TSM | Earnings Review
Taiwan Semiconductor Manufacturing Company | 2026Q2 reported July 16, 2026 | Analysis date: July 19, 2026 | Daloopa company_id 911
EPS Beat
+12.8%
$4.31 ADR vs $3.82 Street — largest surprise in 12Q; +77.4% YoY (NT$27.25)
Revenue
$40.2B
Top end of $39.0-40.2B guide; +0.9% vs Street; +33.7% YoY USD / +36.0% NT$
Gross Margin
67.7%
Record; above 65-67% guide; +910 bps YoY, +150 bps QoQ
FY2026 Guide
Above 40%
Raised from >30% USD; Q3 +12% QoQ / +37% YoY; capex to $60-64B
TSM delivered a clean, high-quality beat and raised nearly everything that matters. Revenue of $40.2B landed at the top of the $39.0-40.2B guide (+33.7% YoY USD, +36.0% NT$), gross margin hit a record 67.7% (above the 65-67% guide, +910 bps YoY), and diluted EPS of NT$27.25 (NT$706.6B net income) grew +77.4% YoY — the +12.8% ADR EPS surprise was the largest in 12 quarters. Management lifted the FY2026 revenue-growth guide from "above 30%" to "slightly above 40%" (USD), raised 2026 capex to $60-64B, hiked the dividend +33% to NT$24, and announced +$100B of incremental Arizona investment. The single caveat that worsened: 2nm ramp dilution to gross margin widened to 3-4pp in 2H. Read: decelerating on the surface (tough comp + TWD strength), accelerating underneath (record margins, +77% EPS, re-accelerating NT$ revenue).
What is new this quarter
| Theme | What changed |
|---|---|
| FY2026 revenue guide | Raised from "above 30%" to "slightly above 40%" (USD) — third upward revision in six months. |
| Capex | Lifted to $60-64B (from ~$56B high end); next 3 yrs "even more significantly higher." Driven by demand pull + tool inflation. |
| Mix | HPC rose to 66% of revenue (+20% QoQ); advanced nodes (7nm and below) at 77% of wafer revenue; 3nm a record 30%; 2nm entered at 3%. |
| Tone | Materially more confident QoQ — AI conviction "very high," demand "extremely robust." Q1's Middle East / materials-supply risk retired. |
| Caveat (worse) | 2nm ramp GM dilution widened to 3-4pp in 2H (from "2-3% full-year"); overseas-fab dilution 2-3% early → 3-4% at scale. |
| Contradiction | Competition is "not a consideration" (Q1) then "number one" (Q2) in capacity planning — one confirmed cross-quarter reversal (see below). |
| Capital return | Dividend hiked +33% to NT$24/sh; committed to further increases in 2027. |
| Next catalyst | ~mid-Oct 2026 Q3 print (guide $44.6-45.8B, +37% YoY); Jan-2027 possible AI-CAGR and 3-yr capex-guide upside. |
Key Metrics Trends
Nine-quarter trend. Revenue on TSM's reported USD net-revenue line; EPS on native NT$. YoY shown from 25Q1 (first quarter with a same-quarter prior-year base in this window).
| Metric | 24Q2 | 24Q3 | 24Q4 | 25Q1 | 25Q2 | 25Q3 | 25Q4 | 26Q1 | 26Q2 |
|---|---|---|---|---|---|---|---|---|---|
| Revenue (USD) | $20.8B | $23.5B | $26.9B | $25.5B | $30.1B | $33.1B | $33.7B | $35.9B | $40.2B |
| Revenue YoY % (USD) | - | - | - | +35.3% | +44.4% | +40.8% | +25.5% | +40.6% | +33.7% |
| Gross margin | 53.2% | 57.8% | 59.0% | 58.8% | 58.6% | 59.5% | 62.3% | 66.2% | 67.7% |
| Gross margin YoY (bps) | - | - | - | +570 | +540 | +170 | +330 | +740 | +910 |
| Operating margin | 42.5% | 47.5% | 49.0% | 48.5% | 49.6% | 50.6% | 54.0% | 58.1% | 60.3% |
| Diluted EPS (NT$) | $9.56 | $12.54 | $14.45 | $13.94 | $15.36 | $17.44 | $19.50 | $22.08 | $27.25 |
| Diluted EPS YoY % | - | - | - | +60.2% | +60.7% | +39.1% | +34.9% | +58.4% | +77.4% |
| HPC revenue mix | 52% | 51% | 53% | 59% | 60% | 57% | 55% | 61% | 66% |
Record gross margin 67.7% (+910 bps YoY) and +77.4% EPS growth on +33.7% USD revenue — a ~44-point EPS-over-revenue spread from margin expansion, utilization and advanced-node pricing. Data sourced from Daloopa.
