GoKawiilTSMC this week posted financial results for the first quarter of 2026 and lifted its 2026 revenue guidance and capital expenditures to the high end of its original expectations. Accelerating sales of AI accelerators and accompanying hardware increases demand for TSMC's wafers, which is why the company said it would build another 3nm-capable fab in addition to those already planned. But while the company is confident in its long-term prosperity driven by the AI megatrend, it warned about profitability due to the war in the Middle East.
AI megatrend earns TSMC tens of billions in one quarter
"Our conviction in the multiyear AI megatrend remains high, and we believe the demand for semiconductors will continue to be very fundamental," said C.C. Wei, chief executive of TSMC, during the company's earnings conference. He admitted that capacity during the quarter was 'tight,' whereas Jen-Chau Huang, TSMC's chief financial officer, confirmed 'higher-than-expected' overall capacity utilization.
(Image credit: TSMC)
Indeed, the HPC segment (an ambiguous term that TSMC uses to describe everything from client PCs to high-end AI accelerators) accounted for 61% of TSMC's revenue in Q1 2026 (or approximately $21.9 billion), up from 46% in Q1 2024 (approximately $8.68 billion), which represents colossal growth in just two years. The smartphone segment accounted for 26% of TSMC's earnings in Q1 2026, whereas IoT and automotive commanded 6% and 4% of the company's revenue in the same quarter.
Article continues below
(Image credit: TSMC)
Based on TSMC's annual report released this week, it looks like Nvidia, with its aggressive capacity booking strategy, has become TSMC's top customer, accounting for 19% of the foundry's revenue for 2025, dethroning Apple, which was responsible for 17% of TSMC's earnings for 2025.
(Image credit: TSMC)
On the fabrication technologies side of matters, TSMC's 5nm-class nodes accounted for 36% of the company's wafer revenue in Q1 2026 (driven by the success of Nvidia's Blackwell AI accelerators), 3nm-class processes were responsible for 25% of the foundry's earnings, while 7nm-class technologies represented 7% of TSMC's revenue. In general, advanced nodes (7nm and below) accounted for 74% of the company's earnings. Yet, keep in mind that while TSMC is mass producing 2nm-class (N2) chips for its customers, it has not formally shipped them to clients and therefore does not recognize 2nm-related revenue.
... continue reading