Taiwan Semiconductor Manufacturing Company Limited · Q2 2026 call

During the second quarter, we generated about TWD783 billion in cash from operations, spent TWD496 billion in CapEx, and distributed TWD156 billion for third quarter 2025 cash dividend. […] In US dollar terms, our second quarter capital expenditures totaled USD15.7 billion.

we expect our third-quarter revenue to be between USD44.6 billion and USD45.8 billion, which represents a 12% sequential increase or a 37% year-over-year increase at the midpoint.

We have just guided our third quarter gross margin to decrease by 1.7 percentage point to 66% at the midpoint, primarily as we expect the steep ramp-up of our 2-nanometer technology to dilute our gross margin by about 3 to 4 percentage points.

as the scale of our overseas expansion grows, we continue to forecast the gross margin dilution from the ramp-up of overseas fabs in the next several years to be 2% to 3% in the early stages and widen to 3% to 4% in the latter stages.

we have decided to raise our full-year 2026 capital budget to be between USD60 billion and USD64 billion as we continue to invest heavily to support our customers' growth.

In 2025, we paid TWD467 billion in cash dividends, up 28.6% year over year as TSMC shareholders receive a total of TWD18 cash dividend per share. In 2026, they will receive TWD24 per share, up another 33% year over year, and we expect a continued and increasing cash dividends per share in 2027 as well.

Supported by our robust technology differentiation and the broad customer base, we now expect our full-year 2026 revenue growth to be slightly above 40% year over year in US dollar terms.

The emergence of agentic AI is leading to a resurgence in the role of CPUs in AI data centers, which drives more silicon demand in addition to AI accelerators. We believe this is positive for TSMC, as no matter what CPU approach is taken, whether it's x86, ARM-based, or RISC-V architecture, they are almost all TSMC's customers.

Now, with a strong collaboration and support from our leading US customers and the US federal, state, and city governments, we would like to announce an additional USD100 billion investment in Arizona. This is to build several more semiconductor logic wafer fabs for 2-nanometer and below technologies, as well as advanced packaging fabs, to support strong multi-year demand from our leading US Customers.

Compared with N2, A14 will provide a 10 to 15% speed improvement at the same power or 25 to 30% power improvement at the same speed, and close to 20% chip density gain. […] Risk production will start in 2027 and volume production is scheduled for 2028.

Last time, we said our CapEx in the next three years will be significantly higher than the CapEx in the past three years. Now the CapEx in the next three years will be even more significantly higher than the past three years.

our packaging capacity is so tight that now it limits my customers' growth. So we welcome that additional flexibility in the market and so that will help TSMC's frontend wafer business growth, which is a majority part of TSMC's business.

Now remember that I believe every customer tell me the truth, everyone. You put all the truth together, it's not a truth.

This year, we say we increased the capex from USD52 billion to USD56 billion, now USD60 billion to USD64 billion. And you bet that will continue to increase. It's a big money, so we do it carefully.

I believe from this day on all the way to probably 2029, 2030, the demand is very strong. Whether in between there's a dip or not, I'm not very sure. But the trend is so robust that I believe we are witnessing a kind of a new industry.

So we don't suddenly increase our price by which I like to have 4x or 5x. You cannot survive for that kind of for -- for your customer to survive for that kind of price increase. So we earn our value and we make sure that our profit, our gross margin is enough for our long-term sustaining expansion

So yes, I'm really jealous about memory company's 86% gross margin. 86 -- 68, I'll be happy about that.

No, we don't have a number to share because of -- let me say that the gap is very big.

Well, simply put, the most important reason is because that demand continues to increase. […] The second reason is inflation. Now we buy the tools with inflation price, okay?