TSMC posted one of its strongest quarters on record, but the stock pulled back as investors processed a major spending ramp. TSM was trading around $385 on Monday, down roughly 3.4% on the day.
Taiwan Semiconductor Manufacturing Company Limited, TSM
Q2 revenue came in at $40.2B, up 33.7% year-over-year. EPS hit $4.31, a 74% jump that beat Wall Street estimates by $0.37.
Gross margins reached a record 67.7% in the quarter. Operating margins expanded to 60.3%, well above industry peers.
High-performance computing now accounts for 66% of revenue, growing 20% quarter-over-quarter. That number tells you everything about where demand is coming from right now.
The 2nm node contributed 3% of wafer revenue in its first full quarter. The 3nm node accounted for 30%, and 5nm represented 33% of the total.
TSMC raised its 2026 capital expenditure guidance to $60B–$64B. On top of that, the company announced an additional $100B U.S. investment, taking the total Arizona commitment to $265B.
That includes four more advanced fabs for 2nm and below technologies, plus advanced packaging capacity. The first Arizona fab began volume production of 4nm chips in late 2024. The second facility is on track to start 3nm production in the second half of next year.
Needham rolled its models forward to 2028 and raised its price target to $530 from $480. The firm forecasts 40% top-line growth in 2027 and 24% in 2028, with capex projected at $80B and $90B in those respective years.
DA Davidson also raised its target to $500, maintaining a Buy rating following the earnings results.
Seeking Alpha’s quant system currently rates TSM a Hold. The profitability grade is A+, but the valuation grade sits at D-, with the stock trading at roughly 23x–24x forward earnings versus a five-year average of around 18.5x–22x.
Bullish analysts pointed to the raised full-year guidance — now slightly above 40% growth — as the second upward revision in 2026. Q3 revenue is guided between $44.6B and $45.8B, implying 37% year-over-year growth.
Bears flagged the Q3 gross margin guide of 65%–67%, which steps down from Q2’s record due to the 2nm ramp costs and dilution from overseas fabs.
JR Research, rated Buy, called the dip “an opportune time to double down.” Julia Ostian, also Buy, compared it to a similar pullback in late 2025 that led to strong gains in early 2026.
One Hold-rated analyst said their DCF model puts fair value below the current price, citing limited margin of safety.
TSMC declared a quarterly dividend of NT$7.00 per share, payable October 8 for shareholders of record September 22.
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