Taiwan Semiconductor Manufacturing - ADR

Q2’26 performance & profitability - Revenue guidance was strong; Q2 revenue ended at $40.2B (at the high end of guidance). - Gross margin (GM) improved sequentially by +150 bps to 67.7%, slightly ahead of guidance. - Key drivers: cost improvement + slightly higher capacity utilization, partially offset by GM dilution from overseas fabs.

Q3’26 outlook (what investors should model) - Revenue forecast: $44.6B–$45.8B → +12% sequential and +37% YoY at the midpoint. - GM forecast: 65%–67% (midpoint ~66%); Operating margin: 56%–58%. - Main headwind called out by management: GM expected to decline ~1.7pp vs. Q2 midpoint guidance, mainly due to steep 2nm ramp dilution.

Full-year growth & demand story (AI-centric, still cautious elsewhere) - Full-year 2026 revenue growth now expected “slightly above 40% YoY” (USD terms)—up from earlier expectations (i.e., revised up). - AI demand remains “extremely robust”; management cites strong signals from cloud service providers and high conviction in the multi-year AI megatrend. - Agentic AI is highlighted as a *new accelerant* for compute demand: resurgence of CPU roles in data centers (in addition to accelerators), potentially supporting more silicon demand across CPU/GPU mixes. - Management is more prudent on consumer / price-sensitive segments due to rising component prices and macro uncertainty (but AI is offsetting).