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Neither stock is the better buy on 2026 results alone. Applied Materials and TSMC both reported strong demand this year, but they earn money at different points in the chip supply chain and carry different risks. Which one fits you depends on the price you pay, and this article does not establish current share prices or valuation multiples. What it does establish is how each business earns revenue, what the latest reported numbers and guidance say, which risks each company discloses, and the test that should decide the choice.
What each company actually sells
Applied Materials (NASDAQ: AMAT)
Applied Materials makes materials-engineering equipment and related services that chipmakers use to manufacture semiconductors. Its revenue depends on when customers choose to spend. Building a new fab, adding capacity, or moving to a new process technology pulls equipment orders forward, and quieter periods push them back. Applied does not make chips itself. It is paid by the factories that do.
Taiwan Semiconductor Manufacturing Company (NYSE: TSM, American depositary shares; TWSE: 2330)
TSMC is a dedicated foundry. It manufactures chips designed by its customers, so its revenue follows wafer volume, the mix of advanced and older process nodes, and how fully its factories are used. Its 2025 annual report states: “The annual capacity of the manufacturing facilities managed by TSMC and its subsidiaries exceeded 17 million 12-inch equivalent wafers in 2025.” That is a capacity figure. It does not show how many wafers TSMC shipped or how fully its factories ran, so it cannot be used to estimate output.
Why revenue size is the wrong yardstick
TSMC books the value of the chips it manufactures as foundry revenue. Applied books the value of the tools and services it sells to those factories. TSMC’s $40.20 billion quarter and Applied’s $9.12 billion quarter therefore measure different things. Compare growth rates, margins, capital needs, and valuation within each business model, and do not treat the larger revenue figure as the larger opportunity.
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Latest reported results and guidance
The two companies’ quarters do not line up. Applied’s fiscal third quarter ended July 26, 2026, and its results were released August 13, 2026. TSMC’s latest reported quarter in this comparison is its second quarter of 2026. Read each set of figures as reported rather than as a head-to-head on the same calendar window. In the table, “Not stated” means the figures cited in this article do not include that item.
| Measure | Applied Materials | TSMC |
|---|---|---|
| Latest reported period | Fiscal Q3 2026, ended July 26, 2026 | Q2 2026 |
| Revenue | $9.12 billion | $40.20 billion |
| Revenue growth, year over year | Up 25% | Not stated |
| Earnings per share | $3.50 non-GAAP EPS, up 41% year over year | Not stated |
| Gross margin | Not stated | 67.7% |
| Operating margin | Not stated | 60.3% |
| Next-quarter guidance (management estimate) | Fiscal Q4 2026: revenue $10.25 billion, plus or minus $500 million; non-GAAP diluted EPS $4.02, plus or minus $0.20 | Q3 2026: revenue $44.6 billion to $45.8 billion; gross margin 65.0% to 67.0%; operating margin 56.0% to 58.0% |
Applied’s EPS figure is non-GAAP, which adjusts for items the company chooses to exclude, so it will not match GAAP EPS. Check the GAAP figure in Applied’s August 2026 release before using any EPS number in a valuation.
Both guidance ranges are management estimates, not results. Applied’s fiscal Q4 revenue range runs from $9.75 billion to $10.75 billion, and TSMC’s Q3 revenue range runs from $44.6 billion to $45.8 billion. Measured from the midpoints, both imply roughly 12% sequential revenue growth. By simple arithmetic, that is Applied’s $10.25 billion midpoint against $9.12 billion, and TSMC’s $45.2 billion midpoint against $40.20 billion. The two quarters are adjacent, not identical, so treat the match as a coincidence of the numbers rather than a like-for-like result.
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TSMC’s margin guidance sits below its Q2 actuals: gross margin of 65.0% to 67.0% against 67.7%, and operating margin of 56.0% to 58.0% against 60.3%. Very high margins can be guided lower, and that step-down deserves as much attention as the revenue range.
What management is saying
In its fiscal third-quarter 2026 release, Applied’s President and CEO Gary Dickerson said: “As the rapid global adoption of AI drives unprecedented demand for our materials engineering solutions, we are further raising our Semiconductor Systems revenue expectations for calendar 2026 and are confident we will grow faster than the market this year.” The release also points to continued strength in DRAM, leading-edge foundry-logic, and advanced packaging. This is management’s view of its own prospects, not an independent forecast.
