TSM — Q2 2026 Earnings Preview

None

Taiwan Semiconductor Manufacturing Co.  |  Call: July 16, 2026 at 2:00 AM ET  |  ~$1.95T market cap  |  Preview date: June 5, 2026

Earnings Call

Jul 16

2:00 AM ET — 41 days away

Q2 Revenue Guide

$39.0–40.2B

+32% YoY at midpoint · +10% QoQ

Consensus EPS

$3.78/ADR

+53% YoY · Consensus above guide midpoint

Beat Rate (12 quarters)

100%

Avg EPS beat +9.6% · 12/12 consecutive

Q2 2026 GM Guide

65.5–67.5%

Q1 2026 actual: 66.2% · N3 crossing corp avg in H2

FY2026 Revenue Guide

>+30%

USD growth · Consensus ~$164B (+34% YoY)

FY2026 CapEx Budget

$52–56B

+35% vs. FY2025 $40.9B · Record spend

HPC Revenue Share

~61%

Q1 2026 · AI accelerator CAGR raised to 54-56%

Investment Setup: Q3 2026 Guidance is the Market-Moving Print. Margin Sustainability and AI Demand Durability are the Swing Factors.

1. Q3 2026 Revenue Guidance (most important data point): Consensus expects ~$42-44B (+7-10% QoQ). Q3 is seasonally TSMC's strongest quarter (iPhone ramp + datacenter buildouts). A guide above $44B signals sustained AI re-acceleration into the Rubin ramp and H2 product cycles. A guide below $41B would raise demand deceleration concerns and likely trigger a -5 to -8% reaction. Management has beaten guidance midpoint in 7/7 quarters.

2. Gross Margin Sustainability Above 65%: Q1 2026 delivered 66.2% — a new record. Q2 is guided 65.5-67.5%. N3 is expected to cross above corporate average profitability in H2 2026, a structural tailwind. However, N2 ramp dilution (2-3% full-year) and overseas fab costs (2-4%) are embedded headwinds. Every 100bps of GM = ~$0.12-0.14 EPS at current revenue run-rate. The 15% price hike on 3nm in H2 2026 is the key offset to watch.

3. AI Demand Durability — Agentic AI Driving Token Volume Explosion: C.C. Wei explicitly framed the shift from generative AI to agentic AI as "another step up in token consumption." Hyperscaler CapEx at $725B (+77% YoY) with no pullback signals. NVIDIA's $95B+ in purchase obligations to TSMC. The question is whether this demand is structural or cyclical — management's June 4 AGM comment that supply shortage will last "years" is the strongest signal yet.


Q2 2026 Guidance vs. Consensus
None

Guidance provided at Q1 2026 earnings call (April 16, 2026). Q2 2026 revenue not yet pre-released.

Metric Guide Low Guide High Guide Mid Consensus
Revenue (USD$B) $39.0B $40.2B $39.6B ~$40.1B
Gross Margin (%) 65.5% 67.5% 66.5% ~66.8%
Operating Margin (%) 56.5% 58.5% 57.5% ~57.8%
EPS ADR (diluted USD) $3.78
Revenue YoY Growth +31.6% ~+33.2%

Consensus sits at the high end of guidance — $40.1B vs. $39.6B midpoint. This reflects TSMC's established pattern of conservative guidance: the company has beaten its own revenue midpoint in 7/7 quarters, with an average beat of +2.4%. Gross margin consensus at 66.8% implies the Street expects another beat above the 66.5% midpoint.

