---
title: "TSMC Q2 2026: $40.2B revenue, 67.7% GM, Q3 $44.6–45.8B — Aether-backed scorecard, outlook and risks"
description: "TSMC printed $40.2B revenue and 67.7% gross margin with HPC at 66%. Using Aether-indexed Form 20-F and the July 16 press release: FY25 baselines, Q3 arithmetic, capex path, and the concentration, export-control, utility and overseas-fab risks that still sit in the filing."
canonical: https://evidinvest.com/blog/tsm-q2-2026-earnings-results-margin-q3-capex-2026-07-16
date: "2026-07-16"
last_updated: "2026-07-16"
author: "EvidInvest Team"
publisher: "EBD Sweden AB (EvidInvest)"
tags: ["TSM", "TSMC", "Q2 2026", "earnings", "semiconductors", "AI infrastructure", "CoWoS", "SEC filings", "Aether"]
---

# TSMC Q2 2026: $40.2B revenue, 67.7% GM, Q3 $44.6–45.8B — Aether-backed scorecard, outlook and risks

- Published: 2026-07-16
- Author: EvidInvest Team, EvidInvest (published by EBD Sweden AB)
- Canonical URL: https://evidinvest.com/blog/tsm-q2-2026-earnings-results-margin-q3-capex-2026-07-16
- Research, not investment advice.

> TSMC printed $40.2B revenue and 67.7% gross margin with HPC at 66%. Using Aether-indexed Form 20-F and the July 16 press release: FY25 baselines, Q3 arithmetic, capex path, and the concentration, export-control, utility and overseas-fab risks that still sit in the filing.

*Updated after [TSMC](https://evidinvest.com/valuation/TSM) (**[$TSM](https://evidinvest.com/valuation/TSM)**) became fully
searchable on Aether. Quarter figures trace to TSMC's July 16, 2026 investor
materials and Form 6-K accession `0001046179-26-000451`. FY2025 baselines and
risk language are from the Aether-indexed Form 20-F filed April 16, 2026
(accession `0001628280-26-025362`). Research, not investment advice.*

If you follow [NVIDIA](https://evidinvest.com/valuation/NVDA) (**[$NVDA](https://evidinvest.com/valuation/NVDA)**),
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[Micron](https://evidinvest.com/valuation/MU) (**[$MU](https://evidinvest.com/valuation/MU)**) or
[Apple](https://evidinvest.com/valuation/AAPL) (**[$AAPL](https://evidinvest.com/valuation/AAPL)**), Taiwan Semiconductor
Manufacturing Company (**[$TSM](https://evidinvest.com/valuation/TSM)**) just printed the
manufacturing quarter underneath all of them. The headline is clean: revenue
at the top of guide, margins above guide, HPC now two-thirds of the mix, and
management pointing Q3 at a steep 2-nanometer ramp.

The threat is subtler. Investors can treat a top-line hit as proof the AI
cycle is intact while skipping filed details that change how you read both
the quarter and the guide. Net profit got a **NT$63.20 billion** boost from
Vanguard International Semiconductor (VIS) disposal and mark-to-market gains.
Gross margin already carries overseas-fab dilution even in a beat quarter.
Inventory days jumped on the N2 ramp. And the next test is not Q2 — it is
whether Q3 revenue of **$44.6–45.8 billion** holds while margins stay in the
mid-60s.

We laid out that framing before the call in our
[July 12 preview](https://evidinvest.com/blog/tsm-q2-2026-earnings-preview-revenue-margin-capex-2026-07-12):
revenue would be mostly settled by June sales; margin, N3 tightness, capex and
CoWoS language were the scorecard. Here is how Q2 scored — plus a denser
outlook and risk stack grounded in Aether-retrievable company text.

