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TSM reported Q1 EPS of $3.49, up 64.6% YoY, beating estimates on strong revenues.
Taiwan Semiconductor saw HPC drive 61% of revenues, with AI demand remaining robust.
TSM expanded margins and guided Q2 revenues to $39B-$40.2B, signaling continued growth.
Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) posted first-quarter 2026 earnings per share of $3.49, which increased 64.6% year over year. The bottom line beat the Zacks Consensus Estimate of $3.31 by 5.44%.
TSM posted net revenues of $35.90 billion, which rose 40.6% from the year-ago quarter. The top line surpassed the Zacks Consensus Estimate of $35.50 billion by 1.13%, supported by continued strength in leading-edge process demand and a revenue mix increasingly tilted toward high-performance computing.
TSM Sees HPC Stay Dominant as Smartphone Mix Cools
In the first quarter, high-performance computing remained the largest revenue driver, contributing 61% of net revenues. Smartphone represented 26%, while Internet of Things, automotive, digital consumer electronics and other end markets accounted for 6%, 4%, 1% and 2%, respectively.
On a sequential basis, the mix shift favored infrastructure-oriented demand. HPC revenues increased 20% quarter over quarter, while smartphone revenues declined 11%. Management stated continued strong demand for its leading-edge process technologies as the core support for the quarter’s above-guidance revenue outcome.
Taiwan Semiconductor Manufacturing Company Ltd. Price, Consensus and EPS Surprise
TSMC Node Mix Highlights Strong Pull for Advanced Technologies
TSMC’s wafer revenue profile continued to skew toward advanced nodes. In the first quarter of 2026, 3-nanometer technology contributed 25% of total wafer revenues, while 5-nanometer and 7-nanometer accounted for 36% and 13%, respectively. Advanced technologies, defined as 7-nanometer and below, represented 74% of total wafer revenues.
Management tied the intensity of demand largely to AI-related workloads. On the latest earnings call, the company highlighted that AI-related demand remained “extremely robust,” noting that increased compute needs are supporting tight conditions for leading-edge silicon and reinforcing a multiyear view of the AI megatrend.
TSM Profitability Rises as Utilization and Cost Actions Help
Profitability expanded meaningfully in the first quarter.
TSM’s gross margin was 66.2%, which expanded 740 basis points (bps) from the year-ago quarter and expanded 390 bps sequentially. TSM’s operating margin of 58.1% expanded 960 bps year over year and 410 bps sequentially. TSM’s net profit margin was 50.5%, which expanded 740 bps year over year and 220 bps sequentially.
Management attributed the sequential improvement primarily to cost improvement efforts, a higher overall utilization rate and a more favorable foreign exchange rate.
During the earnings call, the company discussed anticipated gross margin dilution from the initial ramp of 2-nanometer technology and the impact of overseas fab ramp-ups over the next several years.
As of March 31, 2026, cash, cash equivalent balances and investments in Marketable Financial Instruments were $105.53 billion, up from $97.59 billion as of Dec. 31, 2025.
The long-term debt was $31.63 billion at the end of the quarter, down from the previous quarter’s $32.25 billion. TSM posted a free cash flow of NT$348.21 billion.
The company’s capital intensity remains tied to its multiyear buildout plan, with management reiterating its intention to invest aggressively to support customer growth while maintaining a focus on profitable growth.
TSM Guidance Calls for Another Solid Step Up in Q2 2026
For the second quarter of 2026, TSM guided revenues to be in the range of $39.0 billion to $40.2 billion. The Zacks Consensus Estimate is pegged at $39.52 billion.
The company expects gross margin between 65.5% and 67.5% and operating margin between 56.5% and 58.5%, based on an exchange rate assumption of 1 U.S. dollar to 31.7 New Taiwan dollars.
For 2026, management expects 2026 revenues to increase more than 30% in U.S. dollar terms. The Zacks Consensus Estimate is pegged at $160.67 billion.
Shares of Arista Networks have gained 17.8% year to date. The Zacks Consensus Estimate for ANET’s 2026 earnings is pegged at $3.53 per share, up by a penny over the past 30 days, indicating an increase of 18.5% year over year.
Shares of Advanced Energy have gained 78.8% year to date. The Zacks Consensus Estimate for AEIS’ 2026 earnings is pegged at $8.32 per share, up by 12 cents over the past 60 days, indicating a rise of 29.8% year over year.
Applied Materials shares have surged 53.4% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $11.10 per share, down by a penny over the past 30 days, indicating an increase of 17.8% year over year.