Q3 2026 Scenario Sequential Growth Q3 2026 Revenue Market Read
Bear +3% ~$41.0B Demand deceleration signal — stock -5 to -8%
In-Line +7–8% ~$42.5–43.0B Stock flat to +3% — meets seasonal expectations
Bull +10% ~$44.0B AI re-acceleration into Rubin ramp — stock +5 to +8%
Strong Bull +12%+ $45B+ Blowout demand; FY raise likely — stock +8 to +12%

Key Metrics — 10 Quarters
None

Revenue (USD$B) — Quarterly

Quarter Revenue YoY %
Q1 2024 18.87
Q2 2024 20.82
Q3 2024 23.50
Q4 2024 26.88
Q1 2025 25.53 +35.3%
Q2 2025 30.07 +44.4%
Q3 2025 33.10 +40.9%
Q4 2025 33.73 +25.5%
Q1 2026 35.90 +35.1%
Q2 2026E $39.0–40.2B +30–34% YoY

Revenue trajectory: +35.3%, +44.4%, +40.9%, +25.5% (base effect), +35.1%, then guided +32% — AI demand trajectory unbroken through 6 consecutive quarters of 25%+ YoY growth.


Margins — Gross & Operating (%)

Quarter Gross Margin Operating Margin
Q1 2024 53.1% 42.0%
Q2 2024 53.2% 42.5%
Q3 2024 57.8% 47.5%
Q4 2024 59.0% 49.0%
Q1 2025 58.8% 48.5%
Q2 2025 58.6% 49.6%
Q3 2025 59.5% 50.6%
Q4 2025 62.3% 54.0%
Q1 2026 66.2% 58.1%
Q2 2026E 65.5–67.5% (guided) 56.5–58.5% (guided)

Gross margin expanded 1,310 bps from Q1 2024 (53.1%) to Q1 2026 (66.2%). TSMC has beaten GM guidance midpoint in 7/7 quarters with an average beat of +189 bps. The 15% price hike on 3nm in H2 2026 is a structural tailwind.


EPS — ADR Diluted USD

Quarter EPS YoY %
Q1 2024 $1.38
Q2 2024 $1.48
Q3 2024 $1.94
Q4 2024 $2.24
Q1 2025 $2.12 +53.6%
Q2 2025 $2.47 +66.9%
Q3 2025 $2.92 +50.5%
Q4 2025 $3.14 +40.2%
Q1 2026 $3.49 +64.6%
Q2 2026E $3.78 +53.0% YoY est.

FY2025 EPS: $10.65 ($2.12 + $2.47 + $2.92 + $3.14). FY2026 consensus: ~$15.28 (+43.6% YoY). Quarterly build: Q1 $3.49 (actual) + Q2E $3.78 + Q3E ~$4.10 + Q4E ~$4.30 = ~$15.67.


Platform Revenue Mix (%)

Quarter HPC (AI/DC) Smartphone Automotive IoT
Q2 2024 52% 33% 5% 6%
Q3 2024 51% 34% 5% 7%
Q4 2024 53% 35% 4% 5%
Q1 2025 59% 28% 5% 5%
Q2 2025 60% 27% 5% 5%
Q3 2025 59% 28% 5% 5%
Q4 2025 53% 35% 4% 5%
Q1 2026 61% 26% 4% 6%
Q2 2026E ~59-62% ~27-29% ~4-5% ~5-6%

HPC share hit 61% in Q1 2026 — the highest ever outside of Q4 seasonal patterns. AI accelerator CAGR raised to 54-56% (from mid-40s%). Smartphone likely ticks up sequentially as Apple begins new product ramp. Auto remains muted on legacy nodes.


Set Up Analysis
None

Management Tone Trajectory: Peak Bullish and Accelerating

Quarter Tone Key Message
Q2 2025 (Jul) Positive AI CAGR "mid-to-high 50%" through 2029; N3 demand exceeding supply; "very strong" demand
Q3 2025 (Oct) Strongly Positive N2 yields tracking ahead; AI share rising; "megatrend is real"; tariff uncertainties mentioned
Q4 2025 (Jan) Most Confident in Years N2 in HVM; FY2026 +30% revenue; CapEx $52-56B; "unprecedented AI demand"; $50B Arizona investment
Q1 2026 (Apr) Peak Bullish "Extremely robust" AI demand; agentic AI driving token explosion; AI CAGR raised to 54-56%; record 66.2% GM

