Taiwan Semiconductor eyes $40B quarter as AI demand powers July 16 earnings

Taiwan Semiconductor Manufacturing Co. heads into its July 16 earnings report with consensus revenue near $40 billion, up roughly 32% from a year ago, as AI infrastructure spending shows no sign of slowing.

"The results validate our strategy of aggressive capacity expansion to meet AI demand," CEO C.C. Wei said on the company's April earnings call, where he signaled full-year 2026 revenue growth close to 30% in US dollar terms.

TSMC guided second-quarter revenue between $39 billion and $40.2 billion, with gross margin in a 65.5% to 67.5% range. The company's combined April and May revenue grew about 24% year-over-year, trailing the roughly 35% pace some investors had modeled for the quarter, introducing modest near-term jitters. Earnings per ADR unit are expected to rise more than 50% from a year ago, according to consensus estimates compiled by Bloomberg.

The stakes extend beyond a single quarter. TSMC sits at the chokepoint of the AI hardware buildout, fabricating nearly every leading accelerator — Nvidia's GPUs, AMD's MI-series chips, and custom ASICs from Google and Amazon. Amazon, Microsoft, Alphabet and Meta Platforms are together on pace to spend about $700 billion on capital expenditure this year, up roughly three-quarters from 2025, with the bulk flowing into AI data centers and custom silicon.

What Investors Want to Hear

The three questions dominating the call are whether TSMC raises its full-year revenue guidance above the current "above 30%" target, whether it lifts its 2026 capital budget above the $52 billion to $56 billion range, and what management says about CoWoS advanced packaging capacity. Nvidia alone has reportedly secured roughly 60% of TSMC's CoWoS output for 2026, leaving other chipmakers to compete for what remains.

TSMC has responded with one of the most aggressive capacity buildouts in its history, targeting a compound annual growth rate above 80% for CoWoS capacity between 2022 and 2027. Industry trackers estimate the gap between packaging supply and demand, which ran as wide as 20% earlier this year, could narrow to roughly 10% by the end of 2026.

Pricing Power and Margins

TSMC has told major customers including Apple, Nvidia and Qualcomm to expect a fourth consecutive year of price increases starting in 2026, with hikes running 3% to 10% depending on the node. A 2-nanometer wafer now costs upward of $30,000, more than 50% above the cost of a 3-nanometer wafer. The company has guided to gross margin dilution of 2 to 3 percentage points this year from the 2-nanometer ramp and overseas expansion, even as pricing offsets much of that pressure.

Bank of America maintains a Buy rating on the stock, citing cloud AI demand stretching into 2026. Polymarket traders are assigning 94% probability to a Q2 earnings beat. TSM shares trade at $432.57 after a 9.42% pullback from the 52-week high of $479, but remain up 43% year-to-date and 91% over the past year.

The guidance raise, if it comes, would signal management expects AI demand to accelerate through the second half. Investors will watch the July 16 call for updated segment margins and any revision to the 2026 capital spending plan.

This article is for informational purposes only and does not constitute investment advice.