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📊 View earnings presentation

📄 Source: Seeking Alpha

⚡ Q/Q Change Highlights

Revenue $35.9B (+6.4% QoQ USD, +39.2% YoY) — slightly ahead of guidance
Gross margin 66.2% (+3.9pp QoQ) — cost improvements + high utilization + favorable FX; OM 58.1% (+4.1pp)
EPS TWD 22.08; ROE 40.5%; advanced nodes (7nm & below) = 74% of wafer revenue
HPC = 61% of revenue (+20% QoQ); smartphone 26% (-11% QoQ); 3nm = 25% of wafer revenue
Q2 guide: revenue $39.0–40.2B (+10% QoQ, +32% YoY); GM 65.5–67.5%; OM 56.5–58.5%
FY26 revenue growth raised to above 30% (USD); 2026 capex toward high end of $52–56B
Long-term GM target raised to 56%+; ROE target high-20s
N2 ramping well (started H1... Q4-2025 HVM); N3 to cross corporate GM in H2 2026; A14 volume in 2028

🎙️ TSM — Apr 16, 2026

📄 Original Transcript

TSM (Prior-Quarter Earnings Call Transcript (2026-04-16).):

NOTE:The full verbatim TSMC Q1 2026 earnings call transcript is behind paywalls (Seeking Alpha / GuruFocus / MarketScreener). This file compiles the verbatim opening remarks plus a structured, content-accurate summary of the call drawn from the transcript-derived data (GuruFocus / Intellectia AI / TSMC press release, April 16, 2026).

Jeff Su— Director of Investor Relations, TSMC

Good afternoon, everyone, and welcome to TSMC's First Quarter 2026 Earnings Conference Call. This is Jeff Su, TSMC's Director of Investor Relations and your host for today. TSMC is hosting our earnings conference call via live audio webcast through the company's website at www.tsmc.com, where you can also download the earnings release materials. If you're joining us through the conference call, your dial-in lines are in listen-only mode. The format for today's event will be as follows: First, TSMC's Senior Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the first quarter 2026, followed by our guidance for the second quarter 2026. Afterwards, Mr. Huang, and TSMC's Chairman and CEO, Dr. C.C. Wei, will jointly provide the company's key messages. Then we will open the line for the Q&A session. As usual, I would like to remind everybody that today's discussions may contain forward-looking statements.

Key Messages (as delivered on the call)

First quarter revenue increased 8.4% sequentially in NT and 6.4% sequentially in USD, reaching $35.9 billion, slightly ahead of guidance, driven by strong demand for leading-edge process technologies.
Gross margin increased 3.9 percentage points sequentially to 66.2%, primarily due to cost improvement efforts, a high capacity utilization rate, and a more favorable foreign exchange rate.
Operating margin improved 4.1 percentage points sequentially to 58.1%, attributed to operating leverage.
First quarter EPS was TWD 22.08; ROE was 40.5%.
Revenue by technology: 3nm contributed 25% of wafer revenue, 5nm accounted for 36%, 7nm accounted for 13%; advanced technologies (7nm and below) accounted for 74% of wafer revenue.
Revenue by platform: HPC increased 20% QoQ to account for 61% of revenue; Smartphone decreased 11% to account for 26%; IoT increased 12% to account for 6%; Automotive decreased 7% to account for 4%; DCE increased 28% to account for 1%.
Cash and marketable securities ended the quarter at TWD 3.4 trillion (USD 106 billion). Cash flow from operations was TWD 699 billion. Days of inventory increased 6 days to 80, reflecting the ramp of 2nm and strong 3nm demand.
CapEx in the first quarter was TWD 351 billion (USD 11.1 billion). The 2026 capital budget is expected towards the high end of the USD 52-56 billion range.
Distributed TWD 130 billion for the second quarter 2025 cash dividend.

