Taiwan Semiconductor Manufacturing (NYSE:TSM), known as TSMC, reported first-quarter earnings that exceeded expectations on Thursday, as the world’s largest contract chipmaker continued to benefit from strong demand tied to artificial intelligence.
However, the company cautioned that ongoing conflict in the Middle East could eventually affect profitability due to disruptions in the supply of key chemicals and energy, although any immediate impact appears unlikely.
TSMC recorded a net profit of T$572.48 billion ($18.15 billion) for the three months ending March 31, surpassing Bloomberg forecasts of T$542.38 billion and marking a 58.3% increase compared to the same period last year.
The result was driven by a 35% rise in revenue, which reached T$1.134 trillion in the first quarter.
Looking ahead, CFO Wendell Huang projected second-quarter revenue in the range of $39.0 billion to $40.2 billion, representing a 32% increase year on year. The company also expects revenue growth to exceed 30% for full-year 2026.
Huang noted that disruptions to specialty chemical supplies caused by the Middle East conflict could weigh on margins, though he said it was too early to determine the full impact.
He added that any near-term effects are unlikely, as TSMC has secured access to necessary chemical inputs and energy supply commitments for now.
Supply chains for specialty chemicals have been significantly affected since the outbreak of the U.S.-Israel conflict with Iran in March, given the strategic importance of the Strait of Hormuz as a shipping route for these materials.
A large portion of global supplies of chip-grade helium and bromine originates in the Middle East, and escalating military activity has disrupted production, particularly in Qatar, Israel, and Jordan.
As a central player in the AI semiconductor ecosystem, TSMC has seen strong demand for advanced chips, serving major clients such as NVIDIA Corporation (NASDAQ:NVDA), while also producing semiconductors for a wide range of industrial and consumer electronics applications.
During a post-earnings call, CEO C.C. Wei downplayed concerns about rising competition from emerging AI chip initiatives led by companies including Tesla Inc (NASDAQ:TSLA) and Intel Corporation (NASDAQ:INTC), noting that building advanced chip manufacturing capacity takes significant time and investment.
Tesla CEO Elon Musk recently announced a joint venture involving Tesla, xAI, and SpaceX—named Terafab—to develop a vertically integrated chip production facility, with Intel joining the project earlier this month.
Wei emphasized that TSMC will need to continue expanding its production capacity to meet rapidly growing demand. Recent reports have suggested that capacity constraints could lead key customers such as Nvidia to delay next-generation AI chip launches.
TSMC, alongside chip equipment manufacturer ASML Holding NV (EU:ASML), is widely viewed as a bellwether for the semiconductor and AI sectors. ASML also reported strong first-quarter results earlier this week.