Beat / Miss — Last 8 Quarters (EPS, ADR/USD)
| Quarter | Est EPS | Actual EPS | Surprise | Result |
|---|---|---|---|---|
| 2026Q2 ← this quarter | $3.82 | $4.31 | +12.8% | BEAT (largest in 12Q) |
| 2026Q1 | $3.31 | $3.49 | +5.4% | BEAT |
| 2025Q4 | $2.90 | $3.09 | +6.6% | BEAT |
| 2025Q3 | $2.63 | $2.92 | +11.0% | BEAT |
| 2025Q2 | $2.38 | $2.50 | +5.0% | BEAT |
| 2025Q1 | $2.07 | $2.14 | +3.4% | BEAT |
| 2024Q4 | $2.20 | $2.19 | -0.5% | MISS (razor-thin) |
| 2024Q3 | $1.79 | $1.95 | +8.9% | BEAT |
Last 4 Quarters
4 / 4 · 100%
Avg EPS surprise ~+9.0%
Last 12 Quarters
11 / 12 · 91.7%
Avg ~+6.3%; only miss was 2024Q4 (-0.5%)
Magnitude Trend
Improving
Recent 4Q ~+9.0% vs prior 4Q ~+4.2%
Consistent beater with improving magnitude — beats are getting bigger, not just more frequent, as the AI/HPC mix lifts revenue and margin above conservatively-set guidance. Consensus/surprise from FMP (ADR/USD); actuals from Daloopa.
Guidance Deep Dive
| Metric | Prior (Apr/Jan) | New Guide (Jul) | vs Consensus | Signal |
|---|---|---|---|---|
| Q3 2026 revenue (USD) | n/a (guides 1Q out) | $44.6B-$45.8B (mid $45.2B) | ~+2.7% above | +12% QoQ / +37% YoY |
| Q3 2026 gross margin | n/a | 65-67% (mid 66%) | ~in line | -170 bps QoQ on 2nm ramp |
| FY2026 revenue growth (USD) | "above 30%" (~31%) | "slightly above 40%" (~41%) | ~in line (~+41%) | Third raise in 6 months |
| FY2026 capex (USD) | high end of $52-56B | $60B-$64B (mid $62B) | n/a | +$6B; demand + tool inflation |
| 2H26 GM dilution — 2nm | 2-3% full-year | 3-4pp in 2H | n/a | Only caveat that worsened |
| Dividend / share (NT$) | 18 (2025 actual) | 24 (+33% YoY) | n/a | Concrete capital-return step-up |
Guidance-change waterfall
Three consecutive upward revisions in six months on both revenue growth and capex. Guidance implies revenue RE-ACCELERATION into 2H (implied ~+50% Q4) while GM steps down sequentially on widened 2nm dilution. Sourced from FY2026Q2 / FY2026Q1 transcripts; revenue-guide range cited to Daloopa.
Historical Performance & Inflection Points
Revenue YoY peaks at +44.4% (Q2'25), bottoms at +25.5% (Q4'25) on a hard prior-year comp, then re-accelerates to +40.6% (Q1'26) and settles at +33.7% (Q2'26). The single most important read: the Q4'25 deceleration was a base effect, not a demand crack — growth snapped right back the next quarter. EPS YoY plateaus in the ~54-61% band through Q2'25, dips to +34.9% (Q4'25), then surges to a series-high +77.4% (Q2'26). EPS has outrun revenue in every one of the last eight quarters and the gap is widening — margin expansion (gross margin high-50s% to 67.7%) plus utilization and advanced-node pricing compounding on volume. Net: decelerating on the surface, accelerating underneath. Data sourced from Daloopa (company_id 911).