Bull / Bear Factor Analysis — Entering July 16

Factor Bull Read Bear Read Tilt
AI Demand / Hyperscaler CapEx $725B hyperscaler CapEx (+77% YoY); NVIDIA $95B+ purchase obligations; no pullback signals Potential inventory digestion in late 2026/early 2027 STRONG BULL
Gross Margin Trajectory N3 crossing corporate avg in H2; 15% price hike on 3nm; CoWoS becoming profit driver N2 ramp dilution 2-3%; overseas fab costs 2-4%; FX headwind possible BULL
N2 Node Ramp Yields 65-75% and improving; 70+ tape-outs; "strongest ever customer adoption"; all 2026 capacity booked Dilutes GM 2-3pp in FY2026; ramp costs front-loaded BULL
Arizona Fab Economics Fab 1 profitable; yields surpass Hsinchu by 4pp; $20B capital injection approved Structural cost premium vs. Taiwan; 30% leading-edge target "slipping out of reach" BULL
Competitive Moat Samsung yields struggling; Intel foundry subscale; MediaTek rejected Samsung bundled offer Customer diversification discussions (Apple/Samsung/Intel) BULL
Beat Track Record 100% beat rate over 12 quarters; avg EPS beat +9.6% Street has raised consensus — bar is higher; stock near 52-week highs BULL
Geopolitical / Tariffs Arizona investment provides tariff hedge; semiconductor tariffs largely exempt domestic use China developing alternatives (Hua Hong 7nm, Huawei Ascend); Taiwan concentration risk NEUTRAL
Pricing Power 15% 3nm hike in H2 2026; 5-10% more in 2027; Wei confirmed intent at AGM Wei also said TSMC will "refrain from suddenly raising prices" — strategic restraint BULL

Guidance Pattern — 7 Consecutive Quarters of Beats
None

Revenue: Guidance vs. Actual — Last 7 Quarters

Quarter Guided Range Midpoint Actual Beat ($B) Beat %
Q3 2024 $22.4–23.2B $22.80B $23.50B +$0.70B +3.1%
Q4 2024 $26.1–26.9B $26.50B $26.88B +$0.38B +1.4%
Q1 2025 $25.0–25.8B $25.40B $25.53B +$0.13B +0.5%
Q2 2025 $28.4–29.2B $28.80B $30.10B +$1.30B +4.5%
Q3 2025 $31.8–33.0B $32.40B $33.10B +$0.70B +2.2%
Q4 2025 $32.2–33.4B $32.80B $33.73B +$0.93B +2.8%
Q1 2026 $34.6–35.8B $35.20B $35.90B +$0.70B +2.0%
Q2 2026 $39.0–40.2B $39.60B TBD Jul 16

Average Revenue Beat (last 7Q): +$0.69B / +2.4% above midpoint. Beat magnitude has expanded — the trailing 4Q average is +2.9% vs. +1.7% for the prior 3Q. Applying the historical beat to Q2 2026 guidance midpoint implies ~$40.5-41.0B actual revenue.

Gross Margin: Guidance vs. Actual — Last 7 Quarters

Quarter Guided Range Midpoint Actual Beat (bps)
Q3 2024 53.5–55.5% 54.5% 57.8% +330 bps
Q4 2024 57.0–59.0% 58.0% 59.0% +100 bps
Q1 2025 57.0–59.0% 58.0% 58.8% +80 bps
Q2 2025 57.0–59.0% 58.0% 58.6% +60 bps
Q3 2025 55.5–57.5% 56.5% 59.5% +300 bps
Q4 2025 59.0–61.0% 60.0% 62.3% +230 bps
Q1 2026 63.0–65.0% 64.0% 66.2% +220 bps
Q2 2026 65.5–67.5% 66.5% TBD Jul 16

Average GM Beat (last 7Q): +189 bps above midpoint. Applying the pattern to Q2 2026 implies ~68.0-68.5% actual GM — which would be a new all-time high driven by N3 margins crossing corporate average and favorable HPC/AI mix.


