Today's event is being webcast live through TSMC's website at www.tsmc.com, where you can also download the earnings release materials. Wendell Huang, will summarize our operations in the second quarter 2026, followed by our guidance for the third quarter 2026. Wendell Huang, for the summary of operations and the current quarter guidance. After that, I will provide the guidance for the third quarter of 2026.
2 nm process technology contributed 3% of wafer revenue in the second quarter. Advanced technology, defined as 7 nm and below, accounted for 77% of wafer revenue. HPC increased 20% quarter-over-quarter to account for 66% of our second quarter revenue. Based on the current business outlook, we expect our third quarter revenue to be between $44.6 billion and $45.8 billion, which represents a 12% sequential increase or a 37% year-over-year increase at the midpoint.
Based on the exchange rate assumption of $1 to TWD 32, gross margin is expected to be between 65% and 67%. We have just guided our third quarter gross margin to decrease by 1.7 percentage point to 66% at the midpoint. Primarily as we expect the steep ramp-up of our 2 nm technology to dilute our gross margin by about 3 percentage points-4 percentage points. This dilution is expected to be partially offset by very strong demand for our leading-edge technologies and continued cost improvement efforts, including productivity gains and across-node capacity optimization.
| Metric | Period | Current guidance |
|---|---|---|
| Q3 2026 revenue | Q3 2026 | $44.6B-$45.8B (+12% QoQ, +37% YoY at midpoint) |
| Q3 2026 gross margin | Q3 2026 | 65%-67% (66% midpoint; -1.7 pts) at $1=TWD 32 |
| Q3 2026 operating margin | Q3 2026 | 56%-58% |
| Full-year 2026 revenue growth (USD) | FY2026 | slightly above 40% year-over-year |
| 2026 capital budget | FY2026 | $60B-$64B (70%-80% advanced, ~10% specialty, 10%-20% packaging/testing/mask) |
| Cash dividend per share | FY2026 | TWD 24 (up 33% YoY), with continued increases in 2027 |
| N2 gross-margin dilution | 2H 2026 | ~3-4 points |
| Multi-year AI accelerator CAGR | 5-year (from Jan) | stronger than before (no new number given) |
| Metric | YoY | Note |
|---|---|---|
| Q2 revenue (USD) | $40.2B (high end of guidance) | Strong demand for leading-edge process technologies. |
| Gross margin | 67.7% (+150 bps QoQ) | Cost-improvement efforts and higher capacity utilization, partly offset by overseas-fab dilution. |
| HPC platform revenue | +20% QoQ (66% of revenue) | Robust AI-driven demand for leading-edge silicon. |
| Smartphone platform revenue | -4% QoQ (22% of revenue) | Seasonal/mix softness relative to HPC strength. |
| Automotive platform revenue | +15% QoQ (4% of revenue) | Recovery in automotive demand. |
| Advanced technology (7nm and below) | 77% of wafer revenue | 5nm 33%, 3nm 30%, 7nm 11%, 2nm 3% of wafer revenue as N2 begins ramping. |
| Cash from operations | TWD 783B | Strong profitability; CapEx of TWD 496B ($15.7B) and TWD 156B of dividends distributed, cash balance up TWD 99B to TWD 3.1T. |
| Inventory days | 87 days (+7) | Ramp of N2 technology. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| AI megatrend / demand conviction | Strong multi-year AI demand | AI-related demand extremely robust; CSP customers giving strong positive signals; demand seen very strong through ~2029-2030 with a very large demand-supply gap; conviction described as very high, driving the CapEx and revenue-outlook increases. | — |
| Capital expenditure ramp | $52B-$56B (Jan); next-3-year CapEx significantly higher than prior 3 years | Raised to $60B-$64B for 2026; next-3-year CapEx now expected 'even more significantly higher'; increase driven by rising demand (all AI-related) plus tool-price inflation; no formal 3-year CapEx number provided. | — |
| Arizona / global capacity expansion | Existing Arizona and overseas fabs | Additional $100 billion Arizona investment (~4 more front- and back-end fabs, total ~$265B); 13 leading-edge and advanced-packaging fabs being built in Taiwan; three new N3 fabs (Taiwan, Arizona, Japan) plus 5nm-to-3nm tool conversion; schedule flexed to market and customer demand, being expedited. | — |
| Agentic AI / CPU resurgence | — | Emergence of agentic AI is reviving CPU demand in AI data centers alongside accelerators; positive for TSMC since x86, Arm and RISC-V CPUs are almost all TSMC customers; wafer allocation balanced across CPU/GPU/XPU. | — |
| A14 technology roadmap | N2 leading edge | A14 (2nd-gen nanosheet) on track and ahead of schedule (pre-production 2027, volume 2028) with strong smartphone and HPC/AI interest; A13 (~6% die-area saving via 97% optical shrink) and A12 (Super Power Rail) both targeting 2029 volume; A14 family expected to be larger and longer-lasting than N2. | — |
| Competition (Samsung, Intel, packaging) | No shortcuts for newcomers | Acknowledged Samsung's strong memory profits and Intel's U.S. policy support (TSMC also has support) but reiterated technology, manufacturing and customer trust as the durable moat; welcomed alternative advanced-packaging options like EMIB-T given tight back-end capacity, since they can help TSMC's larger front-end wafer business. | — |
| Mature-node strategy | Focus on higher-value-added specialty segments | Only AI-related mature nodes (power-management IC, image sensors) are in shortage; commodity/consumer mature-node demand is soft; TSMC continues to add higher-value mature capacity (JASM Japan for CIS, ESMC Germany for auto/industrial). | — |
| Pricing / profitability philosophy | — | Wants gross margin 'higher the better' but as a trusted partner will not impose extreme increases; targets margins sufficient for sustainable expansion; C.C. Wei jokingly envied memory peers' ~86% margins, saying ~68% would make him happy. | — |