitive [12][13] - TSMC is expanding its global manufacturing footprint, including capacity expansions in Arizona, Japan, and Germany [21][24] Management Commentary on Operating Environment and Future Outlook - Management noted strong demand for leading-edge process technologies, particularly in AI-related markets [15][16] - The company expects full-year 2025 revenue to increase by close to mid-30s percent year-over-year [16] - Management remains cautious about potential impacts from tariff policies and is focused on maintaining technology leadership and customer trust [17][18] Other Important Information - TSMC's two nanometer technology is on track for volume production later this quarter, with expectations for a faster ramp in 2026 [26] - The company is also introducing N2P technology, which offers further performance benefits [26] Q&A Session Summary Question: AI Demand and Growth Forecast - Management confirmed that AI demand is stronger than previously anticipated, with an updated CAGR expected to be better than mid-40s [35] - They emphasized that CapEx will correlate with business opportunities, and growth in revenue should outpace CapEx growth [37] Question: Capacity Expansion Plans - Management indicated that they are working hard to narrow the gap between demand and supply, with plans to increase capacity in 2026 [42] Question: Advanced Packaging and Revenue Drivers - Management stated that growth will be driven by a combination of technology migration, ASP increases, and volume growth [84] Question: Competition and Strategic Initiatives - TSMC is focusing on a holistic approach to system performance, integrating front-end and back-end processes to enhance competitiveness [99] Question: Concerns about Prebuild Inventory - Management expressed no concerns about prebuild inventory levels, noting that inventory is at healthy seasonal levels [101]

Financial Data and Key Metrics Changes - Second quarter revenue increased 11.3% sequentially, supported by strong demand for three nanometer and five nanometer technologies, with a 17.8% increase in U.S. dollar terms to $30.1 billion, exceeding guidance [7][20] - Gross margin decreased by 0.2 percentage points sequentially to 58.6%, primarily due to unfavorable foreign exchange rates and margin dilution from overseas fabs [7][14] - Operating margin increased by 1.1 percentage points sequentially to 49.6%, with EPS up 60.7% year over year and ROE at 34.8% [8][10] Business Line Data and Key Metrics Changes - Revenue by technology: three nanometer contributed 24% of wafer revenue, five nanometer 36%, and seven nanometer 14%, with advanced technologies (seven nanometer and below) accounting for 74% of wafer revenue [8] - Revenue contribution by platform: HPC increased 14% quarter over quarter to 60%, smartphone increased 7% to 27%, IoT increased 14% to 5%, automotive remained flat at 5%, and DCE increased 30% to 1% [9] Market Data and Key Metrics Changes - The company ended the second quarter with cash and marketable securities of NT$2.6 trillion (approximately $90 billion) [10] - Current liabilities decreased by $1 billion quarter over quarter, mainly due to a decrease in accrued liabilities [10] Company Strategy and Development Direction - The company plans to invest a total of $165 billion in advanced semiconductor manufacturing in the U.S., including six advanced wafer manufacturing fabs in Arizona [24][25] - The expansion will enable TSMC to scale up production faster to support leading-edge customers in smartphone, AI, and HPC applications [26][28] - The company aims to maintain a competitive position through technology leadership, manufacturing excellence, and customer trust [22][23] Management's Comments on Operating Environment and Future Outlook - Management expects strong demand for semiconductor technology, particularly in AI and HPC, with a projected 30% increase in full-year 2025 revenue in U.S. dollar terms [22] - There are uncertainties regarding tariff policies and their impact on consumer-related markets, but overall semiconductor demand remains robust [21] - Management remains cautious about the potential impact of macroeconomic factors on future performance [21][47] Other Important Information - The company anticipates gross margin dilution from overseas fabs to be between 2% to 3% annually in the early stages, widening to 3% to 4% in later stages [15] - The sensitivity of revenue to the NT dollar exchange rate is nearly 100%, with a 1% appreciation reducing reported NT revenue by 1% [17][19] Q&A Session Summary Question: Demand outlook for AI and data center - Management noted that AI demand is getting stronger, and they are working to narrow the supply-demand gap [40][42] Question: Gross margin sustainability - Management expressed confidence in maintaining a gross margin of 53% and higher despite structural headwinds from foreign exchange rates and overseas fab dilution [51][76] Question: AI accelerator growth and market potential - Management indicated that while it is too early to revise growth targets, the potential for increased demand from China is positive [54][80] Question: CapEx guidance and future expansion - Management stated that CapEx is aligned with business opportunities and macro uncertainties, with expectations for potential increases in future years [94][95] Question: Advanced packaging and technology prioritization - Management emphasized the importance of customer demand in developing advanced packaging technologies and maintaining flexibility in technology transfer [103][106]