Key Catalysts
| Catalyst | Timing | Consensus / Watch | Implication |
|---|---|---|---|
| Q3 2026 print (next report) | ~mid-Oct 2026 | Guide $44.6-45.8B (+37% YoY); Street revised up post-Q2 | Watch for another beat + FY raise |
| 2nm (N2) steep volume ramp | 2H26 → 200k wpm 2027 | Biggest volume driver AND main margin drag (-3-4pp 2H26) | 3% of wafer revenue in Q2; Apple/Nvidia/AMD lead |
| AI 5-yr CAGR revision | Jan 2027 annual guide | Prior 'mid-to-high 50%'; Wei: 'stronger and stronger' | Formal upward revision — under-modeled upside |
| Capex / possible 3-yr guide | Jan 2027 | 2026 $60-64B; next 3 yrs 'even more significantly higher' | Reinstating a multi-year guide = strong demand signal |
| Arizona +$100B & tariff framework | Multi-year | ~4 more fabs; overseas dilution 2-3% → 3-4% at scale | Jan-2026 framework exempts AZ from Section 232 tariff |
| Advanced packaging (CoWoS) capacity | Tight now | Packaging is 'limiting my customers' growth' today | Real gating constraint on 2027 AI revenue |
| Agentic-AI / CPU resurgence | Emerging, multi-year | x86/Arm/RISC-V 'almost all TSMC customers' | New TAM not fully in Street models |
| Mature-node / consumer softness | Ongoing | Consumer / price-sensitive 'challenged'; smartphone -4% QoQ | Clearest near-term downside watch |
The bull case is management-led and not yet fully Street-believed (agentic-AI CPU, AI-CAGR and capex-guide upside). Downside is bounded to self-inflicted 2nm + overseas-fab margin dilution; CoWoS packaging is the real gating constraint. Sourced from FY2026Q2 transcript + web search.
Street Q&A
Q&A Pairs
24
12 distinct analysts
Well Answered
12
Substantive on every qualitative topic
Deflected
12
Every forward number withheld (evasive-positive)
| Analyst | Question | Management response | Assessment |
|---|---|---|---|
| Charlie Chan (MS) | Foundry competition — Samsung, Intel, ASML EUV; losing slots? | "No shortcuts" — tech, manufacturing, trust are the moat. | Well answered |
| Gokul Hariharan (JPM) | Foundry less profitable than memory — pricing philosophy? | Trustable partner; jealous of memory 86% GM; "~68% I'd be happy." | Well answered |
| Felix Pan (KGI) | Where is the ~$10B capex-guide upside coming from? | Two reasons: demand continues to increase; tool inflation. | Well answered |
| Sunny Lin (UBS) | 3-year capex outlook like the 2021 super-cycle? | "We do not have a number" — but 'even more significantly higher.' | Deflected (positive) |
| Charlie Chan (MS) | Update to 5-yr AI-semi revenue CAGR? | "Not a number, but stronger and stronger... stronger than before." | Deflected (positive) |
| Robert Sanders (DB) | Is unconstrained 3nm-and-below demand 30-50% above supply? | "We don't have a number to share... the gap is very big." | Deflected (positive) |
| Jim Fontanelli (Arete) | Customer-concentration risk — top-5 exposure at record high? | "That's not our concern." Dismissed the premise. | Deflected (red flag) |
Management was substantive on every qualitative topic (moat vs Samsung/Intel, capacity philosophy, packaging strategy, ~68% GM pricing aspiration) but systematically declined ALL forward quantification — 3-yr capex, 5-yr AI CAGR, multi-year growth, 3nm demand/supply gap, Arizona timeline, packaging capex split. Notably the dodges were evasive-POSITIVE: every declined number came with 'bigger/stronger than before' — a bullish tell from a high-guidance-accuracy team (the classic "only management is contrarian" set-up). The one genuinely unhelpful dodge is the customer-concentration dismissal, the standing risk to flag.
Contradictions
Contradiction · Confirmed · Management-quality flag
Competition: "not a consideration" (Q1) vs. "number one" (Q2)
Statement A — FY2026Q1 call (2026-04-16), C.C. Wei to Sunny Lin (UBS)
"we prepare the capacity to meet customers' demand, not because of our competitor or not because of other considerations. The most important one is our customers' demand."
