TSMC posted a blockbuster second quarter with revenue hitting $40.2 billion, a 33.7% jump compared to last year. Earnings per share soared 74% to $4.31, beating Wall Street’s expectations by 37 cents. Despite these strong numbers, the stock dropped 3.4% to around $385 as investors digested the company’s aggressive spending plans.
Margins reached new heights, with gross margin at 67.7% and operating margin climbing to 60.3%, both well above industry norms. High-performance computing now drives 66% of TSMC’s revenue, up 20% from the previous quarter, signaling solid demand in that sector. The rollout of cutting-edge chip nodes continues rapidly: 2nm technology contributed 3% of wafer revenue in its first full quarter, while 3nm and 5nm accounted for 30% and 33%, respectively.
Huge Capital Spending Boosts U.S. Presence
The company raised its 2026 capital expenditure outlook to between $60 billion and $64 billion. On top of that, TSMC unveiled an extra $100 billion investment in the U.S., pushing its total Arizona commitment to an eye-popping $265 billion. This funding will support four additional advanced fabs focused on 2nm and below technologies, plus expanded packaging capabilities. The first Arizona fab is already producing 4nm chips and the second is set to start 3nm production in late 2025.
Analysts responded by boosting price targets. Needham pushed its target to $530 from $480, projecting 40% revenue growth in 2027 and 24% in 2028, with capital spending climbing to $80 billion and $90 billion those years. DA Davidson raised its target to $500 and reaffirmed a Buy rating on the stock.
Seeking Alpha’s quant system currently assigns TSMC a Hold rating, praising its A+ profitability but flagging a D- valuation, as shares trade at around 23 24 times forward earnings, above the five-year average of 18.5 22 times. Still, the company’s strong quarterly results and aggressive investment signal confidence in future growth.
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