Key Catalysts — July 16, 2026 Call
None
Catalyst Timing Consensus Expectation Signal / Evidence Impact
Q3 2026 Revenue Guidance July 16 ~$42.5-44.0B (+7-10% QoQ) Q3 seasonally strongest; iPhone ramp + Rubin + datacenter buildouts TIER 1
Gross Margin Sustainability July 16 66.5-67.5% guided; consensus 66.8% N3 crossing corp avg in H2; 15% 3nm price hike; CoWoS at 7nm ASP levels TIER 1
N2 Ramp Update July 16 Yields 75-80%; all 2026 capacity booked 70+ tape-outs; Apple, NVIDIA, AMD, Google, Amazon confirmed; premium ~$30K/wafer ASP TIER 2
AI/HPC Revenue Share July 16 ~59-62% of Q2 wafer revenue Q1 hit 61%; AI accelerator CAGR raised to 54-56%; agentic AI driving token surge TIER 2
CoWoS Capacity Update July 16 Targeting 130K WPM by year-end 2026 Nearly 4x from 2023 levels; AP7 Chiayi becoming world's largest packaging hub TIER 2
FY2026 Guidance Reaffirmation July 16 >+30% USD revenue — unequivocal language Wei reiterated at June 4 AGM; consensus at ~$164B (+34% YoY) TIER 2
Pricing Strategy Commentary July 16 15% 3nm hike in H2 2026 confirmed Wei confirmed pricing intent at AGM; supply-demand gap persists "years" TIER 3
Arizona Fab Progress July 16 Fab 2 tool install Q3 2026; production H2 2027 $20B capital injection approved May; Fab 1 profitable; yields exceed Taiwan TIER 3
CapEx FY2026 Update July 16 $52-56B (guided Q4 2025, reiterated Q1 2026) Consensus $54B; any raise signals demand exceeding plan TIER 3
Customer Product Launches (H2) July 16 iPhone 17 (3nm), Rubin (N3), AMD MI400 (N2) Multiple product cycles converging in H2 2026 across mobile, HPC/AI, and PC TIER 3

Tier 1 Alert: Q3 Revenue Guidance and Gross Margin Are the Market-Moving Prints

Q3 guide below $41B = demand deceleration concern (-5 to -8%). $42-43B = in-line to modest beat. Above $44B = AI re-acceleration signal (+5 to +10%). Gross margin at or above 67.5% (top of guide) would signal structural margin expansion above consensus. Any guide below 65% would be a negative surprise.

Peer Calendar — Critical Read-Throughs

Date Ticker Company Period Relevance
Jul 15, 2026 ASML ASML Holding Q2 2026 1 DAY BEFORE — WFE demand; EUV order book; direct N2/A16 capex read-through
Jul 23, 2026 INTC / Samsung Intel / Samsung Q2 2026 Foundry competition update; Samsung 2nm yields; Intel external customer wins
~Aug 4, 2026 AMD Advanced Micro Q2 2026 Key HPC/AI customer on N3/N2 nodes; MI400 ramp timing
Aug 26, 2026 NVDA NVIDIA FQ2 FY2027 Largest HPC customer; Rubin ramp; AI GPU demand — reports 6 weeks after TSM
Sep 2, 2026 AVGO Broadcom FQ3 2026 Custom ASIC (Google TPU, Meta MTIA); guided $29.4B (+84% YoY) for FQ3

