The news
TSMC Q2 earnings, released on July 16, 2026, showed net income up 77.4% year over year to NT$706.56 billion at Taiwan Semiconductor Manufacturing Co. (TSM). Chairman C.C. Wei raised the 2026 sales growth forecast to more than 40% in U.S. dollar terms, citing AI demand.
Second-quarter revenue was NT$1,270.38 billion (US$40.20 billion), up 36.0% year over year and 12.0% from the first quarter, according to the company's earnings release. Diluted earnings per share were NT$27.25, or US$4.31 per American depositary receipt (ADR) unit. Gross margin was 67.7%, operating margin 60.3% and net profit margin 55.6%.
Leading-edge manufacturing did most of the work. Chips made on 3-nanometer technology accounted for 30% of wafer revenue, 5-nanometer for 33% and 7-nanometer for 11%, while the new 2-nanometer process contributed 3%. Nodes of 7nm and below made up 77% in total. (Nanometer labels name process generations; smaller generally means denser, more power-efficient chips.)
For the third quarter, TSMC guided revenue of US$44.6 billion to US$45.8 billion, assuming 32 New Taiwan dollars to the U.S. dollar, with gross margin of 65% to 67% and operating margin of 56% to 58%. Chief Financial Officer Wendell Huang said in the release that demand for leading-edge processes, including a steep 2nm ramp-up, would support the quarter. TrendForce reported that Huang put margin dilution from the 2nm ramp at 3% to 4%, and from overseas fabs at 2% to 3% in their early stages.
At the investor conference, Wei made the second upgrade to the 2026 sales forecast this year, after an April estimate of more than 30%, Focus Taiwan reported. TSMC raised its 2026 capital expenditure budget to US$60 billion to US$64 billion from US$52 billion to US$56 billion; second-quarter capex was US$15.7 billion. Wei said the company's "conviction in the multi-year AI megatrend remains very high," as reported by Yahoo Finance, but also said rising component prices and macroeconomic uncertainty were challenging consumer and price-sensitive segments.
The numbers
- Q2 2026 revenue
- NT$1,270.38 billion (US$40.20 billion), up 36.0% YoY
- Q2 2026 net income
- NT$706.56 billion, up 77.4% YoY
- Q2 gross margin
- 67.7%
- Q3 2026 revenue guidance
- US$44.6 billion to US$45.8 billion
- 2026 capex guidance
- US$60 billion to US$64 billion (was US$52 billion to US$56 billion)
- 3nm share of Q2 wafer revenue
- 30%
Why CEOs should care
For companies buying AI infrastructure, the message is that the supply chain behind AI accelerators is still spending to grow. TSMC is the primary supplier to Nvidia (NVDA), according to Yahoo Finance, and Focus Taiwan reported that 70% to 80% of this year's capex goes to advanced processes. Capacity funded now takes time to come online, so buyers should ask GPU and custom-chip vendors how much 3nm and 2nm capacity they have secured, and what delivery dates they will commit to for 2027.
CFOs should read the margins as a signal about pricing power. A 67.7% gross margin, and a third-quarter guide of 65% to 67% even with 2nm and overseas-fab dilution, leaves little sign that leading-edge silicon is getting cheaper. Budgets for AI hardware in 2027 should not assume falling chip costs, and procurement teams should ask suppliers how foundry and packaging costs flow into their prices.
Boards of companies that sell phones, PCs or other consumer devices should note the other half of Wei's message. If component prices are squeezing price-sensitive segments while AI customers absorb leading-edge capacity, product margins face pressure from both sides. Ask management how exposed next year's device plans are to component inflation, and whether any products depend on the same advanced nodes that AI chips use.
The bigger picture
TSMC's 2026 outlook has moved up all year: about 30% growth in January, more than 30% in April and more than 40% in July, according to Focus Taiwan. On the same day as these results, TSMC also announced an additional US$100 billion for its Arizona operations, which Yahoo Finance reported alongside the earnings.
The node mix shows how concentrated the business has become. With 77% of wafer revenue coming from 7nm and more advanced technologies, TSMC's results now track demand for high-end chips closely. Any slowdown in AI data center spending would likely show up in these shares and in the capex plan before it reaches the broader chip market.
What happened next
Monthly sales kept rising after the report. On August 10, 2026, TSMC reported July revenue of NT$467.58 billion, up 44.7% from July 2025. On September 10, it reported August revenue of NT$514.81 billion, up 53.3% year over year and 10.1% from July, taking January-to-August revenue to NT$3,386.87 billion, up 39.3%.
On August 11, the board approved capital appropriations of approximately US$29,442.50 million for advanced-technology capacity, advanced packaging, mature and specialty capacity, and fab construction, plus a NT$7.0-per-share cash dividend for the second quarter, payable January 7, 2027. What to watch: TSMC's September revenue report and third-quarter results, which will show whether revenue landed inside the US$44.6 billion to US$45.8 billion range and whether the more-than-40% full-year forecast holds.
