What Can We Expect as Asia’s Largest Company Readies Earnings?
Chip-foundry market leader TSMC already gave impressive June sales numbers, but there’s plenty riding on guidance for the rest of the year.
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Asia’s largest company is due to report earnings on Thursday. What can we expect?
Taiwan Semiconductor Manufacturing Co. (TSM) (TW:2330) is one of my perennial favorite stocks in Asia. It is the region’s largest stock by market capitalization, at $2.2 trillion, good for No. 6 worldwide, just behind Amazon.com (AMZN) and ahead of Broadcom (AVGO) and SpaceX (SPCX).
And it is the standard bearer for the chip sector. It has 73% of the chip-foundry business as of Q1, according to the latest data from Counterpoint. That has risen steadily, too, up from 59.0% as recently as 2023.
Strong June Numbers
TSMC just notched sales figures for June, typically a sluggish month, that saw a slight monthly rise (up 6.2%) and significant year-on-year jump (up 67.9%). The figures were reported Monday but delayed from delivery last week due to the impact of Typhoon Bavi in Taiwan. They mean the company recorded record revenue for Q2, if I back out the numbers. The figures indicate sales rose 36.1% to NT$1.27 trillion ($39.5 billion at today’s exchange rate).
The exact numbers may vary slightly when they come in on Thursday, particularly given currency fluctuations over the quarter, and we don’t yet know the degree of profitability. Suffice to say, though, business has been very, very good.
Will it be good enough?
On its last call, TSMC forecast Q2 sales of between $39 billion and $40.2 billion. So this is toward the lower end of its own given range.
Analysts are expecting a 58.8% increase in Q2 net profit, per the poll from LSEG. We don’t yet have any indication whether net income will outstrip those expectations.
And of course, the biggest deal will be the forward-looking guidance from the company. TSMC is due to update its outlook for Q3 and for the full year.
Story of the Year
We could see choppy trade out of the earnings. Even last week’s forecast increase from Samsung caused a 6.9% correction for that company, as I noted at the time. Samsung also has an affiliated chip foundry business that’s second in terms of global market share, although running at 7% at last count. The exceptional volatility in chip stocks indicate that investors are worried the AI cycle may be, if not peaking, at least fully priced-in.
Semiconductors and the boom in Artificial Intelligence spending have been the story of the year so far — and my last six columns have focused on South Korea’s chipmakers, mainly Samsung Electronics (KR:005930) and SK Hynix (SKHY) (KR:000660), the latter fresh off its successful $26.5 billion U.S. listing on Friday, the largest-ever U.S. listing by a foreign-based company.
Now Samsung is also exploring options to list stateside, according to Bloomberg, although the talks are “in the very early stages.” Samsung would be foolish not to! Both Samsung and Hynix have seen exceptional earnings and share-price growth in 2026, but are also experiencing shocking volatility. A U.S. listing should broaden the investor base and lead to greater stability in the stock, at a time it is nigh on impossible for U.S. investors to tap Samsung shares directly.
A Comparative Model of Consistency
Compared to the Korean chipmakers, TSMC is a model of consistency. There’s a lot that could go wrong at Samsung or Hynix if they make any missteps in increasing production, or if the $1 trillion boom in AI capital expenditures turns to bust, or if the hyperscalers bring chip design in-house. TSMC will power along so long as companies continue to need chips physically produced.
I made TSMC my stock to watch in Asia heading into 2024, as you can see from my recommendation on the stock here. To be honest, it would have been my stock for 2025 and 2026, too, but I forced myself to look further afield!
How has it done? Stellar! It was up 82.1% for 2024, added another 43.5% in 2025, and is up 56.1% year to date in 2026. Since the end of 2023, it’s notching a cumulative gain of 308.1%.
TSMC is far more predictable than Hynix, Samsung or Micron (MU), which have all notched mammoth gains in 2026. But that also leads to down days, as we saw on Monday, when Hynix shares sank 15.4%. Now Tuesday it is leaping 21.5%! It listed at $149, remained above that even given Wednesday’s fall, and is now trading at $185.
Bearish Brokerage Report on Hynix
I would read Monday’s move as a risk-off trade after U.S.-Iran hostilities resumed, and ship traffic stopped sailing through the Strait of Hormuz. But the brokerage Korea Investment & Securities also issued a bearish report forecasting that Hynix will miss its operating profit expectations by 8%.
The analyst involved, Chae Min-suk, explains that the forecast is made on a below-average increase in chip sales prices, mainly because Hynix has its production concentrated in High Bandwidth Memory (HBM) chips, where prices are already high.
“This is not about earnings concerns but the result of making price assumptions more realistic,” Chae says, according to the Chosun Daily. Companies like Hynix are signing 3-5 year long-term agreements on supply that should shift the focus away from massive quarterly price increases to longer-term profitability.
Still, an earnings miss will be punished massively in the market. I’m not sure if Chae’s analysis is on the mark — earnings have been growing at an incredible clip for the HBM makers, and I’m not sure a concentration in those chips should be read as a weakness — but Samsung and Hynix are already 27.4% and 34.4% off their closing highs for the year.
Greater Confidence in TSMC
I am far more confident that TSMC can continue its strong performance. Whenever the Korean market or chipmakers as a whole have a shocking down day, I check TSMC’s showing. It may dip 3%, 5% here or there. But there’s no double-digit fall.
It sounds like TSMC, a key supplier to the likes of Nvidia (NVDA) and Apple (AAPL), will hit its sales forecast at the lower end of the range. Given the June figures, it’s sure to see a fifth straight quarter of record sales.
Will they be record profits? That’s also likely. Analysts expect a 59% increase in net profit to NT$632.6 billion ($19.65 billion), according to LSEG. That would mark the 10th straight quarter of earnings increases.
Where the share price heads will depend on the company’s guidance.
There’s been little buying on the rumor ahead of the news of the earnings. The stock is down 3.4% since the start of the month, and 3.6% from their all-time closing high of NT$2,510 on June 22.
We saw selling in TSMC shares at the end of Q1. The stock then sparked to life again in April and May. Now we have had a lull into the end of Q2. Much will depend on how optimistic management is about prospects heading into 2027.
Still, this is my largest and longest-term holding. I’m quite happy for its performance to proceed in a more measured way than the memory makers … it’s a stock I’m extremely happy to continue to hold, and to recommend.
At the time of publication, McMillan was long TSMC and NVDA as well as the DRAM ETF.
