TSMC Forecasts 30% Revenue Growth, Raises 2026 Capex to $54B
TSMC reported 36% revenue growth to $122 billion in 2025 (Q4 YoY sales up 26%) and projected 30% sales growth in 2026 with 25% CAGR through 2029, underscored by AI-driven HPC revenue now accounting for 58% of sales. Management is raising capex to $54 billion in 2026 (70–80% on advanced nodes), while analysts peg 2026 EPS at $13.05 on a 31x P/E and targets range from $408.50 to $520.
1. Robust 2025 Performance and 2026 Guidance
Taiwan Semiconductor Manufacturing delivered a standout year in 2025, with full-year revenue up 36% to $122 billion and fourth-quarter sales rising 26% year-over-year. Management has guided for 30% revenue growth in 2026, reflecting strong order visibility from major hyperscalers and continued strength in high-performance computing. This outlook implies top-line expansion to approximately $158 billion in the coming year, underscoring the company’s ability to translate surging demand for advanced nodes into meaningful sales gains.
2. Capital Expenditure Ramp to Support AI and HPC
To meet skyrocketing demand for AI and high-performance computing chips, the company plans to boost capital spending to roughly $54 billion in 2026, up from $41 billion in 2025. Approximately 70%–80% of this investment will be allocated to advanced process technologies at 7-nanometer nodes and below. This capex increase is the largest in the industry and is designed to expand capacity for extreme-ultraviolet lithography and 3-nanometer production, ensuring the foundry can service clients’ next-generation chip requirements without meaningful supply constraints.
3. Expanding Profitability and Margins
Despite the capital-intensive nature of semiconductor manufacturing, TSM has achieved impressive margin expansion. In 2025, gross margin rose from 59% to 62.3%, while operating margin expanded from 49% to 54%. For the first quarter of 2026, management expects gross margins in the mid-60% range and operating margins above 54%. This disciplined cost structure and high utilization of fabrication facilities position the company to convert incremental sales into strong bottom-line growth.
4. Attractive Valuation and Analyst Consensus
The stock trades at approximately 24 times forward earnings, a multiple that has remained stable even after a 54% share-price gain in 2025. Wall Street’s consensus calls the company a buy, with 98% of covering analysts recommending the shares and an average 12- to 18-month upside target of 25%. Given projected EPS growth of 23% and revenue growth in line with management’s guidance, the combination of robust fundamentals and modest valuation suggests further upside potential for long-term investors.