TSMC (TSM) Q1 profit rises 58% to record NT$572bn on AI chip demand

TSMC (TSM) Q1 profit rises 58% to record NT$572bn on AI chip demand

Taiwan Semiconductor Manufacturing Co. (TSM) posted record net income of NT$572.48 billion ($18.2 billion) for the first quarter. The 58.3 per cent jump from the same period a year earlier stretched its run of record quarterly profits to four. AI chip demand kept the world’s largest contract chipmaker’s most advanced fabrication lines at near-full capacity through the period.

Revenue climbed 40.6 per cent to $35.90 billion in US-dollar terms. That cleared the company’s own guidance range of $34.6 billion to $35.8 billion and was the fastest year-on-year expansion in six quarters. Diluted earnings per share reached NT$22.08, or $3.49 per American depositary receipt. The consensus estimate from analysts polled by the company was NT$20.88.

Gross margin expanded to 66.2 per cent. TSMC had forecast 63 to 65 per cent for the period. Higher utilisation rates across its 3nm and 5nm fabrication plants offset rising electricity costs. The ramp of overseas facilities, which typically dilute margins in their early stages, was absorbed without denting profitability. “Our business in the first quarter was supported by strong demand for our leading-edge process technologies,” senior vice-president and chief financial officer Wendell Huang said in the company’s earnings statement.

What drove the quarter

TSMC’s 3-nanometre and 5-nanometre process nodes together generated more than half of wafer revenue in the quarter, the company disclosed in its filing with the US Securities and Exchange Commission. High-performance computing, the segment that captures AI accelerator chips for customers including Nvidia and Advanced Micro Devices, contributed 58 per cent of total revenue. A year earlier the figure was 53 per cent. In the prior quarter it was 55 per cent.

The smartphone segment, TSMC’s second-largest, accounted for 28 per cent of revenue. It was broadly flat sequentially. The automotive and internet-of-things businesses each represented 5 per cent of the total.

“AI-related demand continues to be extremely robust,” chairman and chief executive C.C. Wei told analysts on the post-earnings call. Orders from hyperscale cloud providers remained far in excess of what TSMC could currently produce. Wei described the supply-demand gap as a multi-year structural issue. The company is adding fabrication capacity to close it.

The guidance

For the second quarter, TSMC guided revenue to a range of $39.0 billion to $40.2 billion. The midpoint implies roughly 10 per cent sequential growth from a record first quarter. Gross margin for the June quarter is expected to land between 64 and 66 per cent.

Full-year 2026 revenue is forecast to grow more than 30 per cent in US-dollar terms. The company left that outlook unchanged from its January forecast even as it raised its capital expenditure budget. The additional spending targets advanced packaging facilities and overseas fabrication plants. Both are capacity-constrained.

William Li, a senior analyst at Counterpoint Research, said the supply-demand imbalance in advanced logic showed little sign of abating. “Demand still significantly outpaces supply and isn’t showing any major sign of slowing down,” Li told CNBC. He added that TSMC’s pricing power had strengthened as customers competed for limited wafer allocations across the 3nm and 5nm nodes.

What’s next

TSMC’s American depositary receipts moved only modestly in after-hours trading despite the record print. Seeking Alpha noted that strong results had failed to ignite fresh rallies during the current earnings cycle. The stock had already gained 38 per cent over the preceding twelve months. Much of the AI-fuelled growth looked priced in.

The company lifted its 2026 capital expenditure forecast above previous estimates. Construction is under way on new fabrication capacity in Arizona and Kumamoto, Japan, alongside advanced packaging lines in Taiwan. Those packaging lines are critical to serving Nvidia’s next-generation Blackwell Ultra and Vera Rubin platforms. Both are expected to begin ramping in the second half of the year.

The second quarter is already pointed toward double-digit sequential growth. Full-year expansion is tracking north of 30 per cent. As demand for AI compute accelerates, TSMC’s hold on the market for advanced chip manufacturing is only tightening.