## How we sourced this (Aether + primary filings)

TSMC is now in Aether's equity corpus end-to-end for this post:

| Layer | What we pulled | Why it matters |
| --- | --- | --- |
| Aether `transcript_search` | TSMC Q2 FY2026 press release (July 16, 2026) | Official revenue, margins, node mix, Q3 guide, company profile stats |
| Aether `financial_search` | Form 20-F filed April 16, 2026 | FY2025 platform / geography / node tables, $52–56B 2026 capex, concentration, export-control and utility risks |
| Aether `financial_search` | Monthly revenue 6-Ks (Apr–Jul 2026) | Confirms June sales arithmetic behind Q2 |
| Company IR / EDGAR | Q2 management report + Form 6-K `0001046179-26-000451` | Capex, FCF, VIS gain, inventory days, platform mix QoQ |

Every number below is company-disclosed. Where we do simple arithmetic (H1
totals, remaining H2 capex, Q3 midpoint), we label it as math, not guidance.

## Primary sources

Filed / official (July 16, 2026):

[Form 6-K cover](https://www.sec.gov/Archives/edgar/data/1046179/000104617926000451/tsm-20260716x6k.htm)
— accession `0001046179-26-000451` (earnings package exhibits on EDGAR).

[TSMC Q2 2026 quarterly results and Q3 guidance](https://investor.tsmc.com/english/quarterly-results/2026/q2)
— earnings release, presentation, and management report (platform mix, cash
flow, capex).

[TSMC 2026 monthly revenue](https://investor.tsmc.com/english/monthly-revenue/2026)
— April–June consolidated sales (June posted July 13 after typhoon delay).

Aether-indexed baseline:

[TSMC 2025 Form 20-F](https://www.sec.gov/Archives/edgar/data/1046179/000162828026025362/tsm-20251231.htm)
— accession `0001628280-26-025362` (platform, geography, node revenue,
customer concentration, 2026 capex plan, export-control and utility risks).

[TSMC Q1 2026 results and Q2 guidance](https://investor.tsmc.com/english/quarterly-results/2026/q1)
— prior-quarter actuals and the guide Q2 just beat.

## The preview scorecard

| Preview test (July 12) | Q2 result | Score |
| --- | --- | --- |
| Revenue mostly known from June sales | **$40.20B** — top of **$39.0–40.2B** guide | Settled |
| Gross margin inside **65.5–67.5%** | **67.7%** | Above high end |
| Operating margin inside **56.5–58.5%** | **60.3%** | Above high end |
| N3 still very tight; advanced mix rising | 3nm **30%** of wafer revenue (from 25% in Q1); 7nm+ **77%** | Hit on mix |
| 2026 capex near high end of **$52–56B** | Q2 capex **$15.70B**; H1 YTD **$26.80B** | On pace if H2 holds |
| CoWoS / advanced packaging language | Written release stresses leading-edge + N2 ramp; full CoWoS color still on the call / transcript | Partial |

Revenue behaved exactly as the preview predicted once June landed. Margin was
the surprise — not a miss. Capex spending accelerated hard in the quarter;
whether that still maps to the high end of the full-year range is a
trajectory question, not an empty cell.

## FY2025 baseline: the AI foundry year the quarter sits on

Q2 only makes sense on top of the FY2025 20-F. Aether returns the platform
table cleanly:

| Platform | 2023 (NT$M) | % | 2024 (NT$M) | % | 2025 (NT$M) | % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| High Performance Computing | 934,769 | 43% | 1,476,891 | 51% | **2,192,931** | **58%** |
| Smartphone | 814,914 | 38% | 1,005,130 | 35% | 1,110,816 | 29% |
| IoT | 161,917 | 8% | 165,516 | 6% | 191,047 | 5% |
| Automotive | 133,654 | 6% | 139,323 | 5% | 186,667 | 5% |
| DCE | 47,000 | 2% | 47,961 | 1% | 47,997 | 1% |
| Others | 69,482 | 3% | 59,487 | 2% | 79,596 | 2% |
| **Total** | **2,161,736** | 100% | **2,894,308** | 100% | **3,809,054** | 100% |

HPC alone added **NT$716.0 billion** (+48% YoY) from 2024 to 2025 — more than
the entire company grew in some prior years. Smartphone still grew (**+11%**,
**NT$105.7B**), but lost six percentage points of mix. That is the structural
shift Q2 just extended: HPC went from **58%** of FY2025 to **66%** of Q2
2026.

