TSMC’s second-quarter 2026 results show the extent to which demand for advanced computing is shaping foundry growth. Revenue reached US$40.20 billion, up 12.0% from the first quarter and 33.7% from a year earlier in US dollars. In New Taiwan dollars, revenue rose 36.0% year over year to NT$1,270.38 billion. The distinction matters: year-over-year growth differs by reporting currency because of exchange rates.^[1]

Gross margin was 67.7%, and operating margin was 60.3%, exceeding TSMC’s guidance ranges for both measures. Net income attributable to shareholders was NT$706.56 billion, up 77.4% year over year.^[1]

High-performance computing reaches 66% of revenue

High-performance computing (HPC) represented 66% of net revenue in Q2, up from 61% in Q1 and 60% a year earlier. Smartphones accounted for 22%, versus 26% in the previous quarter. HPC is a broad TSMC platform category: its 66% share should not be presented as a pure measure of AI-chip revenue, though demand for AI infrastructure is an important driver.^[3]

The supplied earnings-summary report traces this change over a longer period: HPC rose from 52% of revenue in Q2 2024 to 60% in Q2 2025 and 66% in Q2 2026. Smartphone revenue share moved from 33% to 27% and then 22% over the same comparison points. These are shares of TSMC’s revenue, so a falling share does not necessarily mean an equivalent drop in smartphone sales dollars.

2nm enters the revenue mix

TSMC’s 2nm process accounted for 3% of wafer revenue in Q2, its first reported contribution in the comparison shown. The 3nm, 5nm and 7nm nodes contributed 30%, 33% and 11%, respectively. Taken together, 7nm and more advanced technologies represented 77% of wafer revenue, up from 74% in Q1.^[1][3]

For ASIC and system designers, the rising advanced-node share reflects strong commercial demand for performance and power-efficiency gains. It does not, by itself, establish lead times, allocation policies or available capacity for a particular tape-out.

Higher utilization helps margins, while overseas expansion adds cost

Gross margin improved by 1.5 percentage points sequentially, from 66.2% to 67.7%. TSMC attributed the increase mainly to cost-improvement efforts and higher capacity utilization, partly offset by dilution from overseas fabs. Operating margin rose by 2.2 percentage points to 60.3%.^[2][3]

TSMC shipped 4.336 million 12-inch-equivalent wafers during the quarter, up 3.9% sequentially and 16.6% year over year. The shipment measure provides another view of activity, although changes in product mix and wafer pricing mean that shipment growth should not be equated directly with revenue growth.^[2]

Capital spending and cash generation

The earnings-summary report describes a US$62 billion 2026 capital-spending plan. That is the midpoint of the US$60 billion–US$64 billion capital budget communicated in TSMC’s Q2 earnings call, and should be understood as a budget outlook rather than actual expenditure. The report’s indicative allocation is about 70%–80% for advanced nodes, approximately 10% for specialty technologies, and about 10%–20% for advanced packaging and other investments. These allocation ranges are planning estimates and need not sum to precisely 100% at their endpoints.^[4][5]

In Q2, TSMC recorded NT$496.00 billion of capital expenditures, compared with NT$350.76 billion in Q1. Cash from operations reached NT$783.36 billion, leaving NT$287.36 billion of free cash flow after capital spending. Free cash flow remained positive but declined from NT$348.21 billion in Q1 because capital expenditure rose faster than operating cash flow.^[2][3]

For designers, the distinction between capital budget and usable production capacity is important. New fabs and equipment take time to install, qualify and ramp; the investment figure does not specify when a particular process, wafer allocation or packaging service becomes available.

Q3 guidance calls for further revenue growth

TSMC expects Q3 revenue of US$44.6 billion to US$45.8 billion. At the midpoint, US$45.2 billion, that would be approximately 12.4% above Q2 revenue. Management guided gross margin to 65%–67% and operating margin to 56%–58%, both below Q2’s actual levels. Those ranges assume an exchange rate of NT$32 per US dollar.^[1]

TSMC explained that its projected Q3 gross-margin decline is primarily associated with the steep 2nm ramp, which it expected to dilute gross margin by roughly 3–4 percentage points. That is management’s forecast for the ramp’s effect, not a separately reported Q2 cost figure.^[5]

TSMC’s earnings presentation also projected slightly above 40% revenue growth for full-year 2026 in US-dollar terms. This is a forward-looking company outlook and may change as demand, exchange rates and production conditions evolve.^[2]

Conclusion

TSMC’s Q2 results combine rapid revenue growth, a larger HPC share and the initial revenue ramp of 2nm. The next quarter’s guidance points to further top-line expansion, alongside lower forecast margins. For the semiconductor industry, the central question is how quickly advanced manufacturing and supporting capacity can scale to meet demand while sustaining yields and economics.