Second Quarter 2026 Guidance

Revenue expected between USD 39.0 billion and USD 40.2 billion — a 10% sequential increase and 32% year-over-year increase at the midpoint.
Gross margin between 65.5% and 67.5%; operating margin between 56.5% and 58.5%.
Tax rate for the quarter around 20%; full-year tax rate between 17% and 18%.
2026 full-year revenue expected to grow by above 30% in USD terms.

Key Messages & Technology Roadmap

N2 (2nm): high-volume manufacturing started in Q4 2025 with good yield; ramping successfully in Taiwan, supported by strong smartphone and HPC AI demand. Initial ramp expected to dilute gross margin by 2%-3% for full-year 2026.
N3 (3nm): contributed 25% of wafer revenue; N3 gross margin expected to cross the corporate average in H2 2026. Global N3 capacity expansion underway — new 3nm fabs planned in Taiwan (2027), Arizona (2027), and Japan (2028).
A14: second-generation nanosheet transistor structure; volume production scheduled for 2028 with 10%-15% speed improvement or 25%-30% power improvement vs N2 and close to 20% chip density gain.
Mature node strategy: focus on high-yield capacity for specialized technologies in Japan and Germany; plans to wind down older fabs (Fab 2 and Fab 5) while optimizing capacity for leading-edge applications.
Long-term gross margin target revised to 56% and higher through the cycle, with an ROE target of high 20s.
Overseas fabs expected to dilute gross margin by 2%-3% in early stages, widening to 3%-4% in later stages.
Supply chain resilience: multi-source supply and safety stock inventory in place for specialty chemicals and gases; no near-term impact expected from the Middle East situation.

Q&A Highlights

Q: Applications driving 3nm strength and gross margin outlook? A: Strong demand primarily from HPC and AI applications; N3 gross margin expected to reach and cross the corporate average in H2 2026; margins generally very high after full depreciation.
Q: Confidence behind CapEx revision to high end? A: Robust demand, especially HPC and AI, driving us to speed up and pull in equipment procurement and capacity expansion.
Q: How long will supply constraints last? A: Demand continues robust; it takes 2-3 years to build a new fab, so tight supply expected to continue into 2027; building three new N3 fabs and working with construction/equipment suppliers to accelerate.
Q: Competition (e.g., Terafab) and strategy? A: View competitors like Intel and Tesla as formidable; focus on technology leadership, manufacturing excellence, customer trust, and service; confident in technology position.
Q: Advanced packaging and larger reticle-size chips? A: Supplying the largest reticle-size packaging; developing CoWoS and CoPoS; building a CoPoS pilot line and working on System on Wafer technology.
Q: Long-term CapEx guidance / equipment supply? A: No specific long-term CapEx number, but expect CapEx over the next three years to be significantly higher than the past three years; working closely with ASML and Applied Materials.
Q: Capital intensity and revenue vs CapEx growth? A: Revenue growth expected to outpace CapEx growth over the next several years, maintaining steady capital intensity without a sudden surge.
Q: 2026 revenue outlook and memory price-hike impact? A: Strong growth in high-end smartphones despite softness in PC and the broader market from memory price hikes; more precise guidance in July.
Q: Long-term margin structure? A: Revised long-term gross margin target to 56% and higher through the cycle; ROE target of high 20s.
Q: AI revenue definition — include CPUs? A: Currently do not include CPUs in the AI revenue definition, but recognize their growing importance in AI data centers; may consider including them in the future.

Source: Compiled from TSMC Q1 2026 earnings call data (April 16, 2026); full transcript paywalled at Seeking Alpha / GuruFocus / MarketScreener.

📝 Summary

TSM (Taiwan Semiconductor / TSMC) — Q1 2026 (Apr 16, 2026). Blowout quarter — revenue, GM (66.2%) and OM (58.1%) all beat, HPC/AI demand inflecting; raised FY26 revenue growth outlook (>30% USD) and kept 2026 capex at the high end of $52–56B.

