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. Wendell Huang, will summarize our operations in the first quarter 2026, followed by our guidance for the second quarter 2026. Wendell Huang, for the summary of operations and the current quarter guidance. After that, I will provide the guidance for the second quarter 2026.
First quarter revenue increased 8.4% sequentially in TWD, supported by strong demand for our leading-edge process technologies. dollar terms, revenue increased 6.4% sequentially to $35.9 billion, slightly ahead of our first quarter guidance. 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% due to operating leverage.
Overall, our first quarter EPS was TWD 22.08 and ROE was 40.5%. 3 nm process technology contributed 25% of wafer revenue in the first quarter, while 5 nm and 7 nm accounted for 36% and 13% respectively. Advanced technologies, defined as 7 nm and below, accounted for 74% of wafer revenue. HPC increased 20% quarter-over-quarter to account for 61% of our first quarter revenue.
| Metric | Period | Current guidance |
|---|---|---|
| Revenue | Q2 2026 | $39.0B-$40.2B (+10% QoQ / +32% YoY at midpoint) |
| Gross margin | Q2 2026 | 65.5%-67.5% (+30 bps at midpoint) |
| Operating margin | Q2 2026 | 56.5%-58.5% |
| Tax rate | Q2 2026 | ~20% (elevated by accrual on undistributed retained earnings) |
| Full-year revenue growth | FY 2026 | above 30% (USD) (raised) |
| Capital budget | FY 2026 | toward the high end of $52B-$56B (raised toward high end) |
| Metric | YoY | Note |
|---|---|---|
| Gross margin | — | Reached 66.2%, up 390 bps sequentially on cost improvement, high utilization and favorable FX; YoY not disclosed on the call. |
| HPC platform revenue | — | Up 20% sequentially to 61% of revenue on robust HPC/AI demand; YoY not disclosed. |
| Smartphone revenue | — | Down 11% sequentially to 26% of revenue as memory price hikes weighed on price-sensitive segments. |
| Q2 2026 revenue (guided) | +32% | Guided +32% YoY at the midpoint on continued strong leading-edge demand. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| AI / HPC demand | Strong; AI accelerator CAGR raised to mid-to-high 50s% in Q4 | Extremely robust; agentic AI shift stepping up token consumption; CAGR toward higher 50s% | Increasing |
| CapEx | $52B-$56B budget set | Toward high end of $52B-$56B; next three years to be significantly higher than prior $101B | Increasing |
| N2 ramp | Entered high-volume manufacturing in Q4 2025 | Ramping multi-phase at Hsinchu and Kaohsiung with good yield on smartphone and HPC AI demand | Increasing |
| N3 capacity and margin | — | Global N3 capacity step-up (new fabs in Tainan, Arizona, Japan); N3 gross margin to cross corporate average in H2 2026 | Expanding |
| Overseas expansion / dilution | Pulling forward Arizona schedule | Second Arizona land purchased, more fabs planned; dilution 2%-3% early to 3%-4% later | Expanding |
| Non-AI / consumer softness | Mild recovery, memory price risk flagged | Memory price hikes softening price-sensitive PC and smartphone; high-end smartphone still strong | Weakening |