TSMC's July Revenues Soar: How Should You Play the Stock Now?

Taiwan Semiconductor Manufacturing Company TSM, or TSMC, released its July 2026 revenue report yesterday. Last month, revenues jumped 44.7% year over year to NT$ (New Taiwan Dollar) 467.58 billion, up 5.6% sequentially. Through the first seven months of 2026, revenues totaled NT$2.87 trillion, increasing 37% compared with the same period in 2025.

As the world’s largest semiconductor foundry, TSMC manufactures computer chips for major technology players, including Apple, NVIDIA and Broadcom, based on their proprietary designs. The July results extend the company’s strong second-quarter performance, wherein revenues came in at $40.2 billion, up 33.7% year over year, driven by continued demand for leading-edge process technologies. Adjusted earnings per share (EPS) climbed 74.5% year over year to $4.31, growing faster than revenues.

TSMC is also working to increase wafer output and optimize capacity across nodes in its fab operations to boost profitability.

TSM Stock Price Performance

Over the past 12 months, TSMC has surged 71.7%, slightly trailing the industry’s 71.9% growth. However, the stock has comfortably surpassed the sector’s 29.6% gain and the S&P 500 composite’s 22.7% rise. TSMC has also delivered stronger returns than its peers GlobalFoundries GFS and NXP Semiconductors N.V. NXPI, which have returned 53.4% and 6.1%, respectively, during the same period.

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Factors Working in TSMC’s Favor

AI Demand Remains Robust: TSMC is highly optimistic regarding the multi-year artificial intelligence (AI) megatrend since demand for leading-edge silicon is supported by the growing need for computing power. The company’s customers, including cloud service providers, are also showing strong demand signals and a positive outlook. The rise of Agentic AI is driving greater CPU use in AI data centers, adding to demand for silicon beyond AI accelerators. TSMC expects to benefit from this shift regardless of which CPU approach gains traction, whether it is x86, ARM-based or RISC-V architecture, as these companies are among its clients. Backed by its technology advantages and broad customer base, management raised its 2026 revenue growth forecast to slightly above 40% in U.S. dollar terms, up from its previous expectation of more than 30%.

N2 Ramp-Up Gains Momentum: TSMC’s 2-nanometer (N2) technology entered high-volume manufacturing in the fourth quarter of 2025 with good yield and is progressing in multiple phases at its Hsinchu and Kaohsiung sites. The ramp-up is supported by strong demand from smartphone and high-performance computing (HPC) AI applications. The company expects the N2 family to become another large and long-lasting process node, supported by continued enhancements such as N2 Nanosheet Plus (“N2P”) and A16.

N3 Capacity Expansion:TSMC is executing a global capacity expansion plan to support robust multiyear demand for 3-nanometer (N3) technologies used by smartphone, high-performance computing (HPC), AI, including HBM-based dies, automotive and Internet of Things (IoT) customers. TSMC plans to add three N3 fabs in Taiwan, Arizona and Japan to support the robust multiyear demand pipeline for N3 technologies. In addition to the new fabs, the company continues to convert 5-nanometer (N5) tools to support N3 capacity in Taiwan. The company is also working to optimize capacity across nodes, including flexible capacity support among 7-Nanometer (N7), N5 and N3 nodes.

Dividend Growth Continues:TSMC remains committed to a sustainable increase in its cash dividend per share on both an annual and quarterly basis. The company paid TWD 467 billion in cash dividends in 2025, 28.6% more than a year earlier, bringing the total dividend to TWD 18 per share. For 2026, TSMC expects shareholders to receive TWD 24 per share, a 33% year-over-year increase and anticipates further growth in its cash dividend per share in 2027.

TSM: Estimates Show Upward Momentum

The Zacks Consensus Estimate for TSM’s 2026 EPS stands at $16.45, implying 54.5% growth, while the 2027 estimate is expected to rise another 26.7% to $20.83.Estimates have seen an upward trend over the past 90 days.

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Revenues are expected to increase 35.7% to $166.12 billion in 2026, followed by another 29.8% gain to $215.6 billion in 2027.

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TSMC’s Valuation vs. Peers

Based on the forward 12-month Price/Earnings (P/E), TSM trades at 21.90X compared with its median of 24.39X and the 21.98X industry average. In contrast, GFS commands a higher earnings multiple of 26.91X, while NXPI is cheaper at 15.04X.

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Endnote

TSMC’s robust revenue growth indicates continued strong demand for its leading-edge process technologies. The company is ramping up global N3 capacity as demand remains strong across smartphones, HPC AI, automotive and IoT applications. The N2 node ramp-up is also advancing, with TSMC continuing to enhance the technology.

The company expects to continue raising its dividend in the coming years, adding to the appeal of the stock. TSM has also delivered solid returns over the past year, outperforming the broader sector and close peers. From a valuation standpoint, TSM trades broadly in line with the industry average and below its historical median. With earnings estimates consistently trending higher, the stock presents a compelling investment case right now.         

TSM sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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