Customer-geography revenue (by HQ country, same 20-F):

| Geography | 2023 (NT$M) | 2024 (NT$M) | 2025 (NT$M) | 2025 share |
| --- | ---: | ---: | ---: | ---: |
| United States | 1,408,842 | 1,992,280 | **2,834,692** | **~74%** |
| China | 267,154 | 331,673 | 327,503 | ~9% |
| Taiwan | 149,777 | 270,414 | 299,446 | ~8% |
| Japan | 132,072 | 144,240 | 150,428 | ~4% |
| EMEA | 117,348 | 102,761 | 126,584 | ~3% |
| Others | 86,542 | 52,940 | 70,402 | ~2% |

Wafer revenue by node (FY2025, NT$ millions):

| Node | 2023 | 2024 | 2025 | 2025 % of wafer rev |
| --- | ---: | ---: | ---: | ---: |
| 3nm | 108,045 | 459,530 | **794,341** | **~24%** |
| 5nm | 629,300 | 861,319 | **1,179,907** | **~36%** |
| 7nm | 357,271 | 416,790 | 459,258 | ~14% |
| Total wafer revenue | 1,882,518 | 2,514,461 | **3,272,554** | 100% |

Capex path filed in the same 20-F:

| Year | Capex | Notes |
| --- | ---: | --- |
| 2023 | NT$949.8B | — |
| 2024 | NT$956.0B | — |
| 2025 | **NT$1,272.4B (US$40.9B)** | at NT$31.11 weighted avg |
| **2026 (plan)** | **US$52–56B** | focus: N2/N3 capacity (Fab 20/21/22), specialty + advanced packaging (Fab 24), R&D |

Annual capacity exceeded **17 million** 12-inch-equivalent wafers in 2025
(primary expansion in 3nm). The press release adds scale color: in 2025 TSMC
deployed **305** process technologies and manufactured **12,682** products
for **534** customers.

That is the runway Q2 is accelerating on — not inventing.

## June sales made Q2 revenue arithmetic, not drama

[Monthly disclosures](https://investor.tsmc.com/english/monthly-revenue/2026)
for Q2:

| Month | Net revenue (NT$B) | YoY |
| --- | ---: | ---: |
| April | 410.726 | +17.5% |
| May | 416.975 | +30.1% |
| June | 442.680 | +67.9% |
| Q2 total | **1,270.381** | — |

At TSMC's reported Q2 exchange rate of **NT$31.60 per US dollar**, that sum
converts to roughly **$40.2 billion** — matching reported net revenue. June
came in above the midpoint implied in the preview (~NT$427.6B) and near the
top of the band (~NT$446.6B).

| Metric | Q2 2026 actual | Q2 guide | Q1 actual |
| --- | ---: | ---: | ---: |
| Net revenue (US$B) | **40.20** | 39.0–40.2 | 35.90 |
| Exchange rate (USD/NTD) | 31.60 | 31.7 | 31.59 |
| Gross margin | **67.7%** | 65.5–67.5% | 66.2% |
| Operating margin | **60.3%** | 56.5–58.5% | 58.1% |
| Net profit margin | **55.6%** | — | 50.5% |
| Wafer shipments (k pcs, 12"-eq.) | **4,336** | — | 4,174 |

Sequential revenue rose **12.0%** in NT dollars and **33.7%** year on year in
US dollars. Shipments rose only **3.9%** QoQ — so ASP / mix did real work
alongside volume. The beat was margin and mix, not a revenue surprise hidden
in the guide.

H1 2026 math (not guidance): **$35.90B + $40.20B = $76.10B**. That is already
~62% of FY2025's US$122.42B print — before a guided Q3 step-up.

