Key Takeaways:
TSMC's record quarterly profit and raised capital spending signal that AI chip demand remains far stronger than Wall Street expected, with the company now guiding for more than 40% full-year revenue growth.
"AI demand is extremely strong, and we are seeing no signs of a letdown," C.C. Wei, chairman and chief executive officer of TSMC, said on the earnings call. "Our customers continue to push for more capacity across both advanced nodes and packaging."
Net profit for the three months ended June 30 climbed to T$706.6 billion ($22 billion), the company's ninth straight quarter of double-digit percentage growth. That surpassed the average estimate of T$632.6 billion compiled by LSEG from 18 analysts. Revenue rose 36% from a year earlier to a record, following a 35.1% gain in the first quarter. Gross margin expanded to 66.2% in the first quarter from 58.9% a year earlier, with the second quarter guided in a range of 65.5% to 67.5%.
The results validate that the AI infrastructure buildout — led by TSMC's key customers Nvidia and Apple — has not peaked. TSMC's Taipei-listed shares have gained 59% this year, pushing its market capitalization to about $1.97 trillion, nearly double that of South Korean rival Samsung Electronics. The company now expects 2026 capital expenditure between $60 billion and $64 billion, up from a prior range of $52 billion to $56 billion, and pledged an additional $100 billion for its Arizona fab complex, bringing total planned US investment to $265 billion.
The earnings beat was driven by sustained demand for TSMC's 3-nanometer and 2-nanometer (N2) process technologies, which pack more transistors per square millimeter to improve performance per watt for AI workloads. The company's high-performance computing platform, which includes AI solutions, generated 61% of first-quarter revenue, while smartphones accounted for 26%. N2 began high-volume manufacturing in the fourth quarter of 2025 and is ramping at two sites, supported by demand from smartphone, AI and high-performance computing customers.
TSMC's advanced chip packaging technology, CoWoS (chip-on-wafer-on-substrate), remains a critical bottleneck in the AI supply chain. Nvidia has booked roughly 60% of TSMC's CoWoS capacity through 2026, according to industry analysts. TSMC is addressing the constraint by building packaging facilities in Arizona and ramping two new packaging plants in Taiwan. Dutch equipment supplier ASML, whose lithography machines are essential for producing TSMC's advanced nodes, raised its own 2026 sales forecasts this week, further confirming the strength of the semiconductor upcycle.
For the current quarter, TSMC forecast sales between $44.6 billion and $45.8 billion, up from $33.1 billion a year earlier. The company's full-year revenue in US dollar terms will increase by slightly more than 40%, compared with a previous forecast of more than 30%.
The raised guidance and capital spending boost suggest TSMC's management sees no near-term slowdown in AI chip demand. For investors, the key question is whether TSMC can maintain gross margins above 65% as N2 ramp costs and overseas fab expansion dilute profitability by an estimated 2% to 3% this year. Analysts project full-year 2026 earnings per share of $15.91, a 49% improvement over 2025, according to consensus estimates.
This article is for informational purposes only and does not constitute investment advice.
