TSMC Q1 profit jumps 58% as AI chip boom drives $35.9bn revenue record

TSMC (TSM) keeps surprising the Street, and itself. The world’s largest contract chipmaker posted a 58.3 per cent jump in first-quarter net income Thursday, reaching NT$572.48bn (US$18.2bn). Revenue hit NT$1,134.10bn (US$35.9bn), up 35.1 per cent from a year earlier. Four straight quarters of record results. The AI build-out shows no sign of slowing.

Those numbers, detailed in a regulatory filing with the US Securities and Exchange Commission and discussed on the company’s earnings call, make plain how thoroughly the AI investment cycle has remade the semiconductor supply chain. Nvidia (NVDA) and Apple (AAPL), TSMC’s two biggest customers by a wide margin, both rely on its most advanced fabrication nodes for their flagship products. The company said its order book is filled well into 2027.

Gross margin came in at 66.2 per cent. That is 120 basis points above the top end of TSMC’s own guidance and up from 65.4 per cent in the prior quarter. Operating margin widened to 54.3 per cent. “Our business in the first quarter was supported by strong demand for our leading-edge process technologies,” Wendell Huang, TSMC’s chief financial officer, said in the earnings release.

The high-performance computing segment, which includes AI accelerator chips sold to Nvidia, AMD and the in-house silicon teams at Amazon (AMZN), Microsoft (MSFT) and Google (GOOGL), accounted for 61 per cent of TSMC’s revenue. That was up 20 per cent from the prior three months. Revenue from the company’s most advanced 3-nanometre process contributed 29 per cent of total wafer revenue. The 5-nanometre node added 33 per cent and 7-nanometre contributed 17 per cent. Smartphone chips, still TSMC’s second-largest end market, made up 28 per cent of revenue, helped by Apple’s adoption of the latest N3E process.

“AI-related demand continues to be extremely robust,” chairman and chief executive C.C. Wei told analysts on the call. Wei expects AI-related revenue to more than double in 2026, building on a year in which the category already tripled. He did not give a specific figure. Morgan Stanley analysts estimate TSMC’s AI revenue was roughly US$12bn in 2025.

Not everyone frames 2026 as a pure demand story. William Li, senior analyst at Counterpoint Research, points to the supply side. “The narrative for 2026 is as much about resource constraints as it is about growth,” he told CNBC. “Demand still significantly outpaces supply and isn’t showing any major sign of slowing down.” The real bottleneck, Li argues, is advanced packaging, not wafer fabrication. TSMC’s Chip-on-Wafer-on-Substrate (CoWoS) technology, which stacks multiple chips into a single package, is essential for Nvidia’s most powerful AI accelerators and remains stubbornly short of demand.

Guidance was strong across the board. TSMC expects second-quarter revenue of US$36.8bn to US$38.2bn, above the US$36.2bn Refinitiv consensus. The company kept its full-year 2026 capital expenditure budget at US$38bn to US$42bn, with the majority going toward advanced packaging capacity expansion. The budget also funds the ramp of TSMC’s 2-nanometre process node, set for volume production in the second half of 2026. The N2 node should deliver a 10 to 15 per cent speed improvement at the same power level as the current N3E process.

TSMC’s New York-listed ADRs closed at US$417.72 on Thursday, up roughly 4 per cent. That values the company at about US$2.17tn. The stock is up 24 per cent year-to-date, outpacing the Philadelphia Semiconductor Index’s 18 per cent gain. In Taipei, TSMC shares rose 2.8 per cent ahead of the earnings release. Those local shares account for the bulk of the company’s equity value.