TSMC's 1Q26 revenue reached the high end of guidance, and Bernstein maintained Outperform

Overview

This report is Bernstein's quick take on TSMC's 1Q26 revenue. TSMC posted March revenue of NT$415 billion and 1Q26 revenue of NT$1.134 trillion, which came in at the high end of guidance and slightly above consensus. The core view is that weak non-AI demand will not materially drag on TSMC because AI demand is strong enough to absorb the capacity released by non-AI customers.

Core views

Bernstein maintained an Outperform rating on TSMC. The report argues that memory prices have risen faster than expected since the start of the year, pressuring demand for non-AI applications such as low-end smartphones and PCs, and may lead Qualcomm and MediaTek to reduce near-term production allocations at TSMC. But TSMC's risk is offset by AI demand: AI customers had previously been constrained by capacity shortages, and the capacity released by non-AI customers is expected to be filled quickly. On the competitive front, Samsung foundry has won more external customers and improved 2nm yield, but Exynos 2600 versus Snapdragon 8 Elite Gen 5 still reinforces the report's view that TSMC retains a unique competitive edge in leading-node foundry work through scale, yield and execution.

Analysis framework

The report mainly uses monthly revenue, quarterly revenue versus consensus, customer demand mix, the impact of memory prices on end demand, smartphone tracking data, leading-node competitor performance, and a P/E valuation framework to form its investment view.

Methodology notes

• Earnings TrackingMonthly Revenue Versus Quarterly Guidance

  Compare March revenue and cumulative 1Q26 revenue with company guidance and consensus expectations.

  TSMC's 1Q26 revenue reached NT$1.134 trillion, about 1.1% above consensus and at the high end of guidance, providing near-term positive evidence.

• Demand Mix AnalysisAI Versus Non-AI Demand Substitution

  Assess the net impact of changes in different end-demand categories on TSMC capacity utilization.

  The report believes that capacity released by non-AI customers will be quickly absorbed by AI customers, so weak smartphone and PC demand has a limited impact on TSMC's overall business.

• Relative Competitiveness AnalysisLeading-Node Foundry Competition Comparison

  Compare TSMC and Samsung foundry on scale, yield, execution, and end-chip performance.

  Although Samsung foundry has improved in external customer wins and 2nm yield, chip reviews still support the view that TSMC remains advantaged in leading-node foundry work.

• Valuation methodsTarget P/E Valuation

  Derive the target price by multiplying target P/E by forward EPS estimates.

  Bernstein used a 20x target P/E multiplied by a forward Q5-Q8 EPS estimate of NT$110 to derive a one-year target price of NT$2,200 for 2330.TT, and then translated that into a TSM.US target price of US$351 using the exchange rate.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 2330.TT

  Primary coverage stock

  Strengths

  1Q26 revenue reached the high end of guidance; AI demand is strong; leading-node scale, yield and execution stand out.

  Weaknesses

  Non-AI demand such as smartphones and PCs is weak, and some customers may reduce production.

  Comparison

  Samsung foundry has improved in customer acquisition and 2nm yield, but the report still views TSMC as more competitive in leading-node foundry work.

  Risks

  Broad market multiple compression, Intel regaining and sustaining a technology lead, and geopolitical uncertainty.

• TSM.US

  TSMC ADR / secondary ticker

  Strengths

  The target price is derived from the primary ticker's target price using the exchange rate and is supported by the same fundamental logic.

  Weaknesses

  Affected by TSMC fundamentals, exchange-rate translation, and ADR market pricing.

  Comparison

  Represents the same issuer exposure as 2330.TT.

  Risks

  In addition to company fundamentals, it may also be affected by exchange-rate and cross-market pricing factors.

• Samsung foundry

  Competitor

  Strengths

  Won more external customers, and 2nm yield has improved significantly since 2H25.

  Weaknesses

  Exynos 2600 still underperforms Snapdragon 8 Elite Gen 5, which is mainly produced on TSMC's N3P process.

  Comparison

  The report believes its improvement is still not enough to change TSMC's advantaged position in leading-node foundry work.

  Risks

  If Samsung foundry continues to improve yield and customer mix, competition in leading-node processes could intensify.

Key data

• March RevenueNT$415BUp 31% sequentially and 45% year over year.
• 1Q26 RevenueNT$1.134TUp 8% sequentially and 35% year over year, about 1.1% above consensus and at the high end of guidance.
• RatingOutperformBernstein maintained its Outperform rating on TSMC.
• Target Price2330.TT: NT$2,200.00; TSM.US: US$351.00Based on a 20x target P/E and a forward Q5-Q8 EPS estimate of NT$110.
• Current Valuation20.6x forward P/EThe report says the stock is currently trading at 20.6x forward earnings.

Impact & implications

For investors, the key takeaway is that TSMC's near-term earnings quality remains strong, AI demand is offsetting the decline in non-AI demand, and the competitive landscape in leading-node foundry work has not been meaningfully altered by Samsung foundry's improvement. If next week's earnings call confirms strong AI demand, a weaker smartphone outlook that can still be offset, and no operational disruption from energy, gas or helium market disturbances, that would support the Outperform rating and target price logic.

Risks

• Broad market multiple compression.
• Intel regaining and maintaining a technology lead.
• Geopolitical uncertainty.
• Non-AI demand weaker than expected, especially smartphones and PCs.
• Operational disruption from energy, gas, or helium market disturbances.

What to watch

• TSMC's comments on the smartphone business outlook at next week's earnings call.
• Whether AI demand is sufficient to continue absorbing capacity released by non-AI customers.
• Further impact of high memory prices on low-end smartphone and PC demand.
• Progress in Samsung foundry's 2nm yield, external customer wins, and real product performance.
• Whether supply-chain disturbances involving energy, gas, or helium affect TSMC operations.