Statement B — FY2026Q2 call (2026-07-16), C.C. Wei to Gokul Hariharan (JPMorgan)
[Asked directly whether capacity expansion also considers competitive pressure] "Definitely, every time when we think about the business, we consider the competition. That's number one."
Why incompatible: Both answers respond to the same question — what inputs drive TSMC's capacity/CapEx build. A factor cannot be both "not a consideration" and "number one." Most likely message drift as competitor threats (Samsung, Intel, ASML EUV) escalated Apr→Jul, but a genuine inconsistency to reconcile with IR — the exact pattern investing-principles flags as a poor-management signal.
Apparent inconsistency · Period-mismatched · Verify
2nm GM dilution: "2-3% full-year" (Q1) vs. "3-4pp in 2H" (Q2)
Statement A — FY2026Q1 call, Wendell Huang (CFO)
"the initial ramp-up of our 2-nanometer technology will start to dilute our gross margin in the second half of this year, and we expect between 2% and 3% dilution for the full year of 2026."
Statement B — FY2026Q2 call, Wendell Huang (CFO)
"we expect the steep ramp-up of our 2 nm to dilute our gross margin by about 3 percentage points-4 percentage points in the second half of the year."
Why flagged (and why it is not a clean contradiction): The figures are quoted against different measurement periods — Q1 gave a full-year 2026 number (2-3%), Q2 gave a 2H-only number (3-4pp). Since the ramp is concentrated in 2H, a full-year 2-3% is roughly consistent with 3-4pp in 2H, so it does not numerically conflict. The issue is disclosure hygiene: switching the reference period obscures an apples-to-apples read. Worth a direct IR question; not a hard contradiction.
Guidance raises (FY revenue >30% → slightly above 40%; capex $52-56B → $60-64B) are management-flagged revisions, not contradictions. Sourced from FY2026Q2 and FY2026Q1 transcripts.
Indirect Read-Throughs
| Company / Theme | Read-through | Why it matters |
|---|---|---|
| ASML / semicap (AMAT, KLAC, LRCX) | Positive | Capex to $60-64B (70-80% advanced process) + tool inflation = more litho/WFE orders; EUV expansion validates multi-year demand |
| HBM / memory (Micron, SK Hynix, Samsung) | Positive | Memory a large, rising share of AI system cost; Wei cites memory 86% GM — pricing power confirmed |
| CPU designers — x86/Arm/RISC-V (AMD, Arm) | Positive | Agentic AI drives CPU resurgence; TSMC is ISA-agnostic and captures all of it as customers |
| Hyperscalers / CSPs | Positive | CSPs provide 'very strong signal and positive outlook'; corroborates sustained cloud AI capex |
| OSATs (ASE) / advanced packaging | Positive | CoWoS capacity-constrained; TSMC welcomes third-party packaging to offload back-end |
| Intel / Samsung (foundry) | Neutral-to-cautious | Framed as non-threatening or helpful; Intel EMIB-T a 'relief valve,' not a share-taker; newcomers dismissed |
| PMIC / sensor suppliers (analog) | Positive | AI data-center power drives PMIC and sensor shortage; rest of mature-node remains soft |
| Consumer / commodity semis | Cautious | Consumer / price-sensitive 'challenged' on rising component prices + macro; smartphone -4% QoQ, 22% of mix |
| Data-center power / grid / cooling | Watch | TSMC checking AI data-center build progress; power buildout gates AI compute deployment |
Net: bullish for the AI / leading-edge / data-center complex (ASML, HBM/memory, CPUs across all ISAs, PMIC/sensor, OSATs, hyperscaler capex), cautious on consumer / commodity semis. Competitors (Samsung, Intel, newcomers) are framed as non-threatening or actually helpful to TSMC's constrained front-end wafer business.
Reported financials and the captured revenue-guidance range sourced from Daloopa (company_id 911). Consensus EPS / surprise history from FMP (ADR/USD basis). Guidance, tone, Q&A, contradictions and read-throughs from the FY2026Q2 (2026-07-16) and FY2026Q1 (2026-04-16) earnings-call transcripts. Data sourced from Daloopa.