Taiwan Semiconductor Manufacturing Co. (TSM) is having one of those moments where the numbers just keep getting bigger. The world's leading contract chipmaker continues to ride the AI wave, and analysts are scrambling to raise their forecasts ahead of Thursday's earnings report.

A Quarter for the Record Books

Wall Street expects Taiwan Semiconductor to deliver its most profitable quarter ever. Analysts polled by LSEG are projecting fourth-quarter net profit of 475.2 billion New Taiwan dollars, which translates to roughly $15.02 billion. That represents a 27% jump from the same period last year.

If the company posts anything above 452.3 billion New Taiwan dollars, it'll mark the eighth consecutive quarter of profit growth. That's not just a streak—it's a testament to how critical advanced chip manufacturing has become in the AI era.

The company already gave investors a preview earlier this month, reporting that fourth-quarter revenue climbed 20.5% to 1.05 trillion New Taiwan dollars ($33.1 billion), beating market expectations. Now the question is whether profit margins kept pace with that top-line growth.

Advanced Chips Driving the Business

What's powering these numbers? Strong demand for Taiwan Semiconductor's most advanced manufacturing capabilities, particularly its 3-nanometer process technology. Apple Inc. (AAPL) is using those chips in its iPhone 17 lineup with the A19 processor, providing a steady stream of high-margin business.

But it's not just about smartphones anymore. Galen Zeng, senior research manager at IDC, told Reuters that AI server accelerators are becoming a massive driver of growth. IDC now expects the AI server accelerator market to grow 78% year over year in 2026. That's the kind of demand that keeps fabrication plants running at full capacity.

Based on this momentum, IDC raised its revenue growth forecast for Taiwan Semiconductor to 25-30% in 2026, up from a previous estimate of 22-26%. The boost reflects not just current AI demand but also the expected ramp-up of 2-nanometer technology, which represents the next frontier in chip manufacturing.

Wall Street Gets More Bullish

Analysts are responding accordingly. Goldman Sachs lifted its price target by 35% to 2,330 New Taiwan dollars, pointing to projected 30% revenue growth in 2026. JPMorgan is even more optimistic about profitability, expecting operating margins to climb above 50%—a three-year high for the company.

Those margin projections matter because they suggest Taiwan Semiconductor isn't just growing revenue by cutting prices or chasing lower-margin business. The company is capturing premium pricing for its most advanced nodes, where competition is virtually nonexistent.

TSM Price Action: Taiwan Semiconductor shares were down 0.56% at $321.83 during premarket trading on Monday, still hovering near the stock's 52-week high of $333.08.