Taiwan Semiconductor Manufacturing Company reported record quarterly capital spending of $15.59 billion in the June 2026 quarter, marking its highest outlay in the past eight quarters and representing a 42% increase from the prior quarter’s $10.98 billion. The elevated investment reflected the company’s third adjustment to its 2026 capital expenditure budget this year, increasing the target range to $60 billion to $64 billion from an initial $52 billion guidance. Chief Executive Officer C.C. Wei indicated that capital spending over the next three years would be “significantly higher” than the prior three-year period.
Despite the aggressive capital deployment, TSMC’s profitability metrics showed continued strength. Gross margin expanded to 67.72% in the June quarter from 58.62% a year earlier, though management guided the third quarter margin down to 66% due to dilution from the ramp of its 2 nanometer manufacturing process. Cost improvement efforts and higher capacity utilization rates offset much of the negative impact from advanced node production startup costs. Quarterly revenue climbed 53.3% year-over-year to approximately $16.1 billion.
The company demonstrated financial capacity to fund its expansion organically, generating roughly $24.5 billion in operating cash flow during the June quarter, sufficient to cover capital expenditures and approximately $4.9 billion in dividends without additional borrowing. Some of the capital spending targets advanced manufacturing facilities with extended timelines; TSMC broke ground on a packaging validation facility in Kaohsiung scheduled to begin operations in the fourth quarter of 2029, and announced a $100 billion commitment to Arizona operations with no defined construction schedule.
TSMC’s stock valuation compressed to 22.46x forward normalized earnings as of the latest reading, near its two-year average of 22.41x and well below a 29.65x peak reached earlier. A mid-September selloff in semiconductor stocks, triggered by artificial intelligence safety concerns from industry executives rather than TSMC-specific developments, contributed to the recent decline. Institutional investor positioning showed mixed signals in June 13F filings, with some funds including Coatue and Situational Awareness increasing stakes while others such as Lone Pine and SoftBank reduced positions, suggesting divergent views on the capital spending program’s timing and returns.
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