Taiwan Semiconductor Manufacturing Co. Ltd.Q1 gross margin of 66.2% exceeded guidance, driven by cost cuts and utilization; Q2 margin guidance also positive

Taiwan Semiconductor Manufacturing Company reported a first-quarter 2026 gross margin of 66.2%, up 390 basis points sequentially and exceeding the high end of management's guidance by 120 basis points. The improvement was driven by cost reduction efforts, higher capacity utilization, and a favorable foreign exchange rate. For the second quarter, TSM expects gross margin to increase by 30 basis points to 66.5% at the midpoint, benefiting from higher utilization and ongoing cost improvements but partially offset by dilution from overseas fabs. Beyond the second quarter, the initial ramp-up of 2-nanometer technology is projected to dilute full-year gross margin by 2% to 3%, while expanding overseas manufacturing capacity is expected to create gross margin dilution of 2% to 3% in early stages, increasing to 3% to 4% as those facilities scale over the coming years. The company also noted that recent Middle East developments could raise prices for certain chemicals and gases, though the financial impact remains uncertain.
Taiwan Semiconductor Manufacturing Co. Ltd.Q1 gross margin of 66.2% exceeded guidance, driven by cost cuts and utilization; Q2 margin guidance also positive
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