On the afternoon of July 16, TSMC released its Q2 2026 earnings report: quarterly revenue reached 1.27 trillion TWD (approximately $40.2 billion), up 36.0% year-on-year; net profit hit 706.56 billion TWD (approximately 148.943 billion yuan), surging 77.4% year-on-year and setting historical records for five consecutive quarters. TSMC simultaneously raised its full-year 2026 revenue growth forecast and capital expenditure budget, providing the latest evidence of sustained AI demand.
The improvement in profitability is even more striking. Gross margin reached 67.7%, up 9.1 percentage points year-on-year; operating margin was 60.3%, up 10.7 percentage points; net margin reached 55.6%. This means for every 100 yuan in revenue, TSMC converts over 55 yuan into net profit.
From a revenue structure perspective, advanced process nodes continue increasing in value: 7nm and below accounted for 77% of total wafer revenue, with 5nm at 33%, 3nm at 30%, 7nm at 11%, and the recently ramped 2nm process (mass production began last Q4) already contributing 3%.
By application platform, High Performance Computing (HPC) accounted for 66% of total revenue, up 20% sequentially — the clear growth engine; smartphones represented 22%, down 4% sequentially; IoT, automotive, and consumer electronics accounted for 5%, 4%, and 1% respectively. Geographically, North American customers contributed 78% of revenue.
TSMC Chairman and CEO C.C. Wei candidly acknowledged during the earnings call that he cannot quantify the market growth driven by AI, 'because this wave is getting stronger and stronger.' TSMC currently still faces capacity constraints, with advanced packaging capacity unable to meet demand, and the company is working to narrow the supply-demand gap.
Based on optimistic demand assessments, TSMC released a series of positive signals: full-year 2026 USD revenue growth guidance was raised from 'exceeding 30%' to 'slightly above 40%'; capital expenditure budget was increased from $52-56 billion to $60-64 billion, with 70-80% directed toward advanced process nodes.
Wei also confirmed an additional $100 billion investment in Arizona, USA, to build 2nm and below advanced fabs and advanced packaging facilities, bringing TSMC's total US investment to $265 billion. Additionally, the A14 process is expected to enter mass production in 2028, with A13 and A12 in 2029.
Analysts note that demand for TSMC's 3nm and 2nm process technologies for AI chips and its advanced packaging technology CoWoS remains strong. Citi Research has raised its TSMC target price from 2,875 TWD to 3,800 TWD.
Despite beating expectations across the board, TSMC's US ADR fell over 4% in pre-market trading on July 16, closing at $409.74, down 2.32%. Market analysts believe the impact of significantly raised capex forecasts outweighed the earnings beat. Over a longer timeframe, TSMC shares rose 37% in Q2, with year-to-date gains approaching 60%, and current market capitalization of approximately $2 trillion.