Taiwan Semiconductor Reports Q2 2026 Results: Full Earnings Call Transcript

Taiwan Semiconductor (NYSE: TSM ) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

Access the full call at Summary Taiwan Semiconductor Manufacturing Co Ltd reported a strong second quarter with advanced technology nodes (7nm and below) contributing 77% of wafer revenue. HPC platform revenue increased significantly by 20% quarter-over-quarter, while smartphone revenue decreased slightly. The company ended the quarter with cash and marketable securities of $110 billion and expects third quarter revenue to rise 12% sequentially. 7% in Q2 but is expected to decrease slightly in Q3 due to the ramp-up of the 2nm technology.

TSMC plans a significant capital investment in 2026, increasing its budget to $60-$64 billion, driven by strong demand in 5G, AI, and HPC sectors. S. customers. , and Japan.

Management expressed confidence in the strong multi-year demand driven by AI, emphasizing robust collaboration with customers. Full Transcript Jeff Hsu, Director of Investor Relations Good afternoon everyone and welcome to TSMC's second quarter 2026 earnings conference. This is Jeff Hsu, TSMC's Director of Investor Relations and your host for today. Today's event is being webcast live through TSMC's website at where you can also download the earnings release materials.

If you are 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 second quarter 2026, followed by our guidance for the third quarter 2026.

Afterwards, Mr. Huang and TSMC's Chairman and CEO Dr. C. Wei will jointly provide the company's key messages.

Then we will open both the floor and the line for the question and answer session as usual. I'd like to remind everybody that today's discussions may contain forward-looking statements that are subject to significant risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. Please refer to the safe harbor notice that appears in our press release. And now I would like to turn the microphone over to TSMC CFO Mr.

Wendell Huang for the summary of operations and the current quarter guidance. Wendell Huang, Senior Vice President and CFO Thank you, Jeff. Good afternoon everyone. Thank you for joining us today.

My presentation will start with financial highlights for the second quarter of 2026. After that, I will provide the guidance for the third quarter of 2026. Now let's move on to revenue by technology. 2 nanometer process technology contributed 3% of wafer revenue in the second quarter.

3 nanometers, 5 nanometers, and 7 nanometers accounted for 30%, 33%, and 11% respectively. Advanced technology, defined as 7 nanometers and below, accounted for 77% of wafer revenue. Moving on to revenue contribution by platform. HPC increased 20% quarter over quarter to account for 66% of our second quarter revenue.

Smartphone decreased 4% to account for 22%. IoT increased 4% to account for 5%. Automotive increased 15% to account for 4%. DCE increased 5% to account for 1%.

5 trillion NT or 110 billion US dollars. On the liabilities side, current liabilities increased by 144 billion NT quarter over quarter, mainly due to the increase of 58 billion in accounts payable and the increase of 48 billion in accrued liabilities and others. In terms of financial ratios, accounts receivable days increased by 3 days to 29 days. Inventory days increased 7 days to 87 days primarily due to the ramp of N2 technology.

Regarding cash flow and CapEx, during the second quarter we generated about 783 billion NT in cash from operations, spent 496 billion NT in CapEx, and distributed 156 billion NT for Q3 2025 cash dividend. 1 trillion at the end of the quarter. 7 billion dollars. I finished my financial summary.

Now let's turn to the current quarter guidance. 8 billion US dollars, which represents a 12% sequential increase or a 37% year-over-year increase at the midpoint. Based on the exchange rate assumption of US$1 to 32 NT, gross margin is expected to be between 65 and 67%, operating margin between 56 and 58%. This concludes my financial presentation.

Now let me turn to our key messages. I will start by talking about our second quarter 26 and third quarter 26 profitability. 7%, slightly ahead of our guidance primarily due to cost improvement efforts and the slightly higher overall capacity utilization rate partially offset by dilution from our overseas fabs. 7 percentage points to 66% at the midpoint primarily as we expect the steep ramp-up of our 2 nanometer technology to dilute our gross margin by about 3 to 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-nod