TSM delivered a very strong Q1: revenue was $35.9B, gross margin reached 66.2%, operating margin reached 58.1%, and diluted EPS was NT$22.08. The biggest change versus the preview is not just that revenue landed above the pre-release frame; it is that the margin stack is improving while HPC mix is still rising. Q2 guidance of $39.0B-$40.2B revenue implies continued sequential growth, keeping the AI capacity and pricing story intact.

Key Metrics Trends

Metric	Q1 2024	Q2 2024	Q3 2024	Q4 2024	Q1 2025	Q2 2025	Q3 2025	Q4 2025	Q1 2026
HPC revenue mix	46.0%	52.0%	51.0%	53.0%	59.0%	60.0%	57.0%	55.0%	61.0%
HPC revenue mix YoY chg (bps)	-	-	-	-	+1300	+800	+600	+200	+200
Smartphone revenue mix	38.0%	33.0%	34.0%	35.0%	28.0%	27.0%	30.0%	32.0%	26.0%
Smartphone revenue mix YoY chg (bps)	-	-	-	-	-1000	-600	-400	-300	-200
Revenue	$18.9B	$20.8B	$23.5B	$26.9B	$25.5B	$30.1B	$33.1B	$33.7B	$35.9B
Revenue YoY %	-	-	-	-	+35.3%	+44.4%	+40.9%	+25.5%	+40.6%
Gross margin	53.1%	53.2%	57.8%	59.0%	58.8%	58.6%	59.5%	62.3%	66.2%
Gross margin YoY chg (bps)	-	-	-	-	+570	+540	+170	+330	+740
Operating margin	42.0%	42.5%	47.5%	49.0%	48.5%	49.6%	50.6%	54.0%	58.1%
Operating margin YoY chg (bps)	-	-	-	-	+650	+710	+310	+500	+960
Diluted EPS (NT$)	$8.70	$9.56	$12.54	$14.45	$13.94	$15.36	$17.44	$19.50	$22.08
Diluted EPS (NT$) YoY %	-	-	-	-	+60.2%	+60.7%	+39.1%	+34.9%	+58.4%

TSM is accelerating: revenue growth remains above 40% in USD, gross margin is stepping up, and HPC mix is carrying the platform toward a higher structural margin profile.

Beat/Miss

Guidance

Catalysts

Street Q&A

Contradictions

Read-Throughs

This Quarter vs Consensus

Metric	Consensus / Guide	Actual	Variance	Read
Revenue	$34.6-$35.8B guide	$35.9B	Above high end	Beat
Gross margin	63%-65% guide area	66.2%	Above high end	Major beat
Operating margin	Low-to-mid 50s expected	58.1%	Ahead	Operating leverage clear
Diluted EPS	NT$20+ expected	NT$22.08	Ahead	Clean profit beat

TSM remains a consistent beater. Q1 adds a margin beat on top of a high-end revenue result, which is a stronger quality beat than revenue alone.

Guidance Deep Dive

Metric	Prior Frame	New Guide	Variance	Implication
Q2 revenue	$39B+ needed for AI-led acceleration	$39.0B-$40.2B	Constructive	Sequential growth continues
HPC demand	AI capacity tight	HPC mix now 61%	Positive	AI demand still dominates mix
Gross margin	Sustain above 60%	66.2% in Q1	Positive	Pricing/utilization outweigh ramp costs
Advanced nodes	N3/N5 utilization focus	3nm/5nm/7nm remain core mix	Positive	Node leadership intact

Guidance and current-quarter margins are both supportive. The only real tension is geopolitical/tariff risk, not current demand.

Upcoming Catalysts

Catalyst	Timing	What To Watch	Bull Case	Bear Case
Q2 revenue delivery	July 2026	$39.0-$40.2B guide	Revenue clears the top end again	AI demand normalizes faster than expected
N2 ramp	2026	Yield, pricing, and early customer uptake	N2 adds another pricing layer	Ramp costs pressure gross margin
CoWoS capacity	2026	Advanced packaging availability	Packaging unlocks more AI wafer demand	Bottlenecks cap upside
Geopolitical/tariff updates	Ongoing	Customer order behavior	No cancellations and US expansion derisks policy	Tariffs create customer deferrals

Street Q&A

Topic	Likely Street Question	Answer / Read
Margins	Is 66% gross margin sustainable?	Some moderation is possible, but the quarter shows pricing and utilization are stronger than ramp-cost headwinds.
AI demand	Is HPC still accelerating?	Yes. HPC mix rose to 61%, and Q2 revenue guidance implies demand remains broad.
Smartphone weakness	Does smartphone mix matter?	Smartphone mix fell to 26%, but that is not negative if AI/HPC mix is replacing it at higher margin.
Capex cycle	Will capex need to rise again?	Likely still elevated; the key is whether capacity additions relieve packaging and advanced-node constraints without destroying margin.

Contradictions

Topic	View 1	View 2	Explainer
AI strength vs concentration risk	HPC mix rose to 61% and revenue reached $35.9B.	That also means the stock is increasingly dependent on AI/HPC demand staying exceptional.	The quarter confirms AI strength, but it concentrates the risk around one very powerful cycle.
Record margins vs sustainability	Gross margin reached 66.2% and operating margin reached 58.1%.	The best margin print also raises the bar for N2, overseas fab dilution, and future depreciation absorption.	Peak-quality execution makes future margin normalization more visible.
HPC mix vs smartphone softness	HPC mix is taking share at high value.	Smartphone mix fell to 26%.	That is fine while AI demand is this strong, but it leaves less diversification if the AI capacity cycle pauses.
Q2 acceleration vs geopolitical risk	Q2 revenue guidance of $39.0B-$40.2B is excellent.	The investment case still carries Taiwan/geopolitical, tariff, and export-control risk.	Current numbers do not capture the main non-operating risks investors still underwrite.

Indirect Read-Throughs

Company / Theme	Read-Through	Why It Matters
NVDA / AVGO / AMD	Positive	TSM revenue and HPC mix support ongoing advanced-node AI demand.
ASML / KLAC / AMAT	Positive	High utilization and N2/N3 demand support WFE intensity.
Apple supply chain	Mixed	Smartphone mix is lower, but TSM's margin impact is offset by HPC.
AI infrastructure	Positive	The foundry bottleneck remains a demand confirmation, not a demand warning.

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