## Profitability: manufacturing strength, plus a one-time lift

| Profit measure | Q2 2026 | QoQ | YoY |
| --- | ---: | ---: | ---: |
| Gross profit (NT$B) | **860.31** | +14.5% | +57.2% |
| Operating income (NT$B) | **766.60** | +16.3% | +65.4% |
| Non-operating items (NT$B) | **95.83** | vs 28.83 in Q1 | vs 29.61 in 2Q25 |
| Net income to parent (NT$B) | **706.56** | +23.4% | +77.4% |
| Diluted EPS (NT$) | **27.25** | +23.4% | +77.4% |
| Diluted EPS per ADR (US$) | **4.31** | — | +77.4% |
| Net profit margin | **55.6%** | +5.1 ppts | +12.9 ppts |

TSMC's management report attributes the gross-margin lift primarily to **cost
improvement and higher capacity utilization**, **partially offset by margin
dilution from overseas fabs**. That sentence matters: even a 67.7% quarter
still carries geographic expansion cost in the gross line.

Separate from operations: **NT$63.20 billion** (~$2.0 billion at ~31.6 FX) of
VIS disposal and mark-to-market gains drove most of the jump in non-operating
income (total non-op **NT$95.83B** vs **NT$28.83B** in Q1). Operating profit
still beat guide; net income beat by more than operations alone would explain.
When you compare Q2 net profit or EPS to Q3 / FY models, strip that item.

Other P&L color from the same report:

- OpEx **NT$98.98B** (7.8% of revenue vs 8.3% in Q1) — operating leverage.
- Other operating income **NT$5.27B**, including insurance claims tied to the
  April 3, 2024 earthquake (the 20-F recorded ~**NT$3B** net quake loss in
  2Q24 and ~**NT$5.3B** net in 1Q25 for the January 2025 quakes).
- Effective tax rate **18.1%** (vs 16.8% in Q1), with higher tax on
  undistributed retained earnings.

## Mix: HPC is 66% — node stack and geography moved with it

| Net revenue by platform | Q2 2026 | Q1 2026 | 2Q25 | QoQ revenue change |
| --- | ---: | ---: | ---: | ---: |
| HPC | **66%** | 61% | 60% | **+20%** |
| Smartphone | **22%** | 26% | 27% | **−4%** |
| IoT | 5% | 6% | 5% | +4% |
| Automotive | 4% | 4% | 5% | +15% |
| DCE | 1% | 1% | 1% | +5% |
| Others | 2% | 2% | 2% | +5% |

| Wafer revenue by node | Q2 2026 | Q1 2026 | FY 2025 (20-F) |
| --- | ---: | ---: | ---: |
| 7nm and below (total) | **77%** | — | ~74% of wafer rev (3+5+7nm) |
| 3nm | **30%** | 25% | ~24% |
| 5nm | **33%** | 36% | ~36% |
| 7nm | **11%** | 13% | ~14% |
| 2nm | **3%** | 0% | — |

| Revenue by customer geography | Q2 2026 | Q1 2026 | 2Q25 | FY2025 (20-F, US HQ) |
| --- | ---: | ---: | ---: | ---: |
| North America | **78%** | 76% | 75% | ~74% United States |
| Asia Pacific | 8% | 9% | 9% | — |
| China | 6% | 7% | 9% | ~9% |
| Japan | 4% | 4% | 4% | ~4% |
| EMEA | 4% | 4% | 3% | ~3% |

HPC rose five percentage points from Q1 and now supplies two-thirds of
revenue, with sequential HPC revenue up **20%**. Smartphone fell to 22% of
mix (−4% QoQ), consistent with CEO C.C. Wei's Q1 warning that memory-price
inflation could pressure price-sensitive end markets even as high-end
handsets held up. North America–based customers are **78%** of revenue —
concentration by platform *and* by HQ geography.

