What is an income statement waterfall?

An income statement waterfall is a bar chart that walks from total revenue down to net income, with each step showing how much a cost or tax line removes (or adds). Subtotals — gross profit, operating income, pre-tax income — are anchored to zero so the cascade reconciles exactly to the bottom line.

How much of TSMC (TSM) revenue becomes net income?

For TTM through Q2 2026, TSMC turned 4.45T TWD of revenue into 2.24T TWD of net income — a net margin of 50.4%. The waterfall shows where the rest goes: cost of revenue, operating expenses, non-operating items, and taxes.

What are TSMC (TSM) gross, operating, and net margins?

For TTM through Q2 2026, TSMC reported a gross margin of 64.2%, an operating margin of 56%, and a net margin of 50.4%. Each subtotal in the waterfall corresponds to one of these margins.

Why does TSMC (TSM) have such a high (or low) gross margin?

Gross margin (gross profit ÷ revenue) reflects how much of each revenue dollar remains after direct production costs. Capital-light software and platform businesses often show gross margins above 60–80% because their cost of revenue is mainly hosting and support. Hardware, retail, and commodity businesses show lower gross margins because raw materials and manufacturing costs are significant. The waterfall makes this visible at a glance — the size of the "Cost of Revenue" bar relative to Revenue is the gross margin complement.

What is the difference between gross, operating, and net margin?

Gross margin = (Revenue − Cost of Revenue) ÷ Revenue. It measures production efficiency. Operating margin = Operating Income ÷ Revenue. It adds operating expenses (R&D, S&M, G&A) and measures the profitability of core operations. Net margin = Net Income ÷ Revenue. It also includes interest, other income/expense, and taxes, and represents the shareholder take after everything.

TSMC (TSM) Income Statement Waterfall

Revenue

4.45T TWD

Gross Margin

+64.2%

Operating Margin

+56.0%

Net Margin

+50.4%

Income statement waterfall for TSMC (TSM) — TTM through Q2 2026

Net income: 2.24T TWD

Margin breakdown for TSMC (TSM) — TTM through Q2 2026

Line item	Amount	Running total
Revenue	4.45T TWD	4.45T TWD
Cost of Revenue	-1.59T TWD	2.86T TWD
Gross Profit	2.86T TWD	2.86T TWD
Operating Expenses	-365B TWD	2.49T TWD
Operating Income	2.49T TWD	2.49T TWD
Other Income / Expense	180B TWD	2.67T TWD
Pre-tax Income	2.67T TWD	2.67T TWD
Income Tax	-432B TWD	2.24T TWD
Net Income	2.24T TWD	2.24T TWD

Revenue4.45T TWD
Cost of Revenue-1.59T TWD
Gross Profit2.86T TWD
Operating Expenses-365B TWD
Operating Income2.49T TWD
Other Income / Expense180B TWD
Pre-tax Income2.67T TWD
Income Tax-432B TWD
Net Income2.24T TWD

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