TL;DR — TSMC’s July revenue hit a record NT$467.6 billion, up 44.7% year over year, capping a quarter with 67.7% gross margin that beat guidance. But NT$2.24 of the quarter’s 23.4% EPS growth came from a one-time gain on a Vanguard share sale; strip that out and adjusted EPS grew just 13.3%, barely ahead of revenue. Capex is set to hit $60-64 billion this year, plus $100 billion more for Arizona, where TSMC says its own gross margin will be diluted by up to 4 points.
TSMC’s July revenue came in at NT$467.6 billion (roughly $14.5 billion), up 5.6% from June and up 44.7% from July 2025 — a new monthly record, and the seventh straight month of accelerating year-over-year growth. Year-to-date revenue through July reached NT$2.87 trillion, up 37.0%. Those are the numbers that made headlines. They’re also not quite the same story the stock market read when TSMC reported full second-quarter results a few weeks earlier — and fell 7.3% on the day, despite beating its own margin guidance.
A Beat That Wasn’t Entirely a Beat
Second-quarter gross margin came in at 67.7%, above TSMC’s own guided range of 65.5–67.5%, and EPS grew 23.4%. Look closer, though: NT$2.24 of that EPS growth came from a one-time gain on the sale of Vanguard International Semiconductor shares. Strip it out, and adjusted EPS grew roughly 13.3% — barely ahead of the quarter’s 12.0% revenue growth, and a much less dramatic number than the headline suggested.
The Capex Line Is Becoming a Liability, Not Just a Cost
TSMC spent NT$496 billion on capital expenditures in the quarter — 39% of quarterly revenue, and roughly 2.5 times depreciation. That compressed free cash flow by 17.5% sequentially. Full-year 2026 capex guidance was raised again, to $60–64 billion, on top of a separate $100 billion committed to the Arizona expansion. TSMC has now pledged $200 billion in U.S. investment since 2025, and the company has told investors directly that overseas fabs will dilute its own gross margin by 3 to 4 percentage points once fully ramped — Morningstar estimates chips made in the U.S. cost 20% to 50% more to produce than the same chips made in Taiwan.
- July revenue: NT$467.6 billion, up 44.7% year over year — a genuine record.
- Adjusted EPS growth: 13.3% once the one-time Vanguard gain is excluded, versus 23.4% headline.
- 2026 capex: $60–64 billion, plus $100 billion for Arizona, where margins will run 3–4 points lower.
TSMC’s July revenue was a real record. Its own CFO’s math on the quarter it came from says the growth investors are pricing is smaller than the headline, and getting more expensive to produce.
The Comment That Undercut the Whole Sector’s Story
The single line that did the most damage on the earnings call came from CEO C.C. Wei, who said mature-node capacity was “not at all” tight — directly contradicting the capacity-shortage narrative that’s been supporting valuations across the chip sector, including at Nvidia’s advanced packaging bottleneck and the memory supercycle at Samsung, SK Hynix and Micron. Advanced-node capacity — the kind AI chips actually need — remains genuinely constrained. But a comment suggesting slack exists anywhere in the chip supply chain was enough to trigger a broader selloff across foundry-adjacent stocks the same day.
TSMC reports full third-quarter results in October, alongside August and September monthly revenue figures before then. The headline growth rate will almost certainly stay elevated. The more useful number is whether adjusted EPS growth — stripped of one-time items — starts closing the gap with revenue growth, or keeps lagging it as Arizona capex ramps.
Figures are from TSMC’s official July 2026 revenue report and its Form 6-K filings with SEC EDGAR, with second-quarter earnings-quality analysis from How They Make Money’s coverage of the report. Third Pole Markets holds no position in TSMC, Nvidia or Apple as of publication; see our About page for the full disclosure policy.