The node table is the capacity story in numbers: 3nm is nearly one-third of
wafer revenue; 2nm has already entered at **3%** in early mass production.
CFO Wendell Huang's written framing for Q3 is explicit:

> "Moving into third quarter 2026, we expect our business to be supported by
> continued strong demand for our leading-edge process technologies,
> including the steep ramp-up of our 2-nanometer technology."

HPC products in the 20-F explicitly include **AI accelerators, AI GPUs, AI
ASICs**, server processors and high-speed networking chips for AI, cloud and
enterprise data centers — plus 3DFabric / TSMC-SoIC / CoWoS advanced
packaging. That is the filing-backed AI link; it is still not a pure "AI
revenue %" disclosure.

## Balance sheet and cash: spending into the ramp

| Balance / cash measure | Q2 2026 | Q1 2026 |
| --- | ---: | ---: |
| Cash & marketable securities (NT$B) | **3,518.01** | 3,383.60 |
| Inventories (NT$B) | **385.53** | 311.45 |
| Inventory days | **87** | 80 |
| A/R days | 29 | 26 |
| Net PP&E (NT$B) | **4,302.88** | 3,954.68 |
| Operating cash flow (NT$B) | **783.36** | 698.97 |
| Capex (NT$B / US$B) | **496.00 / 15.70** | 350.76 / 11.10 |
| Free cash flow (NT$B) | **287.36** | 348.21 |
| H1 2026 capex (US$B) | **26.80** | — |

Inventory days rose **seven days to 87**, "primarily due to N2 ramp." Free
cash flow fell sequentially even as operating cash rose, because capex
(**$15.70B** in the quarter, **$26.80B** year-to-date) outpaced the OCF
gain. That is what a steep leading-edge build looks like on the cash
statement: still strongly FCF-positive, but the spend is real.

Capacity-reservation signal from the 20-F (year-end): temporary receipts from
customers were **NT$189.9B** at Dec 31, 2025, down from **NT$291.1B** at
Dec 31, 2024. Contract liabilities were **NT$50.0B** (from **NT$89.4B**).
Lower prepayments can mean customers are drawing reserved capacity — or that
new reservation intensity cooled. Either way it is a leading indicator to
watch alongside monthly sales, not a one-line bull/bear.

## Outlook: five numeric paths from here

### 1. Q3 guide — another ~$5B step-up, softer margins at the midpoint

| Metric | Q3 2026 guide | Q2 actual | Implied QoQ (mid) |
| --- | ---: | ---: | ---: |
| Net revenue (US$B) | **44.6–45.8** | 40.20 | **~+12.4%** at $45.2 mid |
| Exchange rate (USD/NTD) | **32.0** | 31.60 | +1.3% NTD weaker vs $ |
| Gross margin | **65.0–67.0%** | 67.7% | **~−170 bps** at 66.0% mid |
| Operating margin | **56.0–58.0%** | 60.3% | **~−330 bps** at 57.0% mid |

Read the guide as three simultaneous statements:

1. **Demand** — another sequential revenue jump on the same order as Q1→Q2,
   driven by leading-edge demand and a **steep N2 ramp**.
2. **Margin path** — midpoint gross margin steps down from 67.7% into the
   mid-60s. That fits the Q1 roadmap: N2 ramp and overseas fabs dilute even
   when utilization stays high.
3. **FX** — Q3 assumes **NT$32.0** per dollar vs **31.60** realized in Q2.

Dollar bridge (illustrative math, not company FY guidance):

| Scenario | Q3 revenue | vs Q2 | Rough H1+Q3 |
| --- | ---: | ---: | ---: |
| Low end of guide | $44.6B | +10.9% | $120.7B |
| Midpoint | $45.2B | +12.4% | $121.3B |
| High end | $45.8B | +13.9% | $121.9B |

H1 alone is already **$76.1B**. A midpoint Q3 puts the company past FY2025's
full-year US dollar print (**$122.42B**) with a full Q4 still ahead — which
is why the market cares less about "did they beat Q2" and more about whether
the **mid-60s margin + N2 ramp** combination survives the next two prints.