News Flow — April 16 to June 5, 2026
None
Date Headline Detail Thesis Impact
Apr 22 TSMC Unveils Roadmap Through 2029; A16 Delayed to 2027 A12, A13, N2U announced at North America Technology Symposium. No High-NA EUV through 2029 (cost-positive). A16 volume production pushed from H2 2026 to 2027. Neutral — A16 delay widely telegraphed; cost discipline on High-NA EUV is positive
Apr 28 CoWoS Wafer ASP Reportedly Nears 7nm Levels Advanced packaging becoming a key profit driver, not just a cost center. Validates margin contribution from packaging. Positive — CoWoS as margin contributor strengthens bull thesis
May 8 April Revenue: NT$410.7B (+17.5% YoY) — 2nd Highest Month Ever Slowest YoY growth in ~6 months, but strong absolute level. In-line with Q2 guidance midpoint run-rate. Neutral — deceleration reflects tough comp (Apr 2025 was strong), not demand weakness
May 12 Board Approves $20B Capital Injection into Arizona Subsidiary Massive funding commitment for US expansion. Signals confidence in Arizona economics and demand outlook. Positive — Arizona commitment deepens US positioning and tariff hedge
May 16 Japan Fab (JASM/Kumamoto) Posts First Quarterly Profit NT$951M profit in Q1 2026 after NT$1.39B loss in Q4 2025. Turnaround validates Japan economics. Positive — neutralizes overseas fab dilution bear argument
May 19 Arizona Fab Posts $514M Profit; Q1 Alone Exceeds Full-Year 2025 Yields reportedly surpass Hsinchu by 4 percentage points. Shatters narrative that overseas fabs can't be profitable. Strongly Positive — transforms Arizona from margin headwind to contributor narrative
May 27 TSMC Planning 15% Price Hike on 3nm in H2 2026; Further 5-10% in 2027 Strong pricing power driven by AI/ASIC demand. Direct gross margin tailwind starting Q3-Q4 2026. Strongly Positive — direct margin catalyst; validates structural pricing power
Jun 1 TSM Surges >5% to Record High; Market Cap Exceeds $2.28T Catalyzed by NVIDIA new AI chip launch and expected 3nm price hikes. 6th most valuable company globally. Positive — market endorsement of structural growth thesis
Jun 3 Broadcom Reports FQ2: Revenue $22.2B (+48% YoY); Guides FQ3 $29.4B (+84%) Freshest AI/DC read-through ahead of TSMC. Custom ASIC demand (Google TPU, Meta MTIA) validating AI silicon spend. Strongly Positive — hyperscaler AI demand re-acceleration confirmed
Jun 4 C.C. Wei at AGM: Supply Shortage Will Last "Years"; >30% Growth Reiterated Strongest supply constraint language to date. Pricing discipline confirmed. Robotics and autonomous driving flagged as new growth drivers. Strongly Positive — multi-year demand visibility; structural supply-demand gap reinforced
Jun 5 WSTS Forecasts Global Semiconductor Market at $1.51T in 2026 +90% YoY driven by memory surge. TSMC positioned as primary beneficiary of logic/advanced node demand. Positive — rising tide for the industry; TSMC captures outsized share

Key Newsflow Takeaway

Since the Q1 2026 earnings call, the news flow has been overwhelmingly positive. The biggest surprises were overseas fab profitability (Arizona Fab 1 yields exceeding Taiwan, Japan turning profitable) and the aggressive 15% 3nm pricing posture. Broadcom's June 3 report with a $29.4B Q3 guide (+84% YoY) is the freshest validation of AI demand heading into TSMC's print. Wei's June 4 AGM comment that supply shortage will last "years" is the strongest demand signal in the current AI cycle. No material negative developments.


Beat / Miss Track Record — 12 Consecutive Beats
None
Quarter Date Rev Actual Rev Beat % EPS Actual EPS Beat % Signal
Q2 2023 Jul 20, 2023 $15.68B +0.5% NT$7.01 +5.4% BEAT
Q3 2023 Oct 19, 2023 $17.28B +1.1% NT$8.14 +10.3% BEAT
Q4 2023 Jan 18, 2024 $19.62B +1.1% NT$9.21 +5.9% BEAT
Q1 2024 Apr 18, 2024 $18.87B +1.5% NT$8.70 +7.8% BEAT
Q2 2024 Jul 18, 2024 $20.82B +3.6% NT$9.56 +18.5% BEAT
Q3 2024 Oct 17, 2024 $23.50B +2.2% NT$12.54 +11.6% BEAT
Q4 2024 Jan 16, 2025 $26.88B +3.8% NT$14.45 +16.5% BEAT
Q1 2025 Apr 17, 2025 $25.53B +0.5% NT$13.94 +2.3% BEAT
Q2 2025 Jul 17, 2025 $30.07B +4.4% NT$15.36 +8.9% BEAT
Q3 2025 Oct 16, 2025 $33.10B +1.8% NT$17.44 +11.2% BEAT
Q4 2025 Jan 15, 2026 $33.73B +1.9% NT$19.50 +11.4% BEAT
Q1 2026 Apr 16, 2026 $35.90B +3.5% NT$22.08 +5.7% BEAT
Q2 2026E Jul 16, 2026 $40.1B cons. TBD $3.78 cons. TBD PENDING