Results

Revenue: $35.9B (+6.4% QoQ USD; +39.2% YoY), slightly ahead of guidance; NT +8.4% QoQ
GM / OM / EPS: gross margin 66.2% (+3.9pp QoQ); operating margin 58.1% (+4.1pp); EPS TWD 22.08; ROE 40.5%
Tech mix: 3nm 25%, 5nm 36%, 7nm 13%; advanced (7nm & below) 74% of wafer revenue
Platforms: HPC 61% (+20% QoQ), Smartphone 26% (-11% QoQ), IoT 6% (+12%), Automotive 4% (-7%), DCE 1% (+28%)
Balance sheet: cash + marketable securities TWD 3.4T (USD 106B); OCF TWD 699B; inventory days 80 (up 6, N2 ramp + N3 demand); Q1 capex TWD 351B (USD 11.1B); distributed TWD 130B dividend
Drivers: HPC/AI demand (3nm strong); N2 HVM started Q4-2025 with good yield, ramping successfully; N3 global capacity expansion (new fabs Taiwan 2027, Arizona 2027, Japan 2028); supply-chain resilience (multi-source chemicals/gases, safety stock — no near-term Middle East impact)

Guidance

Next quarter (Q2 2026): revenue $39.0–40.2B (+10% QoQ, +32% YoY at midpoint); GM 65.5–67.5%; OM 56.5–58.5%; tax ~20% (FY26 tax 17-18%)
FY26: revenue growth above 30% USD; 2026 capex toward high end of $52–56B; N2 ramp to dilute GM 2-3% for full year; overseas fabs dilute GM 2-3% early, 3-4% later
Long term: GM target raised to 56%+ through the cycle; ROE target high-20s; N3 GM to cross corporate average in H2 2026; A14 (2nd-gen nanosheet) volume production 2028 (10-15% speed / 25-30% power vs N2, ~20% density gain)

Capex

Q1 capex $11.1B; 2026 budget toward high end of $52–56B (70-80% advanced process, 10-20% packaging/testing); capex over next 3 years "significantly higher" than prior 3; revenue growth to outpace capex growth (steady capital intensity)

Key Q&A

Q (3nm drivers / GM): What's driving 3nm and its margin outlook?
A: HPC/AI applications; N3 GM to reach and cross corporate average in H2 2026; margins very high after full depreciation.
Q (CapEx confidence): Why revise to high end?
A: Robust demand especially HPC/AI; speeding up and pulling in equipment procurement and capacity expansion.
Q (Supply constraints): How long will tightness last?
A: 2-3 years to build a new fab; supply expected to remain very tight into 2027; building three new N3 fabs, working with suppliers to accelerate.
Q (Competition / Terafab): Strategy vs new entrants?
A: View competitors (Intel, Tesla) as formidable; focus on technology leadership, manufacturing excellence, customer trust, service; confident in technology position.
Q (Advanced packaging): CoWoS/CoPoS and larger reticle sizes?
A: Supplying the largest reticle-size packaging; developing CoWoS and CoPoS; building a CoPoS pilot line; System on Wafer technology.
Q (AI revenue definition): Include CPUs?
A: Currently not in AI revenue definition, but their importance in AI data centers is growing; may include in the future.
Q (Long-term margins): Changed with strong demand?
A: Raised long-term GM target to 56%+; ROE target high-20s.

Notes

Q1 2026 was a margin blowout: GM 66.2% / OM 58.1% on HPC/AI mix and utilization; Q2 guided to another big step (+32% YoY at midpoint).
The AI megatrend is the story — HPC 61% of revenue, N2 ramping, N3 expanding globally, A14 in 2028, and the long-term GM target raised to 56%+.
Capex stays heavy (high end of $52–56B) with 3-year "significantly higher" framing — the market's key debate (vs the current Q2 2026 print that raised it to $60–64B).
Watch: 2nm/overseas-fab GM dilution (2-4%), smartphone softness, and AI supply-demand gap (management: "very big"). Caveat: full verbatim transcript paywalled; compiled from call data + press release.