### 2. Capex path — H2 still has ~$25–29B to spend if the band holds

| Capex frame | Amount |
| --- | ---: |
| 2026 filed band (20-F) | **$52–56B** |
| H1 2026 actual | **$26.80B** |
| Remaining if year hits low end ($52B) | **~$25.2B** |
| Remaining if year hits high end ($56B) | **~$29.2B** |
| Q2 run-rate annualized (×4) | **~$62.8B** (above band — not a forecast) |

H1 at **$26.8B** is roughly half of a $52–56B year if H2 matches. Q2 alone
at **$15.7B** is a hot spend quarter; sustaining that pace would overshoot
the filed band, so either H2 slows or management revises. The 20-F says 2026
spend focuses on **N2/N3 capacity** (Fab 20, 21, 22), **specialty + advanced
packaging** (Fab 24), and **R&D**.

### 3. N2 / advanced-mix outlook

| Mix marker | Level | Outlook question |
| --- | ---: | --- |
| N2 wafer revenue | **3%** in Q2 | Does it climb toward high-single-digits by year-end? |
| N3 wafer revenue | **30%** (from 25% in Q1; ~24% in FY25) | Still the utilization engine |
| 7nm and below | **77%** of wafer revenue | Can it hold mid-to-high 70s as N2 ramps? |
| HPC platform | **66%** of net revenue (58% in FY25) | Is 2H still an HPC story if smartphone stays soft? |

Bull path: N2 ramps without breaking the GM band; HPC stays ≥65% of mix;
monthly sales track the Q3 bracket. Base path: GM lands mid-band (66%), N2
share rises slowly, overseas dilution visible every quarter. Bear path: Q3
revenue sticks but GM tests the **65%** floor while inventory days stay
elevated — the market then reprices "AI foundry" as a margin-dilution story.

### 4. Overseas footprint and the US build

A March 2025 6-K (Aether-indexed) said TSMC intends to expand US investment
to **US$165 billion** (prior **$65B** Arizona plan plus **$100B** for three
new fabs, two advanced packaging facilities and an R&D center). That is the
multi-year dilution and resilience trade in one number: more geographic
redundancy, structurally higher cost vs Taiwan megafabs. Q2's own language —
gross margin helped by utilization, **partially offset by overseas fabs** —
is the near-term P&L expression of that strategy.

### 5. What to watch next (30–90 days)

- Monthly sales into Q3 vs the **$44.6–45.8B** bracket
- N2 wafer-revenue share after the early **3%** print
- Gross margin vs the **65–67%** band as overseas capacity and N2 ramp
- Capex pace vs remaining **~$25–29B** of a $52–56B full-year frame
- CoWoS / advanced-packaging tightness language once the call transcript is
  out (Q1: large-reticle CoWoS still the main approach; packaging "very
  tight"; CoPoS pilot "a couple of years later")
- Smartphone sequential trend after the −4% QoQ soft patch
- Temporary receipts / contract liabilities on the next balance sheet (capacity
  reservation intensity)

## Risks: what the beat does *not* retire

A record-looking foundry quarter does not erase the risk stack. These are the
ones that still matter after July 16 — grounded in company language and the
filed 20-F, not a vibe check.

### 1. Customer concentration is still rising into the AI cycle

From the Aether-indexed 2025 20-F (Item 2):

| Filing measure | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: |
| Top 10 customers as % of revenue | **70%** | **76%** | **78%** |
| Largest customer | **25%** | **22%** | **19%** |
| Second-largest customer | **11%** | **12%** | **17%** |

The top-ten share rose eight points in two years. The largest customer's
share fell, but the **second-largest rose to 17%** — concentration broadened
inside the top two rather than disappearing. Q2's own geography print is even
more North America–heavy at **78%**. HPC at **66%** of revenue means the AI /
high-end compute cycle and a small set of fabless (and system) buyers are the
same trade.