What drives each stock
Applied Materials: the equipment cycle
Applied’s earnings follow customer capital spending. Results can shift with the timing of orders, the mix of products sold, and the geography of demand. Export rules can change which customers are able to buy, so policy is part of the earnings picture, not a side issue.
TSMC: foundry volume and execution
TSMC’s results depend on chip volumes, demand for advanced nodes, factory utilization, product mix, manufacturing execution, and the cost of adding capacity. The last two matter because new capacity is expensive to build and has to be filled to earn a return on that spending. That is why margin guidance matters as much as the revenue range.
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Both companies benefit when AI-related chip demand is strong, and both are exposed to the same broad semiconductor cycle. That overlap is also the trap. If both stocks already reflect strong AI demand, owning either one is a bet that results will beat what the price already assumes, not simply a bet that demand exists. Neither company’s recent growth guarantees future earnings or shareholder returns.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Risks side by side
The risks below come from the FY2025 annual filings: Applied’s Form 10-K and TSMC’s Form 20-F. They are disclosed risk factors, not predictions that any of them will occur. “Not stated” means the filing passages cited here do not address that item. It does not mean the risk is absent.
| Risk | Applied Materials (FY2025 Form 10-K) | TSMC (FY2025 Form 20-F) |
|---|---|---|
| Customer concentration | Customer base concentrated in China, Taiwan, and Korea | Not stated |
| Export controls and trade policy | Changing regulations can affect results | Export controls, tariffs, and trade tensions |
| Order volatility | Possible order changes or cancellations; customer spending can change | Not stated |
| Supply inputs | Supply-chain constraints | Equipment and raw-material supply |
| Taiwan operating exposure | Not stated as a separate item | Geopolitical, economic, or social disruption affecting Taiwan could adversely affect operations and results |
A checklist before you compare
- Fill the gaps in the table. Applied’s gross and operating margins, and TSMC’s growth rate and earnings per share, are not in the figures used here. Take each from the company’s own release for the same period before you compare.
- Price both stocks on the same day. For TSMC, decide whether you are buying the NYSE American depositary shares, priced in U.S. dollars, or the Taiwan-listed 2330 shares, priced in Taiwan dollars. The ADS also carries exposure to the U.S. dollar and Taiwan dollar exchange rate.
- Calculate identical multiples on one earnings basis. Use the same definitions for both companies, such as forward price-to-earnings on non-GAAP earnings and enterprise value to free cash flow. Run GAAP as a second check.
- Test against your horizon. Equipment-cycle swings and Taiwan-related disruption affect each stock differently. Decide how long you can hold through a downturn and how much concentration you can accept.
Valuation is the missing piece
This article does not establish current share prices or valuation multiples for either stock, so it cannot say which is cheaper or which has more upside. Analyst buy ratings are not used here. A rating carries someone else’s price target and assumptions, and you should test it against your own numbers. A stock with faster growth can still be the weaker buy if its price already assumes that growth continues.
Which is the better buy? A decision framework
- Applied Materials fits if you want exposure to chipmakers’ spending on equipment and process technology, you accept cyclical order timing and China and export-control exposure, and its price on the same earnings basis looks reasonable against the guidance above.
- TSMC fits if you want exposure to foundry volume and high reported margins, you accept Taiwan-related disruption risk, and its price on the same basis looks reasonable against its guided margin range.
- Neither fits if the price of either already assumes the AI demand described in management commentary, or if you cannot tolerate the specific risks in the table above.
Choose only after the price check. If the valuation work does not separate the two, pick the one whose exposure you actually want, not the one with the bigger headline growth figure.
Quick Recap
Sources
- Applied Materials, “Applied Materials Announces Third Quarter 2026 Results,” August 13, 2026 (official results and fiscal Q4 2026 outlook).
- Applied Materials, fiscal Q3 2026 release, CEO commentary on AI demand and the 2026 outlook.
- Applied Materials, FY2025 Form 10-K, risk factors.
- TSMC, “TSMC 2026 Q2 Quarterly Results,” official results page (Q2 2026 actuals and Q3 2026 guidance).
- TSMC, FY2025 Form 20-F, business and geopolitical risk factors.
- TSMC, 2025 Annual Report, manufacturing capacity and company identification.
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