Terahertz (THz) gyrotrons can operate with a lower applied magnetic field in harmonic operation, but the weakened harmonic interactions in harmonic gyrotrons can introduce serious challenges when mode competition occurs. The use of an axis-encircling electron beam can greatly alleviate mode competition in a harmonic gyrotron. In this paper, we study axial modes for third-harmonic TE3,7-mode large-orbit gyrotrons. Simulation results reveal that the minimum current for oscillation to begin in each axial mode in the gyrotron regime is associated with a specific range of applied magnetic field. To avoid mode competition, tapered applied magnetic fields and waveguide radii are employed to enhance the high-order axial modes and suppress the low-order axial modes. Furthermore, spurious transverse modes in a THz gyrotron are discussed below. A stable third-harmonic TE3,7-mode large-orbit gyrotron at the third-order axial mode is predicted to yield peak output power of 6.5 kW at 768.1 GHz with an efficiency of 10% for a 75-kV, 0.85-A electron beam with an axial velocity spread of 3%.