Beat Magnitude Visual

Q2'23  Rev +0.5%  EPS  +5.4%  |  █████░░░░░░░░░░░░░░░
Q3'23  Rev +1.1%  EPS +10.3%  |  ██████████░░░░░░░░░░
Q4'23  Rev +1.1%  EPS  +5.9%  |  ██████░░░░░░░░░░░░░░
Q1'24  Rev +1.5%  EPS  +7.8%  |  ████████░░░░░░░░░░░░
Q2'24  Rev +3.6%  EPS +18.5%  |  ██████████████████░░
Q3'24  Rev +2.2%  EPS +11.6%  |  ████████████░░░░░░░░
Q4'24  Rev +3.8%  EPS +16.5%  |  █████████████████░░░
Q1'25  Rev +0.5%  EPS  +2.3%  |  ██░░░░░░░░░░░░░░░░░░
Q2'25  Rev +4.4%  EPS  +8.9%  |  █████████░░░░░░░░░░░
Q3'25  Rev +1.8%  EPS +11.2%  |  ███████████░░░░░░░░░
Q4'25  Rev +1.9%  EPS +11.4%  |  ███████████░░░░░░░░░
Q1'26  Rev +3.5%  EPS  +5.7%  |  ██████░░░░░░░░░░░░░░

12Q Revenue Beat Avg: +2.2%  |  12Q EPS Beat Avg: +9.6%  |  Pattern: 12/12 Consecutive Beats
Statistic Value
Beat Rate (Revenue & EPS) 12/12 (100%)
Average Revenue Beat % +2.2%
Average EPS Beat % +9.6%
Last 4Q Revenue Beat Avg +2.9%
Last 4Q EPS Beat Avg +9.3%
Smallest EPS Beat +2.3% (Q1 2025)
Largest EPS Beat +18.5% (Q2 2024)
Revenue/EPS Beat Multiplier 4.4x (revenue beats amplified to EPS via margin leverage)
Q2 2026 Implied Beat Scenarios Implied EPS
+5% beat (low end of recent range) ~$3.97
+9.6% beat (12Q historical avg) ~$4.14
+12% beat (recent strong quarters) ~$4.23
+18.5% beat (Q2 2024 repeat) ~$4.48
Consensus used: $3.78/ADR

Bottom Line: TSMC is the Highest-Quality Beat Machine in Large-Cap Semiconductors

100% beat rate over 12 consecutive quarters on both revenue and EPS. Revenue beats average +2.2% and EPS beats average +9.6%, with a 4.4x amplification from revenue to EPS via operating leverage and systematic margin outperformance. The setup entering July 16 is overwhelmingly positive: peak bullish management tone, hyperscaler CapEx at $725B (+77% YoY), overseas fabs now profitable, 15% 3nm price hike incoming, and Wei saying supply shortage will last "years." The question is not whether TSMC beats — it's by how much, and whether Q3 guidance triggers another leg higher. The biggest risk is that expectations are already very high (stock at $422, near 52-week highs), leaving limited room for upside surprise in the stock.

All EPS figures are TSMC ADR diluted USD EPS unless noted as NT$. Revenue in USD unless noted. Consensus estimates from Zacks, TipRanks, StockAnalysis. Preview generated June 5, 2026.