TSMC heads into earnings with analyst expectations for continued AI-driven growth and CoWoS advanced-packaging capacity leading demand.

Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) is expected to report second quarter results slightly ahead of expectations, with Wedbush analysts pointing to strong revenue trends and continued demand for advanced semiconductor technologies as potential drivers for a stronger outlook.

Wedbush reiterated its 'Outperform' rating ahead of TSMC's earnings, noting that the company's monthly revenue figures indicate it likely exceeded the firm's prior second-quarter estimate by approximately 1%, consistent with the previous quarter's performance. The analysts expect gross margins to have at least reached the midpoint of TSMC's prior guidance range, with results tracking closely to expectations throughout the quarter.

Looking ahead, Wedbush expects TSMC to provide an improved revenue outlook for the full year. The company previously guided for sales growth exceeding 30% in US dollar terms, while actual revenue growth has been tracking in the high-30% range year-to-date. The ramp of TSMC's 2-nanometer process technology in the second half of 2026 could support at least mid-30% annual sales growth, which could lead to higher 2026 estimates and reduce the magnitude of the slowdown Wedbush currently models for 2027.

Gross margins remain a key monitoring area, with forecasts expecting some pressure in the second half of the year due to the 2nm launch and expanded overseas manufacturing capacity. Third-quarter guidance should provide visibility into how these factors will affect profitability, though recent currency movements could provide some benefit.

Capital spending will also be closely watched. Sustained demand for advanced nodes could prompt TSMC to raise its annual capex outlook again, which would further support the view that current 2027 revenue growth expectations may be too conservative.

Wedbush reiterated that TSMC remains one of its preferred hardware investments, citing the company's position in advanced semiconductor manufacturing and packaging as a key beneficiary of the ongoing AI data center build-out and future edge AI opportunities across optics, robotics, automotive technology and electronic design automation.

Shares of TSMC traded at $417 on Wednesday afternoon, having gained more than 37% year-to-date.