The 20-F is explicit that a more concentrated base "may subject our revenue
to seasonal demand fluctuations," that system companies designing their own
silicon can create "significant variations in our sales if the growth of
their products and services, particularly in the AI sector, is volatile,"
and that export controls aimed at major customers can cut demand.

### 2. One-time gains can flatter the "quality" of EPS

VIS disposal / MTM gains of **NT$63.20B** are disclosed and large. Operating
margin beat guide without them; **net income and EPS did not**. Models that
annualize Q2 net profit without stripping non-op will overstate run-rate
earnings power into Q3–Q4. Strip ~**NT$2.0B / ADR ~$0. something** of that
distortion before you chain EPS growth.

Rough quality check (illustrative): Q2 net income **NT$706.56B** less
**NT$63.20B** VIS-related ≈ **NT$643B** — still a huge quarter, but closer to
the operating story (+~12% QoQ on that adjusted lens vs +23.4% reported).

### 3. Margin dilution is structural, not a footnote

Management already says overseas fabs diluted Q2 gross margin *inside* a beat.
Q3 guides GM **65–67%** and OM **56–58%** — below Q2 actuals at the midpoint.
N2 ramp inventory (87 days) is the balance-sheet twin of that dilution story.
The bull case is utilization and cost improvement keep overpowering dilution;
the risk is the dilution stack (N2 + overseas + US$165B US build) wins a
quarter before demand does.

### 4. Capex and free-cash-flow timing risk

Q2 FCF fell QoQ because capex jumped to **$15.70B**. That is not distress —
ending cash & marketable securities are **NT$3,518B** — but it is a
commitment. If demand visibility softens while spend stays high, the market
reprices TSMC as a cash-conversion story, not just a revenue story. If spend
slows while AI demand stays tight, the constraint shifts back to capacity /
packaging.

### 5. End-market bifurcation (HPC vs smartphone)

HPC +20% QoQ and smartphone −4% QoQ is a clean split. FY2025 already showed
the same pattern at annual scale (HPC +48%, smartphone share down to 29%).
The risk is not that HPC fails tomorrow; it is that smartphone / broader
consumer softness lasts longer than the AI narrative assumes, or that
memory-cost pressure (Wei's Q1 theme) bleeds into handset builds that still
matter for leading-edge utilization between AI peaks.

### 6. FX

Guides are given in US dollars with an explicit NT$ assumption. A move in
USD/NTD changes NT-dollar margins and translation optics even when US-dollar
demand is unchanged. Q3's jump from 31.60 realized to **32.0** assumed is
itself a modeling input, not noise. At scale: every **NT$0.10** move on
~$45B quarterly revenue is roughly **NT$4.5B** of translation — before any
margin effect from a local-currency cost base.

### 7. Export controls and dual-use AI compute rules

The 20-F details the October 2022/2023 U.S. "October Rules" on advanced
computing ICs and notes that in **January 2025** the U.S. issued further
rules under which TSMC "may need to obtain an export license prior to
shipping products using **16-nanometer or below** process to specified
destinations unless specific conditions are met." Shipments "may be delayed
or prohibited." TSMC Nanjing's Validated End-User authorization **expired in
December 2025**; operations now depend on an **annual export license** with
"no assurance" of renewal. China was still ~**9%** of FY2025 revenue and
**6%** of Q2 — not the growth engine, but a live compliance and demand risk.

### 8. Geopolitics and Taiwan manufacturing concentration

TSMC's safe-harbor language points readers to the 20-F risk factors for what
can make forward statements wrong. Geographic revenue concentration in North
America customers, manufacturing concentration in Taiwan, export-control
regimes, and overseas fab execution are not retired by a strong June quarter.
They are the reason the company is building outside Taiwan *and* the reason
that build dilutes margins.

