TSMC's Q2 Revenue Reaches Upper Guidance, Bernstein Maintains Outperform Rating

TSMC's Q2 revenue reached the upper end of the company's guidance range, slightly exceeding market expectations, indicating strong demand for advanced processes and AI-related products. Bernstein maintains an Outperform rating for TSMC, with a target price of NT$2,780 for the Taiwan stock market and US ADR target price of $430, implying an upside potential of about 14%. Bernstein expects investors to focus on the expansion plans, gross margin outlook, and the ramp-up of the N2 process during the earnings call. TSMC's capital expenditures are projected to be $56 billion in 2026 and $68 billion in 2027, with CoWoS monthly capacity expected to reach 135,000 units by the end of 2026 and 195,000 units by the end of 2027. Regarding gross margins, it is anticipated to rise from approximately 60% to 65% in 2026, driving a year-on-year increase in earnings per share of about 50%, reaching NT$102. The report notes that due to tight capacity in TSMC's advanced processes, customer interest in Samsung Foundry and Intel Foundry has increased, with Samsung raising prices for some new customers by about 15%. However, Bernstein believes these dynamics will not materially impact TSMC's revenue in the short term, as TSMC leads in technology nodes, has a better execution record, and larger scale, with demand for advanced processes still significantly exceeding available capacity.

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