TSMC Q2 Earnings Highlights: Record Revenue and Profit

On July 27, 2026, TSMC released its second-quarter 2026 financial report, with all indicators surpassing market expectations. Consolidated Q2 revenue was approximately NT$782 billion (about US$24.5 billion), up 38.2% YoY and 12.5% QoQ; net profit was about NT$321 billion, up 44.1% YoY and 15.3% QoQ. Gross margin reached 56.8%, up 1.2pp from previous quarter, net margin 41.1%.

This performance was mainly driven by strong demand for advanced process (7nm and below), with 3nm contributing 28% of Q2 wafer revenue, 5nm 32%, and 7nm 14%. 3nm revenue share surpassed 5nm for the first time, becoming TSMC's largest revenue node. Chairman Mark Liu said that since mass production started last year, 3nm yield has improved rapidly, and customer adoption speed set a record.

AI and HPC Continue to Drive: 3nm Becomes Growth Engine

By application platform, High-Performance Computing (HPC) accounted for the highest share at 48%, followed by smartphones 38%, IoT 6%, automotive electronics 5%, and digital consumer electronics 3%. HPC revenue grew 52% YoY, driven mainly by AI chips, cloud server processors, and network accelerators. In smartphones, adoption of 3nm application processors (AP) in high-end models boosted revenue by 21%.

TSMC President C.C. Wei revealed that 3nm capacity utilization exceeds 105%, marking full production for three consecutive quarters, with optimistic H2 outlook. Customers including NVIDIA, AMD, Apple, and other major firms are increasing 3nm orders, especially AI training and inference chips requiring the energy efficiency advantage of 3nm. TSMC expects 3nm revenue to double YoY in full-year 2026, accounting for over 25% of total revenue.

CapEx and Capacity Expansion: Accelerating Global Expansion

TSMC maintains its full-year 2026 CapEx budget of US$40-44 billion, with 70% for advanced processes, 20% for specialty technologies, and 10% for advanced packaging. Q2 CapEx was about US$9.8 billion, mainly for 3nm expansion, 2nm pilot line construction, and overseas fabs. 2nm process is expected to enter mass production in 2027; current pilot yield exceeds internal targets with positive customer feedback.

Against the geopolitical backdrop, TSMC's overseas expansion is progressing smoothly: the second phase of its Arizona fab has completed main structure, expected to mass produce 3nm in 2028; the first Kumamoto fab in Japan has started mass production at 28/22nm, and the second fab will begin 6/7nm production in 2027; the Dresden fab in Germany held its groundbreaking ceremony in June, focusing on automotive chips.

Industry Insight: Leading the Semiconductor Cycle Recovery

TSMC's strong earnings further confirm that the global semiconductor industry is in an upcycle. WSTS' latest forecast sees the global semiconductor market surpassing US$650 billion in 2026, up 18% YoY. AI-related chip demand is the main driver, and advanced process capacity tightness will persist through the year.

In the Asia-Pacific region, TSMC, Samsung Electronics, MediaTek and other top players all posted strong Q2 results. However, TSMC's monopoly on sub-7nm processes gives it far higher profitability than peers. Morgan Stanley analysts noted that TSMC has nearly all AI-related orders at the 3nm node, and its technology lead will last at least until 2nm mass production.

H2 Outlook: Peak Season Effect Combined with 2nm Warm-up

Looking ahead to Q3 2026, TSMC forecasts revenue between US$20-24 billion, with gross margin in the 55%-57% range. The second half enters the traditional electronics peak season, with iPhone new product stocking, AI server shipment acceleration, and PC replacement cycle – multiple catalysts that could push TSMC to new records. C.C. Wei said that despite macroeconomic uncertainties, the semiconductor demand structure has shifted to an AI super-cycle, and the company is confident in long-term growth.

TSMC's earnings are not just a corporate report card but also reflect the industry trend in the Asia-Pacific semiconductor supply chain tilting toward advanced processes. With subsidy policies and FDI inflows, Asia's chip manufacturing landscape is being reshaped, and TSMC is undoubtedly at the core of this wave.