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Taiwan Semiconductor Q1 Earnings Beat Estimates, Revenues Rise Y/Y
Key Takeaways
Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) posted first-quarter 2026 earnings per share of $3.49, which increased 64.6% year over year. The bottom line beat the Zacks Consensus Estimate of $3.31 by 5.44%.
TSM posted net revenues of $35.90 billion, which rose 40.6% from the year-ago quarter. The top line surpassed the Zacks Consensus Estimate of $35.50 billion by 1.13%, supported by continued strength in leading-edge process demand and a revenue mix increasingly tilted toward high-performance computing.
TSM Sees HPC Stay Dominant as Smartphone Mix Cools
In the first quarter, high-performance computing remained the largest revenue driver, contributing 61% of net revenues. Smartphone represented 26%, while Internet of Things, automotive, digital consumer electronics and other end markets accounted for 6%, 4%, 1% and 2%, respectively.
On a sequential basis, the mix shift favored infrastructure-oriented demand. HPC revenues increased 20% quarter over quarter, while smartphone revenues declined 11%. Management stated continued strong demand for its leading-edge process technologies as the core support for the quarter’s above-guidance revenue outcome.
Taiwan Semiconductor Manufacturing Company Ltd. Price, Consensus and EPS Surprise
Taiwan Semiconductor Manufacturing Company Ltd. price-consensus-eps-surprise-chart | Taiwan Semiconductor Manufacturing Company Ltd. Quote
TSMC Node Mix Highlights Strong Pull for Advanced Technologies
TSMC’s wafer revenue profile continued to skew toward advanced nodes. In the first quarter of 2026, 3-nanometer technology contributed 25% of total wafer revenues, while 5-nanometer and 7-nanometer accounted for 36% and 13%, respectively. Advanced technologies, defined as 7-nanometer and below, represented 74% of total wafer revenues.
Management tied the intensity of demand largely to AI-related workloads. On the latest earnings call, the company highlighted that AI-related demand remained “extremely robust,” noting that increased compute needs are supporting tight conditions for leading-edge silicon and reinforcing a multiyear view of the AI megatrend.
TSM Profitability Rises as Utilization and Cost Actions Help
Profitability expanded meaningfully in the first quarter.
TSM’s gross margin was 66.2%, which expanded 740 basis points (bps) from the year-ago quarter and expanded 390 bps sequentially. TSM’s operating margin of 58.1% expanded 960 bps year over year and 410 bps sequentially. TSM’s net profit margin was 50.5%, which expanded 740 bps year over year and 220 bps sequentially.
Management attributed the sequential improvement primarily to cost improvement efforts, a higher overall utilization rate and a more favorable foreign exchange rate.
During the earnings call, the company discussed anticipated gross margin dilution from the initial ramp of 2-nanometer technology and the impact of overseas fab ramp-ups over the next several years.
TSMC Balance Sheet Supports Investment-Led Expansion
As of March 31, 2026, cash, cash equivalent balances and investments in Marketable Financial Instruments were $105.53 billion, up from $97.59 billion as of Dec. 31, 2025.
The long-term debt was $31.63 billion at the end of the quarter, down from the previous quarter’s $32.25 billion. TSM posted a free cash flow of NT$348.21 billion.
The company’s capital intensity remains tied to its multiyear buildout plan, with management reiterating its intention to invest aggressively to support customer growth while maintaining a focus on profitable growth.
TSM Guidance Calls for Another Solid Step Up in Q2 2026
For the second quarter of 2026, TSM guided revenues to be in the range of $39.0 billion to $40.2 billion. The Zacks Consensus Estimate is pegged at $39.52 billion.
The company expects gross margin between 65.5% and 67.5% and operating margin between 56.5% and 58.5%, based on an exchange rate assumption of 1 U.S. dollar to 31.7 New Taiwan dollars.
For 2026, management expects 2026 revenues to increase more than 30% in U.S. dollar terms. The Zacks Consensus Estimate is pegged at $160.67 billion.
TSM’s Zacks Rank and Stocks to Consider
Currently, TSM carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector are Arista Networks (ANET - Free Report) , Advanced Energy (AEIS - Free Report) and Applied Materials (AMAT - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Arista Networks have gained 17.8% year to date. The Zacks Consensus Estimate for ANET’s 2026 earnings is pegged at $3.53 per share, up by a penny over the past 30 days, indicating an increase of 18.5% year over year.
Shares of Advanced Energy have gained 78.8% year to date. The Zacks Consensus Estimate for AEIS’ 2026 earnings is pegged at $8.32 per share, up by 12 cents over the past 60 days, indicating a rise of 29.8% year over year.
Applied Materials shares have surged 53.4% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $11.10 per share, down by a penny over the past 30 days, indicating an increase of 17.8% year over year.