In the second quarter of 2026,Taiwan Semiconductor Manufacturing Company TSM, or TSMC, generated nearly New Taiwan Dollar (“TWD”) 783 billion in cash from operations, spent TWD 496 billion in capital expenditure and distributed TWD 156 billion as its third-quarter 2025 cash dividend. Even so, the company’s cash balance increased TWD 99 billion to TWD 3.1 trillion at the end of the quarter.
TSMC views higher capital spending as a reflection of greater growth opportunities over the coming years. Backed by its strong technology leadership and differentiation, the company believes it is well-positioned to capture the multiyear structural demand from the industry megatrends of 5G, artificial intelligence (AI) and high-performance computing (HPC).
Citing strong structural demand from customers, including the emerging Agentic AI market, TSMC raised its full-year 2026 capital budget to be between $60 billion and $64 billion. The company works closely with the tool equipment suppliers well ahead of time to prepare capacity, whether it is a strong up cycle or down cycle. Likewise, customers collaborate with the company well in advance to plan their capacity needs. As such, TSMC does not expect any bottlenecks to its capacity expansion plans.
Of the total capital budget, roughly 70% to 80% will be allocated to TSMC’s advanced process technologies, about 10% to specialty technologies and 10%-20% to advanced packaging, testing, mask-making and other areas. Even as it continues to invest heavily in 2026, TSMC reiterated its commitment to delivering profitable growth for shareholders.
TSM’s Peer Updates
GlobalFoundries Inc. GFS generated $542 million in cash flow from operations in the first quarter of 2026. Capital expenditure, net of proceeds from government grants, was $309 million or roughly 19% of revenues. The company is expanding capacity in high-growth technology corridors such as silicon photonics, FDX and high-performance SiGe to unlock sustainable accretive revenue growth. GlobalFoundries expects net capital expenditure to increase in the second quarter, driven by the timing of tool delivery windows and government grants. GFS also reaffirmed its full-year 2026 non-IFRS net capital expenditure outlook of 15%-20% of revenues.
United Microelectronics Corp. UMC reported NT$21.98 billion in operating cash flows in the first quarter of 2026. Cash outflow from investing activities totaled NT$21.35 billion, including NT$13.16 billion in capital expenditures, resulting in free cash flow of NT$8.83 billion. UMC reiterated its overall annual capital expenditure budget to be roughly $1.5 billionduring the April earnings call.
The Zacks Rundown for TSM Stock
Over the past 12 months, Taiwan Semiconductor shares have surged 66.1%, in line with the Zacks Semiconductor - Circuit Foundry industry.
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TSM currently trades at a forward, five-year Price/Sales (P/S) of 10.86X, above its historical median of 8.12X while remaining in line with the industry average.
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The Zacks Consensus Estimate for TSMC’s 2026 and 2027 earnings has been showing an upward trend.
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Taiwan Semiconductor sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).