TSMC Second Quarter Net Profit Surges 77.4% to Record, AI Chip Demand Drives Results Above Estimates

TradingKey - On July 16 Eastern Time, TSMC ( TSM) announced its second-quarter financial results for 2026. The company's revenue for the quarter reached NT$1.27 trillion, up 36.0% year-on-year and 12.0% quarter-on-quarter; in US dollar terms, revenue was $40.2 billion, up 33.7% year-on-year, reaching the upper limit of its previous guidance range of $39 billion to $40.2 billion.

TSMC's second-quarter financial data, Source: TSMC official website

Net profit attributable to shareholders of the parent company for the second quarter reached NT$706.56 billion (approximately $22 billion), up 77.4% year-on-year and 23.4% quarter-on-quarter, hitting a record high, significantly exceeding the NT$632.6 billion (approximately $19.7 billion) expected by LSEG SmartEstimate. Diluted earnings per share was NT$27.25, and earnings per American Depositary Receipt (ADR) was $4.31, both up 77.4% year-on-year.

Profitability also exceeded the company's previous expectations. TSMC's second-quarter gross margin rose to 67.7%, above its guidance range of 65.5% to 67.5%; operating margin reached 60.3%, also exceeding the expected 56.5% to 58.5%. The company stated that cost improvements and higher capacity utilization supported the gross margin, though overseas fabs still diluted the margin to some extent. Notably, net profit for the quarter was also boosted by a NT$63.2 billion (approximately $1.97 billion) gain from the sale and remeasurement of Vanguard International Semiconductor shares.

In terms of revenue structure, High Performance Computing (HPC) accounted for 66% of TSMC's total revenue, up 20% from the previous quarter, serving as the primary growth driver; the smartphone business accounted for 22%, down 4% quarter-on-quarter. 7nm and more advanced technologies collectively contributed 77% of wafer revenue, of which 3nm accounted for 30%, 5nm accounted for 33%, and 2nm, which has just entered the mass production ramp-up stage, has already contributed 3%.

The earnings report shows that Nvidia ( NVDA) and other customers' demand for AI processors and advanced processes remains strong, driving TSMC's revenue, profit, and gross margin to high levels simultaneously. Following the earnings release, the stock price showed no significant change, indicating that the market is waiting for the earnings conference. Investors will next focus on whether management will raise full-year revenue growth targets, adjust capital expenditure plans, and whether AI demand can continue to offset overseas expansion costs. The relevant guidance will serve as an important catalyst for the next phase of TSMC's stock price and the global semiconductor sector's performance.