This article first appeared on GuruFocus .
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Revenue:USD 241.7 million, up 82.6% quarter-over-quarter but down 18.7% year-over-year.
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Operating Income:USD 52.1 million, up 20.5% quarter-over-quarter and 38.7% year-over-year.
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Net Income:USD 51.8 million, up 14.9% quarter-over-quarter and 20.7% year-over-year.
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EPS:USD 20.01.
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Revenue by Application:50% from HPC, 16% from networking, 32% from consumer, and 1% from each market.
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Process Node Revenue:3-nanometer and 2-nanometer process nodes contributed 47% of revenue in Q2, up from 21% in Q1.
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Regional Revenue:North America contributed 51% of revenue in Q2, up from 23% in Q1.
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Release Date: August 14, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Alchip Technologies Ltd ( TPE:3661 ) reported a significant 82.6% quarter-over-quarter revenue growth in Q2, driven by the mass production ramp of its N3 AI accelerator.
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The company's N3 AI accelerator entered mass production in late May, with July revenue reaching a record high, indicating strong and continuous production momentum.
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Alchip Technologies Ltd ( TPE:3661 ) has secured the next two generations of design from its automotive ADAS customer, with the first next-generation product on track for tape-out in early Q4.
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The company is confident in securing another major hyperscaler CSP customer in the near future, which would diversify its revenue base.
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Management expects record-high revenue and earnings in Q3, followed by another sequential increase in Q4, with growth momentum expected to sustain for at least the next three to four years.
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Alchip Technologies Ltd ( TPE:3661 ) has largely resolved key constraints on engineering resources, manufacturing capacity, and working capital, positioning it well for future growth.
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The company's gross margin for the N3 project is expected to be better than its first high-volume production project, due to improved customer appreciation and supplier positioning.
Negative Points
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Alchip Technologies Ltd ( TPE:3661 ) experienced an 18.7% year-over-year revenue decline in Q2, reflecting a challenging comparison period.
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The company's gross margin declined significantly from 50% in Q1 to 30% in Q2 due to the increasing portion of production revenue, with expectations of further decline to the low-to-mid 20s for the full year.
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Operating expenses increased significantly quarter-over-quarter due to headcount expansion, salary adjustments, and higher EDA tool licensing and server usage costs.
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The company faces high revenue concentration risk from its largest customer, which is expected to account for a majority of ASIC revenue.
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Management noted that the next-generation N2 project's design schedule is sensitive and cannot be disclosed, creating uncertainty about future timelines.
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The company acknowledged that the GDSE (production-only) business model could be a 'bloody' battlefield with intense pricing competition, though it is pursuing such projects as a 'knocking door' strategy.
Q & A Highlights
Q: What should we expect for gross margin and operating margin trends in the next few quarters as the largest hyperscaler ASIC (N3 accelerator) ramps up in a meaningful way? A: Daniel Wang (CFO) stated that with production revenue making up 80% to 90% of the mix, the blended gross margin for Q3 and Q4 will likely be in the "20%-something" range, with the full-year margin in the low-to-mid 20s. He reiterated that the business model has good operating leverage, and as scale increases, the target operating margin is in the "high 10s."
Q: How is Alchip able to lift gross margins compared to the previous high-volume production project (Trainium 2) while ramping production to 80-90% of revenue? A: Daniel Wang (CFO) explained that the customer has started to appreciate the value Alchip provides, which has improved generation by generation. Additionally, Alchip's position with suppliers (foundry and OSAT) has strengthened, giving the company room to stretch its gross margin. CEO John Shen added that they are confident in outperforming the gross margin of their first high-volume production project.
Q: Can you provide more detail on the schedule for the next-generation N2 project (Trainium 3), including engineering verification and mass production timelines? A: Shyang-Lin Shen (CEO) stated that the design is a heterogeneous chiplet design requiring multiple tape-outs, so they won't all happen at the same time. The target is to complete tape-out by the end of this year, with production ramping by the end of next year. He noted that the customer is very satisfied with the current status.
Q: Will Alchip be in charge of the next-generation chipset as well, and can you discuss the content and volume opportunity given the customer's plans to sell the chipset externally? A: Shyang-Lin Shen (CEO) confirmed the continuity of the relationship, stating there is no urgency for the customer to pursue other choices. He noted that precise schedules depend on manufacturing availability and customer decisions on I/O and memory chiplets. A test chip is under discussion, similar to the previous generation's approach.
Q: With the N3 accelerator starting production in late May, will the company revise its original guidance for the 2026 contribution from this project? A: Daniel Wang (CFO) said the 2026 contribution will remain as previously guided because the lead time is very long and all orders for this year have already been placed. However, he confirmed there is a chance to revise up the previous assumptions for next year's shipment and revenue contribution.
Q: What is Alchip's value proposition in the COT (Customer Owned Tooling) business model, especially against competitors who are aggressive on pricing or have proprietary IP? A: Shyang-Lin Shen (CEO) emphasized that "schedule control and priority control" are Alchip's strengths, citing their track record of taping out the most CoWoS designs in the industry. He stated that Alchip has a competitive price and that no ASIC vendor can come close in the short term. Daniel Wang (CFO) added that Alchip is likely the only company in Asia with experience in advanced 2.5D and 3D packaging design.
Q: For the N2 project, what is Alchip's level of involvement in the I/O die and final packaging integration? Could other vendors be involved? A: Shyang-Lin Shen (CEO) clarified that Alchip is the sole design partner and is responsible for everything, including the compute die, I/O die, and final packaging. He stated that the schedule is too tight for the customer to work with other vendors on alternative solutions at this moment, and all resources are concentrated on the current implementation.
Q: Regarding the potential new major hyperscaler customer, would Alchip be happy to be a KGD (Known Good Die) provider, or will it engage in final packaging design as well? A: Daniel Wang (CFO) explained that Alchip would support and compete for production-only (GDSE) projects as a "knocking door" strategy to penetrate into design-plus-production projects. John Shen (CEO) added that while high-speed interface IP is often in the I/O chiplet, the compute die is the most expensive part, and they can adopt various business models, including sourcing IP through integration or using the KGD model.
Q: Can you share more details on the two CPU projects in mass production, including specs and whether they are for new or existing customers? A: Shyang-Lin Shen (CEO) shared that one is a server CPU and the other is a consumer-type CPU, both ARM-based and performing well. He noted that CPU design complexity is lower than GPU, but if 3D technology becomes popular, it will become a strength for Alchip, and they are already discussing this area with their end customer.
Q: How should we think about the revenue scale for the N2 project in the next 2-3 years, and are there any capacity or working capital restrictions? A: Daniel Wang (CFO) stated that while the die size remains at the four-reticle limit, the pricing and volume for the N2 accelerator will be significantly higher than the N3. He suggested the serviceable market scale could be in the $80-100 billion range. Regarding capacity, he expressed confidence that the customer will get strong support from TSMC for wafer and packaging in 2027-2028.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
