TSMC’s first-quarter gross margin surpasses 66%, the stock price hits a new high, and analysts continue to raise their profit forecasts for the next two years

TSMC (Taiwan Semiconductor Manufacturing Company, NYSE ticker symbol TSM）amid cost pressures from its 2-nanometer process and the expansion of overseas wafer fabs across multiple countries, still posted strong profitability in the first quarter. Its gross margin rose to 66.2%. As of the time of this writing, the stock price hit a record high, reaching $405.52 per share. Wall Street analysts are closely watching whether its revenue growth momentum and competitive advantages in advanced packaging technology can continue. Pure market observation, not any investment advice.

TSMC (TSM) gross margin reached 66.2%, absorbing pressure from rising costs

In recent years, TSMC has been actively expanding global wafer fabs and its 2-nanometer process, facing significant challenges from cost increases. According to prior financial analyses and estimates, the increase in operating expenses brought by overseas expansion may cause this year’s gross margin to decline by 2% to 3 percentage points. However, this year’s first-quarter financial report shows a gross margin of 66.2%, up 740 basis points from the same period last year. On a quarter-over-quarter basis, (Sequential Expansion) increased by 390 basis points, indicating that the company can currently offset input cost increases through automated production and government incentive measures in various countries.

TSMC (TSM) Q2 revenue outlook

Analysts indicate that in the second quarter of this year, the gross margin provided by TSMC is expected to fall between 65.5% and 67.5%, with the midpoint up 30 basis points from the prior quarter. First-quarter revenue reached $35.9 billion, a year-over-year growth rate of 40.6%, showing that this growth momentum is largely driven by strong demand for artificial intelligence and advanced computing chips. According to the Zacks market analysts’ consensus expectations (Zacks Consensus Estimate), benefiting from its global expansion strategy and high utilization rates of high-end capacity, TSMC’s revenue in 2026 and 2027 is expected to grow by 31.2% and 25.5%, respectively, indicating that the market for advanced processes is still in a highly growth stage.

How is TSMC responding to competitive conditions from peers in the advanced packaging sector?

In the contract manufacturing market, Intel and GlobalFoundries are actively expanding their market share for advanced packaging technologies. Intel, through its IDM 2.0 strategy, is investing in the development of Foveros and EMIB technologies, aiming to provide system-level foundry services that combine manufacturing and packaging. GlobalFoundries is focused on mature process nodes, concentrating on efficient integration solutions for specific application areas. Despite ongoing investment by competitors, TSMC still maintains a leading position in cutting-edge artificial intelligence chips thanks to its large customer base, long-accumulated scale in process technology, and the highly integrated advantages of packaging technology and the manufacturing of advanced process nodes—ensuring its competitiveness in the advanced packaging (Advanced Packaging) market.

Does the current stock valuation match expectations for future profit growth?

TSMC’s stock performance has been outstanding over the past year, with a gain of about 130.7%, significantly outpacing the同期科技板塊（Computer and Technology Sector）52.6%. As of the time of this writing, TSMC’s expected forward P/E ratio for the next 12 months is about 24.27x, slightly below the industry average of 25.32x, reflecting that its valuation remains relatively reasonable. The market is optimistic about profit expectations for 2026 and 2027, projecting growth of 41.1% and 24.2%, respectively. With transparent financial reporting and technological leadership, analysts have continued to revise upward their profit expectations for the next two years over the past seven days, indicating that the market has strong confidence in TSMC.

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