Taiwan Semiconductor Manufacturing Company (TSM) Q2 2026 earnings summary

Executive summary

• Q2 2026 revenue reached NT$1,270.38 billion (US$40.20 billion), up 12% sequentially and 36% year-over-year, driven by strong demand for leading-edge process technologies and robust HPC growth; advanced nodes (7nm and below) accounted for 77% of wafer revenue.

• Net income for Q2 2026 was NT$706.56 billion, up 23.4% sequentially and 77.4% year-over-year; diluted EPS was NT$27.25.

• AI-related demand remains extremely robust, supporting a revised full-year 2026 revenue growth outlook of slightly above 40% year-over-year in USD terms.

• HPC platform revenue surged 20% quarter-over-quarter, now representing 66% of total revenue, while smartphone revenue declined 4% sequentially.

• North America accounted for 78% of total net revenue in Q2 2026.

Financial highlights

• Gross margin in Q2 2026 increased to 67.7%, up 1.5 percentage points sequentially and 9.1 points year-over-year.

• Operating margin reached 60.3%, up 2.2 points from last quarter and 10.7 points year-over-year.

• Net profit margin was 55.6%, up 5.1 points sequentially.

• Free cash flow was NT$287.36 billion in Q2 2026.

• Cash and marketable securities stood at NT$3,134.22 billion ($110B) at quarter end.

Outlook and guidance

• Q3 2026 revenue is expected between $44.6B and $45.8B, a 12% sequential and 37% year-over-year increase at midpoint.

• Q3 gross margin is guided at 65%-67%, with operating margin at 56%-58%.

• Full-year 2026 revenue growth is projected to be slightly above 40% year-over-year in USD.

• Gross margin in Q3 is expected to decrease by 1.7 percentage points due to 2nm ramp-up dilution, partially offset by strong demand and cost improvements.

• Management expects continued strong demand in high performance computing and smartphone platforms.