We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
TSM's Q2 EPS jumped 74.5% as revenues rose 33.7% to $40.2B, beating estimates.
TSM's AI-driven HPC business made up 66% of revenues, while advanced nodes continued to lead wafer sales.
TSM's Q3 revenue guidance of $44.6-$45.8B implies 12% sequential and 37% year-over-year growth.
Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) reported second-quarter 2026 earnings of $4.31 per share, which increased 74.5% year over year. The bottom line surpassed the Zacks Consensus Estimate by 11.4%.
Revenues increased 33.7% year over year to $40.2 billion and beat the consensus estimate by 1.4%. Results benefited from strong demand for leading-edge process technologies.
TSM's HPC Mix Strengthens Revenue Base
High-performance computing revenues accounted for 66% of total revenues and increased 20% sequentially, reflecting sustained demand tied to artificial intelligence and data-center computing.
Smartphone revenues declined 4% sequentially and accounted for 22% of total revenues. Automotive revenues increased 15%, while Internet of Things revenues rose 4%. Digital consumer electronics and Other revenues increased 5% each on a sequential basis.
Taiwan Semiconductor Manufacturing Company Ltd. Price, Consensus and EPS Surprise
Taiwan Semiconductor's Advanced Nodes Lead Wafer Sales
The 5-nanometer process remained the largest contributor to wafer revenues at 33%. The 3-nanometer node followed at 30%, while the 7-nanometer process contributed 11%.
The company’s 2-nanometer technology generated 3% of wafer revenues during its initial ramp. Management expects continued strong demand for leading-edge technologies, including a steep increase in 2-nanometer production during the third quarter of 2026.
TSM’s Margins in Details
TSM’s gross margin was 67.7%, which expanded 910 basis points (bps) from the year-ago quarter and expanded 150 bps sequentially. The improvement reflected cost-reduction efforts and higher overall capacity utilization, partly offset by dilution from overseas fabrication facilities.
TSM’s operating margin of 60.3% expanded 1,070 bps year over year and 220 bps sequentially. TSM’s net profit margin was 55.6%, which expanded 1,290 bps year over year and 510 bps sequentially.
As of June 30, 2026, cash, cash equivalent balances and investments in Marketable Financial Instruments were $110.22 billion, up from $105.53 billion as of March 31, 2026.
The long-term debt was $32.69 billion at the end of the second quarter compared with the previous quarter’s $31.62 billion. TSM posted a free cash flow of NT$287.36 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 Issues Upbeat Guidance for Q3 2026
For the third quarter of 2026, Taiwan Semiconductor expects revenues between $44.6 billion and $45.8 billion. The midpoint implies sequential growth of roughly 12% and year-over-year growth of about 37%. The Zacks Consensus Estimate is pegged at $42.59 billion.
Gross margin is projected between 65% and 67%, while operating margin is expected in the 56-58% range. Management expects the 2-nanometer ramp to reduce gross margin by roughly 3-4 percentage points in the second half of 2026, partly offset by leading-edge demand, productivity gains and capacity optimization.
Management expects 2026 revenues to increase slightly more than 40% in U.S. dollar terms. The outlook reflects robust AI-related demand, including growing computing requirements from agentic AI applications and increased demand for CPUs alongside AI accelerators. The Zacks Consensus Estimate is pegged at $161.44 billion.
Shares of Analog Devices have gained 40.2% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.43 per share, up by 11 cents over the past seven days, indicating an increase of 55.6% year over year.
Shares of Applied Materials have gained 119.3% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.13 per share, up by 2 cents over the past seven days, indicating a rise of 28.8% year over year.
Cisco Systems shares have surged 42.1% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2026 earnings is pegged at $4.28 per share, unchanged over the past 30 days, indicating an increase of 12.3% year over year.
View the Zacks #1 Rank List
Image: Bigstock
Taiwan Semiconductor Q2 Earnings Beat Estimates, Revenues Rise Y/Y
Key Takeaways
Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) reported second-quarter 2026 earnings of $4.31 per share, which increased 74.5% year over year. The bottom line surpassed the Zacks Consensus Estimate by 11.4%.
Revenues increased 33.7% year over year to $40.2 billion and beat the consensus estimate by 1.4%. Results benefited from strong demand for leading-edge process technologies.
TSM's HPC Mix Strengthens Revenue Base
High-performance computing revenues accounted for 66% of total revenues and increased 20% sequentially, reflecting sustained demand tied to artificial intelligence and data-center computing.
Smartphone revenues declined 4% sequentially and accounted for 22% of total revenues. Automotive revenues increased 15%, while Internet of Things revenues rose 4%. Digital consumer electronics and Other revenues increased 5% each on a sequential basis.
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
Taiwan Semiconductor's Advanced Nodes Lead Wafer Sales
The 5-nanometer process remained the largest contributor to wafer revenues at 33%. The 3-nanometer node followed at 30%, while the 7-nanometer process contributed 11%.
The company’s 2-nanometer technology generated 3% of wafer revenues during its initial ramp. Management expects continued strong demand for leading-edge technologies, including a steep increase in 2-nanometer production during the third quarter of 2026.
TSM’s Margins in Details
TSM’s gross margin was 67.7%, which expanded 910 basis points (bps) from the year-ago quarter and expanded 150 bps sequentially. The improvement reflected cost-reduction efforts and higher overall capacity utilization, partly offset by dilution from overseas fabrication facilities.
TSM’s operating margin of 60.3% expanded 1,070 bps year over year and 220 bps sequentially. TSM’s net profit margin was 55.6%, which expanded 1,290 bps year over year and 510 bps sequentially.
Taiwan Semiconductor Maintains Strong Financial Flexibility
As of June 30, 2026, cash, cash equivalent balances and investments in Marketable Financial Instruments were $110.22 billion, up from $105.53 billion as of March 31, 2026.
The long-term debt was $32.69 billion at the end of the second quarter compared with the previous quarter’s $31.62 billion. TSM posted a free cash flow of NT$287.36 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 Issues Upbeat Guidance for Q3 2026
For the third quarter of 2026, Taiwan Semiconductor expects revenues between $44.6 billion and $45.8 billion. The midpoint implies sequential growth of roughly 12% and year-over-year growth of about 37%. The Zacks Consensus Estimate is pegged at $42.59 billion.
Gross margin is projected between 65% and 67%, while operating margin is expected in the 56-58% range. Management expects the 2-nanometer ramp to reduce gross margin by roughly 3-4 percentage points in the second half of 2026, partly offset by leading-edge demand, productivity gains and capacity optimization.
Management expects 2026 revenues to increase slightly more than 40% in U.S. dollar terms. The outlook reflects robust AI-related demand, including growing computing requirements from agentic AI applications and increased demand for CPUs alongside AI accelerators. The Zacks Consensus Estimate is pegged at $161.44 billion.
TSM’s Zacks Rank and Other Stocks to Consider
Currently, TSM carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader Zacks Computer and Technology sector are Analog Devices (ADI - Free Report) , Applied Materials (AMAT - Free Report) and Cisco Systems (CSCO - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Analog Devices have gained 40.2% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.43 per share, up by 11 cents over the past seven days, indicating an increase of 55.6% year over year.
Shares of Applied Materials have gained 119.3% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.13 per share, up by 2 cents over the past seven days, indicating a rise of 28.8% year over year.
Cisco Systems shares have surged 42.1% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2026 earnings is pegged at $4.28 per share, unchanged over the past 30 days, indicating an increase of 12.3% year over year.