San Jose, California – Taiwan Semiconductor Manufacturing Company (TSMC) reported a remarkable 35% surge in its fourth-quarter profits, surpassing analysts’ expectations and achieving a record high, propelled largely by robust demand for artificial intelligence chips.

The company’s revenue for the December quarter reached 1.046 trillion new Taiwan dollars ($33.73 billion), exceeding an expected figure of 1.034 trillion new Taiwan dollars. Net income also demonstrated strong performance, totaling 505.74 billion new Taiwan dollars compared to the anticipated 478.37 billion new Taiwan dollars. TSMC has now recorded profit growth for eight consecutive quarters, showcasing its resilience in a volatile market.

In addition, TSMC’s fourth-quarter revenue increased by 20.5% year-over-year, crossing the significant threshold of NT$1 trillion and outpacing forecasts. With its standing as the world’s leading contract chipmaker and Asia’s largest technology firm by market valuation, TSMC is capitalizing on the burgeoning AI sector. Major clients like Nvidia and AMD have significantly contributed to its success by relying on TSMC for advanced AI processors.

The high-performance computing segment, which encompasses applications in artificial intelligence and 5G, dominated sales during the quarter. TSMC reported that advanced chips, specifically those manufactured at 7-nanometer or smaller scales, accounted for an impressive 77% of total wafer revenue in the quarter. For the entire year of 2025, these advanced chips represented 74% of revenue, a notable increase from 69% in 2024.

In the semiconductor industry, smaller chip sizes signify greater efficiency and enhanced processing speeds due to more compact transistor designs. “The demand for AI is exceptionally strong, enhancing overall chip demand throughout the server sector,” said Jake Lai, a senior analyst at Counterpoint Research. He forecasts that 2026 will see another boom in demand for AI servers.

TSMC is expected to continue its upward trajectory with ongoing expansions in 2nm capacity and new production facilities contributing to revenue growth. These developments, combined with enhancements in advanced packaging, are anticipated to solidify TSMC’s strong performance going into the next year.

However, the company may face challenges related to consumer electronics, particularly smartphones and PCs, due to the ongoing memory shortage and rising prices impacting chip demand in those sectors. Despite these potential hurdles, TSMC’s strategic focus on AI and advanced technologies positions it well for future growth in a rapidly evolving market.