Taiwan Semiconductor Manufacturing Company Ltd. (TSM Quick QuoteTSM - Free Report) , also known as TSMC, is likely to beat expectations when it reports first-quarter 2026 results before the market opens on April 16.

The Zacks Consensus Estimate for first-quarter earnings is pegged at $3.29 per share, implying a 55.2% increase from the year-ago quarter’s reported number. The estimate has been revised upward by 2 cents over the past 30 days.

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Taiwan Semiconductor expects revenues between $34.6 billion and $35.8 billion. The Zacks Consensus Estimate is pegged at $35.5 billion, indicating a rise of 39.1% from the year-ago quarter’s reported actuals.

Taiwan Semiconductor has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 8.1%.

Earnings Whispers for Taiwan Semiconductor Stock

Our proven model predicts an earnings beat for TSM this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($3.40 per share) and the Zacks Consensus Estimate ($3.29 per share), is +2.77%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Taiwan Semiconductor carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Likely to Influence TSM’s Q1 Results

Taiwan Semiconductor continues to assert its dominance in the semiconductor space, benefiting from a robust industry rebound fueled by the growing prominence of artificial intelligence (AI). The surge in AI-driven applications (in manufacturing and end products) has been a significant catalyst for chipset manufacturers like TSMC. The rise of data-centric technologies, especially cloud computing, the Internet of Things (IoT) and the metaverse, has increased the demand for semiconductors, contributing to the company’s business performance in the to-be-reported quarter.

Taiwan Semiconductor’s consistent investments in next-generation and specialty technologies are likely to have driven growth in the first quarter. Its leadership in 7nm and 3nm chip technologies has been instrumental, offering advanced capabilities to customers in high-demand industries. The 5nm process technology has also contributed to TSM’s wafer revenues, reflecting the solid market adoption of these smaller, more efficient chipsets. Taiwan Semiconductor's strategic focus on ramping up 3nm production while advancing its 2nm development positions it for continued leadership in the semiconductor space.

Taiwan Semiconductor's expansion into high-performance computing (HPC) and smartphone sectors is expected to have bolstered its performance in the to-be-reported quarter. The company’s innovative 3nm Fin Field-Effect Transistor (FinFET) technology, alongside its range of FinFET options (spanning 4nm, 5nm, 6nm and 7nm nodes), has become a key growth driver, particularly in HPC applications. TSMC’s advanced FinFET technologies, such as the enhanced 3nm and variants of the 4nm and 5nm chips, have helped it maintain strong momentum in the smartphone market.

Taiwan Semiconductor's technological advancements are anticipated to have supported its expansion into automotive, IoT and digital consumer electronics. The adoption of TSM’s multi-project wafer processing service, which helps customers cut costs, is likely to have boosted the company’s top-line growth. This diversification across industries enhances TSM’s resilience and offers multiple revenue streams.

However, rising operational costs, especially from its overseas expansion into Arizona, Japan and Germany, are likely to have hurt Taiwan Semiconductor’s gross margin in the to-be-reported quarter. Geopolitical tensions, particularly between the United States and China, are anticipated to have hurt the company’s overall revenue growth in the to-be-reported quarter.

TSM’s Stock Price Performance & Valuation

Taiwan Semiconductor shares have appreciated 137.8% over the past year, outperforming the Zacks Computer and Technology sector’s rise of 44.7%. Compared to other major players in the semiconductor space, TSM stock has outperformed Broadcom Inc. (AVGO Quick QuoteAVGO - Free Report) , STMicroelectronics N.V. (STM Quick QuoteSTM - Free Report) and NVIDIA Corporation (NVDA Quick QuoteNVDA - Free Report) . Over the past year, shares of Broadcom, STMicroelectronics and NVIDIA have soared 108.3%, 92.7% and 70.3%, respectively.

TSM One-Year Price Return Performance

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Now, let’s look at the value that Taiwan Semiconductor offers to its investors at the current levels. Currently, TSM is trading at a premium, with a forward 12-month P/E of 24.1X compared with the sector’s 23.5X.

TSM Forward 12-Month P/E Ratio

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Compared with other major semiconductor players, TSMC has a lower P/E multiple than Broadcom and STMicroelectronics, but has a higher multiple than NVIDIA. At present, STMicroelectronics, Broadcom and NVIDIA trade at forward 12-month P/E multiples of 29.39, 26.30 and 22.13, respectively.

Investment Thesis on TSM Stock

Taiwan Semiconductor continues to lead the global chip foundry market. Its scale and technology make it the first choice for companies driving the AI boom. NVIDIA and Broadcom both count on TSM to build advanced graphics processing units (GPUs) and AI accelerators.

AI-related chip sales have become a major driver. In 2025, high-performance computing, which includes AI-related revenues, accounted for 58% of total revenues, up from 51% in 2024. Taiwan Semiconductor’s long-term forecasts depict that the momentum is far from over. Management expects AI revenues to increase at a CAGR of more than 50% over the five-year period from 2024 to 2029, making TSMC central to the AI supply chain.

To keep up with the growing demand for AI chips, Taiwan Semiconductor is spending aggressively. The company is set to invest between $52 billion and $56 billion in capital expenditures in 2026, far outpacing its $40.9 billion investment in 2025. The bulk of this spending is focused on advanced manufacturing processes, ensuring TSMC remains ahead of rivals in the chip manufacturing space.

Despite its strengths, Taiwan Semiconductor witnesses near-term hurdles. Escalating geopolitical tensions, particularly U.S.-China relations, pose strategic risks. With significant revenue exposure to China, TSMC is vulnerable to export restrictions, supply-chain disruptions or further regulatory pressure. These uncertainties could weigh on near-term performance.

The company’s global expansion strategy adds further strain. New fabs in the United States, Japan and Germany are vital for geopolitical risk mitigation, but they come with higher costs. Taiwan Semiconductor is estimating a near-term margin dilution of around 2%, which could further expand to 3-4% as production scales, due to higher labor and energy costs, along with lower utilization rates in the early stages.

Conclusion: Hold TSM Stock for Now

Taiwan Semiconductor remains a cornerstone of the semiconductor industry. Its unmatched capabilities in advanced chip manufacturing, strong exposure to AI demand and expanding capacity give it a solid long-term trajectory.

However, its premium valuation and short-term headwinds, including geopolitical issues and expected pressure on gross margin due to global expansion measures, call for a more cautious stance.