Financial Trends -- 9/10

One of the cleanest financial-trend profiles in large-cap tech. Revenue re-accelerating to +40.6% YoY in Q1'26 ($35.9B), gross margin up +1,310 bps off trough to a record 66.2%, operating margin up +1,610 bps to 58.1% -- driven by the AI/HPC mix shift (HPC now 61% of revenue) and pricing power into sold-out advanced-node capacity. FCF positive every quarter and YoY-accelerating (~$11.0B Q1'26, +22.9%) even while funding a ~$41B/yr capex cycle. Share count flat (no dilution); net-cash balance sheet. No penalty modifiers. Weight: 25%

Q1'26 Revenue

$35.9B

src | +40.6% YoY | Re-accelerating

Gross Margin

66.2%

+1,310 bps off trough | Record

FCF

Growing

~$11.0B Q1'26, +22.9% YoY | Strong

Share Count

Flat

~25,930M diluted | No dilution

Quarterly Revenue Trajectory (USD)

Quarter	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26
Revenue (USD)	$20,820M	$23,500M	$26,880M	$25,530M	$30,070M	$33,100M	$33,730M	$35,900M
YoY	+32.6%	+35.8%	+37.1%	+35.3%	+44.4%	+40.9%	+25.5%	+40.6%

Growth high and re-accelerating: mid-30s-to-40s% for 8 straight quarters. The Q4'25 dip to +25.5% was a base effect (tough comp vs +37% prior); Q1'26 snapped back to +40.6%. Holding this rate at TSMC's scale is exceptional, driven by AI-accelerator demand pulling leading-edge wafers and pricing power into sold-out advanced nodes.

Margin Expansion -- Gross & Operating (GAAP)

Metric	Q1'24 (trough)	Q1'25	Q1'26	Off Trough
Gross Margin	53.1%	58.8%	66.2%	+1,310 bps
Operating Margin (GAAP)	42.0%	48.5%	58.1%	+1,610 bps
HPC / AI Mix	46%	59%	61%	+15 pts

Structural margin expansion, +740 bps of gross margin in Q1'26 alone. The AI/HPC mix shift (HPC 46% to 61% of revenue), pricing power into sold-out advanced nodes, and high utilization more than outweigh N3 and overseas-fab ramp dilution. TSM reports GAAP only -- there is no separate Non-GAAP operating margin.

Annual Financial Summary (FY ends December, USD)

Metric	FY2022	FY2023	FY2024	FY2025
Revenue (USD)	$75,881M	$69,298M	$90,083M	$122,424M
Rev YoY	—	-8.7%	+30.0%	+35.9%
Operating Cash Flow	$53,984M	$39,813M	$56,839M	$73,118M
Capex	($36,289M)	($30,448M)	($29,755M)	($40,895M)
Free Cash Flow	~$17,700M	~$9,370M	~$27,080M	~$32,220M
FCF YoY	—	-47%	+189%	+19%
Total Bond Debt	$27.8B	$30.0B	$30.1B	$31.6B
Diluted Shares (M)	25,929.4	25,929.3	25,929.6	25,930.6

Key trends

Revenue compounding through a full cycle: A -8.7% memory/PC-driven trough in 2023 gave way to +30.0% (2024) and +35.9% (2025); now re-accelerating to +40.6% in Q1'26 on AI/HPC demand
Margins expanding structurally: Gross margin +1,310 bps and operating margin +1,610 bps off the Q1'24 trough, driven by AI/HPC mix and advanced-node pricing power
FCF positive and growing: ~$32.2B in FY2025 (+19% YoY) after a +189% snap-back in 2024, all while funding a ~$41B/yr capex cycle
Debt growing far slower than revenue: total bond debt +4.9% in 2025 vs revenue +35.9%; net-cash balance sheet (net debt/EBITDA -0.68x)
Share count flat: ~25,930M diluted shares, essentially unchanged for four years -- no buyback, but no dilution

Technology-Node Mix (where the moat lives)

Node	Q1'25	Q1'26	Note
3nm (N3)	22%	25%	Rising; highest-value leading node
5nm (N5)	—	36%	Held steady; core AI/mobile node
Advanced (≤7nm)	—	~74%	Of wafer revenue; TSMC controls >90% of all such output

Advanced nodes (7nm and below) are ~74% of wafer revenue. These are the only nodes that can fabricate cutting-edge AI accelerators and flagship SoCs, and TSMC controls more than 90% of all such output. The node mix is both the growth engine and the source of the pricing power behind the margin expansion above.

Free Cash Flow -- Positive Every Quarter (USD)

Metric	Q1'24	Q1'25	Q4'25	Q1'26
Operating CF	$13,894M	$19,027M	$23,379M	$22,125M
Capex	($5,774M)	($10,062M)	($11,507M)	($11,103M)
Free Cash Flow	~$8,120M	~$8,965M	~$11,872M	~$11,022M
FCF YoY	—	+10.4%	—	+22.9%

FCF positive every quarter and YoY-accelerating. ~$11.0B in Q1'26 (+22.9% YoY); Q4'25 ~$11.9B (+48.5% YoY). Quarterly FCF margin is lumpy (14.6%-35.2% across the last 8 quarters), but that swing is capex timing, not cash-conversion deterioration -- FCF generation remains strong through a near-record capex cadence.

Blemishes -- Minor, Against a Near-Ideal Profile

Blemish	Detail	Penalty
No Share Retirement	Share count flat rather than declining, so it misses the literal "share count declining" leg of the 10-anchor. No dilution, though.	None
Rising Capex Intensity	~$41B in 2025, guided to $52-56B in 2026; structurally caps FCF conversion and makes quarterly FCF margin volatile (14.6%-35.2%).	None

Score Rationale

Score of 9/10 reflects a near-textbook accelerating-growth, expanding-margin, growing-FCF setup. No penalty modifiers applied.

Supports 9/10:

Revenue high and re-accelerating to +40.6% YoY in Q1'26; held in the mid-30s-to-40s% range for 8 straight quarters
Gross margin +1,310 bps and operating margin +1,610 bps off the Q1'24 trough (record 66.2% / 58.1%)
FCF positive every quarter and YoY-accelerating (~$11.0B Q1'26 +22.9%; FY2024 +189%, FY2025 +19%)
Share count flat (no dilution); debt growing far slower than revenue on a net-cash balance sheet
Diluted EPS accelerating: NT$8.70 (Q1'24) to NT$22.08 (Q1'26), +58% YoY

Why not a perfect 10 (quibbles, no penalty):

Company does not retire shares -- share count is flat, not declining
Rising capex intensity caps FCF conversion and makes quarterly FCF margin lumpy (14.6%-35.2%) -- a timing effect, not deterioration

Composite quality gate -- positiveGrowingFcf: YES. FCF positive every quarter and YoY-accelerating; ~$32.2B in FY2025 (+19%).

Data sourced from Daloopa (company_id: 911). Fiscal year ends December 31. Revenue/cash-flow in USD; EPS in NT$; margins reported %.