TSMC’s 2Q Margins Reportedly Near 70% amid Strong 3/5nm Demand, 3Q Revenue Seen Growing Over 10%

What's happening

According to a TrendForce report published June 29, 2026, TSMC's second-quarter gross margin is tracking close to 70%, surpassing the upper bound of the company's own guidance range of 67.5%. The outperformance is attributed to sustained, high-volume demand for advanced process nodes — specifically 3nm and 5nm — driven by AI-related chip production. TSMC's second-quarter revenue guidance stood at US$39 billion to US$40.2 billion at an exchange rate of NT$31.7 per US dollar. April and May combined revenue reached NT$827.7 billion, with June revenue estimated at approximately NT$440 billion, suggesting the quarter is tracking at or near the upper end of that guidance range.

Looking ahead, TrendForce projects TSMC's third-quarter revenue will grow more than 10% sequentially, which would constitute another record quarter for the foundry. The report also indicates that full-year revenue growth could exceed TSMC's previously issued guidance of more than 30%. A key enabler of the third-quarter outlook is demand tied to next-generation AI GPU production for NVIDIA and AI ASIC work for AMD, alongside continued cloud provider deployments. On the advanced packaging side, TSMC's CoWoS capacity — critical for high-bandwidth memory integration in AI accelerators — is projected to rise from approximately 140,000 wafers per month in 2026 to approximately 170,000 wafers per month by 2027.

Why it matters for markets

A gross margin approaching 70% — against guidance of up to 67.5% — represents a meaningful beat at the foundry level and reflects the pricing power TSMC holds over leading-edge process nodes where it has no direct peer at scale. For a company with a market capitalization of $2.36 trillion, even incremental margin expansion at this revenue scale carries substantial absolute dollar implications. The second-quarter revenue range of US$39 billion to US$40.2 billion, combined with a projected sequential growth rate exceeding 10% in the third quarter, points to annualized revenue trajectories that could push full-year figures well beyond prior guidance thresholds.

The CoWoS capacity expansion — from roughly 140,000 to 170,000 wafers per month between 2026 and 2027 — is particularly significant because advanced packaging has become a bottleneck in AI accelerator supply chains. CoWoS is the packaging technology used to integrate high-bandwidth memory with logic dies in products such as NVIDIA's data center GPUs. Constraints in this capacity have previously been cited as a limiting factor in AI chip availability, making the projected ramp a supply-chain development with direct implications for customers dependent on TSMC's packaging output.

The potential for full-year growth to exceed the prior guidance of more than 30% would mark a sustained acceleration in TSMC's business cycle, driven almost entirely by AI infrastructure buildout rather than traditional consumer electronics demand. This dynamic distinguishes the current growth phase from prior semiconductor upcycles and has implications for how investors and analysts model the durability of foundry-level demand.

Sectors and assets to watch

TSMC (TSM) is the direct subject of the reported margin and revenue data, and the trajectory described — margins near 70%, sequential third-quarter growth above 10%, and full-year growth potentially exceeding 30% — positions it as the primary entity to monitor as official second-quarter results are disclosed. NVIDIA (NVDA), with a market capitalization of $4.72 trillion and revenue of $253.49 billion, is identified by TrendForce as a key demand driver for TSMC's third-quarter outlook through its next-generation AI GPU program. NVIDIA's data center GPU products rely on TSMC's advanced nodes and CoWoS packaging, making TSMC's capacity trajectory directly relevant to NVIDIA's ability to fulfill customer orders.

AMD (AMD), with a market capitalization of $879.69 billion, is also cited as a contributor to TSMC's third-quarter demand through AI ASIC production. AMD's Instinct accelerator line and related AI products are manufactured at TSMC on advanced process nodes. Beyond these three companies, cloud infrastructure providers — which are end customers for AI accelerators produced on TSMC's leading-edge nodes — represent another layer of the demand chain worth monitoring, as their capital expenditure commitments underpin the multi-quarter visibility that TrendForce's projections reflect.

What to watch next

The primary near-term event to monitor is TSMC's official second-quarter earnings release, which will confirm whether gross margins did in fact approach or reach 70% and whether revenue landed at the upper end of the US$39 billion to US$40.2 billion guidance range. Alongside the earnings report, TSMC's third-quarter revenue guidance will be the key forward indicator — specifically whether management formally endorses sequential growth exceeding 10% and revises full-year guidance above the prior 30%-plus threshold. Progress on CoWoS capacity expansion toward the projected 170,000 wafers-per-month target by 2027 will also be a metric to track in subsequent quarters, as it directly governs the supply ceiling for AI accelerator production across TSMC's major fabless customers.