TSMC (TSM) CEO C.C. Wei told employees at an internal company town hall on May 27 that Taiwan-based workers will see their profit-sharing bonus payments rise by more than 30% year-over-year on average. Wei added that the increase would come in better than the prior year's bump, a notable step up given that last year's bonus pool already grew by nearly 47%.
For investors, a company that is confident enough in its earnings trajectory to guarantee bigger payouts to tens of thousands of employees is sending a clear message as it benefits from the AI megatrend.
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www.barchart.comTSMC's Financials Back Up the Bold Promise
The numbers behind the bonus pledge are hard to argue with.
TSMC reported first-quarter 2026 revenue of $35.9 billion, a 6.4% sequential increase that came in slightly ahead of guidance. Gross margin reached 66.2%, up nearly 4 percentage points from the prior quarter. Operating margin hit 58.1%, and the company generated roughly $22.4 billion in cash from operations during the quarter. High-performance computing (HPC), which includes artificial intelligence accelerators and chips powering AI data centers, now accounts for 61% of total revenue and grew 20% sequentially.“AI-related demand continues to be extremely robust,” Wei said during the April earnings call. For the full year, TSMC now expects revenue to grow by more than 30% in U.S. dollar terms, an upgrade from the previous quarter.
The company also pushed its capital expenditure budget toward the high end of its $52 billion to $56 billion range for 2026, citing overwhelming demand from cloud service providers and chip designers.
AI Demand Is the Engine, and It Is Not Slowing
Wei noted on the earnings call that the industry is shifting from generative AI in query mode to what he described as agentic AI in command-and-action mode. That transition increases the number of computing tokens being consumed, which means more chips, more wafers, and more revenue for TSMC.
The world’s largest chip manufacturer is ramping its two-nanometer technology, which entered high-volume manufacturing in the fourth quarter of 2025. It is also aggressively expanding three-nanometer capacity globally, including a new fab in Tainan scheduled for the first half of 2027, a second fab in Arizona, with volume production beginning in the second half of 2027, and a planned three-nanometer facility in Japan slated for 2028.
Tight supply across leading-edge nodes is expected to persist well into 2027. Meanwhile, the employee profit-sharing pool has been growing in lockstep with the bottom line.
TSMC set aside roughly $3.3 billion for the program in 2025, a 46.6% jump from the year before. The company's founding articles commit it to reserving at least 1% of annual profits for employee incentives. Wei's town hall pledge suggests that figure is set to grow again in 2026.Why TSM Stock Deserves a Spot in Your Portfolio
TSMC is the backbone of global artificial intelligence infrastructure. Every major AI chip, whether from Nvidia (NVDA), Apple (AAPL), AMD (AMD), or a custom-designed accelerator from a hyperscaler, is manufactured in its fabs.
The company is guiding second-quarter 2026 revenue of $39 to $40.2 billion, a 32% year-over-year increase at the midpoint. Gross margin for the second quarter is expected to land around 66.5%.
TSMC also confirmed that three-nanometer gross margins will cross the corporate average in the second half of 2026, adding another layer of profitability upside. TSM is now targeting gross margins of 56% or higher through the cycle from 2024 to 2029, along with return on equity in the high 20% range.
www.barchart.comOut of the 17 analysts covering TSM stock, 13 recommend “Strong Buy,” two recommend “Moderate Buy,” and two recommend “Hold.” The average TSM stock price target is $451, above the current price of $423.
With AI accelerator revenue expected to grow at a high-50s compound annual growth rate through the end of the decade, the growth runway here is attractive. For investors looking for a semiconductor stock with durable AI tailwinds, pricing power, and expanding margins, TSM remains one of the clearest opportunities in the market today.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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