### 9. Electricity, water, and natural disasters

Filed utility risk is concrete: Taiwan electricity tariffs applicable to TSMC
rose **25%** effective April 1, 2024 vs 2023, then another **14%** in October
2024. The 20-F flags drought and grid-stress risks for water and power in the
science parks. Earthquake history is not abstract either — ~**NT$3B** net
loss after the April 2024 quake and ~**NT$5.3B** net after January 2025
quakes — with Q2 2026 still booking related insurance recoveries.

### 10. Advanced packaging still the hidden bottleneck

The written July 16 release is light on new CoWoS capacity numbers. Until the
call transcript is filed, treat third-party wafer / CoWoS unit forecasts as
outside estimates — not company guidance. For
[NVIDIA](https://evidinvest.com/valuation/NVDA), [AMD](https://evidinvest.com/valuation/AMD),
[Broadcom](https://evidinvest.com/valuation/AVGO) and the HBM stack (including
[Micron](https://evidinvest.com/valuation/MU)), packaging remaining "very tight" (Q1 language) can
cap sell-in even when TSMC wafer revenue prints well. The 20-F's own HPC
section treats CoWoS / SoIC / InFO as part of the product, not an optional
extra.

### 11. Customer consolidation and AI demand volatility

The 20-F warns that industry M&A among customers "will further decrease the
overall number of our customer pool," and that AI-sector growth that is
"volatile or not sustainable" can create significant sales variation. A 66%
HPC quarter increases that beta: the upside and the single-cycle risk are the
same exposure.

## Valuation and related research

Click any ticker above (or below) for the EvidInvest fair-value page:

- [TSMC ($TSM) valuation](https://evidinvest.com/valuation/TSM) · [earnings metrics](https://evidinvest.com/earnings/TSM)
- [NVIDIA ($NVDA) valuation](https://evidinvest.com/valuation/NVDA)
- [AMD ($AMD) valuation](https://evidinvest.com/valuation/AMD)
- [Broadcom ($AVGO) valuation](https://evidinvest.com/valuation/AVGO)
- [Micron ($MU) valuation](https://evidinvest.com/valuation/MU)
- [Apple ($AAPL) valuation](https://evidinvest.com/valuation/AAPL)
- [July 12 Q2 preview](https://evidinvest.com/blog/tsm-q2-2026-earnings-preview-revenue-margin-capex-2026-07-12)

## Sources

- [Form 6-K, accession 0001046179-26-000451](https://www.sec.gov/Archives/edgar/data/1046179/000104617926000451/tsm-20260716x6k.htm)
- [TSMC Q2 2026 quarterly results](https://investor.tsmc.com/english/quarterly-results/2026/q2)
- [TSMC 2026 monthly revenue](https://investor.tsmc.com/english/monthly-revenue/2026)
- [TSMC Q1 2026 quarterly results](https://investor.tsmc.com/english/quarterly-results/2026/q1)
- [TSMC 2025 Form 20-F, accession 0001628280-26-025362](https://www.sec.gov/Archives/edgar/data/1046179/000162828026025362/tsm-20251231.htm)
- [TSMC US investment expansion 6-K (Mar 2025)](https://www.sec.gov/Archives/edgar/data/1046179/000104617925000015/tsmcexpandinvestmentintheu.htm)
- [EvidInvest Q2 preview (July 12)](https://evidinvest.com/blog/tsm-q2-2026-earnings-preview-revenue-margin-capex-2026-07-12)
- Aether `transcript_search` / `financial_search` over TSM Q2 FY2026 press
  release, 2025 Form 20-F, and 2026 monthly revenue 6-Ks (retrieval date
  2026-07-16)

*Research assembled from TSMC's July 16 earnings release, management report,
presentation, monthly revenue tables, and the Aether-indexed 2025 20-F. Call
Q&A / official transcript may add CoWoS and FY color not in the written
package. Illustrative bridges (H1 totals, remaining H2 capex, adjusted net
income) are arithmetic on disclosed figures, not company guidance. Research,
not investment advice.*

---

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