Chunghwa Telecom Co Ltd (CHT) (Q3 2026) Earnings Call Highlights: Record Q3 Revenue, EPS and ...

Negative Points

• Enterprise business group income before tax declined slightly due to higher performance bonus accruals and lower-margin ICT projects, which include equipment and construction costs.

• The one-time gain from asset revitalization is not expected to recur at a similar scale in the near term, making future revenue comparisons challenging.

• Chunghwa Telecom Co Ltd ( NYSE:CHT ) does not disclose detailed breakdowns of ICT revenue by recurring vs. one-time or by hardware vs. service, limiting visibility into revenue quality.

• Higher costs from sports broadcasting rights partially offset consumer business group income growth, despite revenue rising 6.3% year-over-year.

• International business group ICT revenue declined due to a high comparison base from a one-off project recognized last year, highlighting potential volatility in project-based revenues.

Q & A Highlights

Q: Can you break down the 19% year-over-year ICT growth between recurring and one-time project revenue, and what are the key strategies and expected revenue from the asset revitalization initiative? A: Angela Tsai, Assistant Vice President of Finance, explained that while the company does not disclose the exact split, one-time project revenue remains larger in absolute terms due to large contracts, though recurring revenue continues to grow year over year. CFO Wen-Hsin Hsu added that the one-time asset revitalization gain came from a subsidiary's residential project in Taoyuan, recognized upon unit delivery in Q3, and noted that while revitalization is ongoing, a contribution of similar size is not expected in the near term.

Q: Within the project-based ICT revenue growth, which service lines are driving the increase? A: Angela Tsai, Assistant Vice President of Finance, stated that growth is mainly coming from IDC services and cloudparticularly international public cloudas well as cybersecurity, where subscription-based services also contribute to recurring revenue.

Q: Why did income before tax in the Enterprise Business Group decline, and what is the future outlook? A: CFO Wen-Hsin Hsu attributed the slight profit decline to two factors: higher performance bonus accruals (including a catch-up adjustment) due to full-year earnings tracking above expectations, which is a timing effect rather than a structural change; and a revenue mix shift toward lower-margin ICT projects that include equipment and construction costs. He expects ICT margins to improve as the company focuses on project margins and recurring revenue grows.

Q: Can you provide the percentage of hardware sales versus service revenue within ICT, and a breakdown of contract value by product type such as cloud, IDC, cybersecurity, and AIoT? A: Angela Tsai, Assistant Vice President of Finance, said the company does not disclose these breakdowns, explaining that most projects combine hardware and services and that winning pilot contracts with industry leaders enables follow-on recurring services. She noted strong adoption of international public cloud by large enterprises and its own HiCloud brand for SMBs, contributing to 45% cloud revenue growth this quarter.

Q: Can you comment on the margin profile of different ICT product types and how management plans to improve overall ICT margins? A: CFO Wen-Hsin Hsu explained that most business is delivered as total solutions combining hardware, software, system integration, cloud, cybersecurity, and IDC under one contracta key competitive advantageso splitting revenue by category would not reflect how the business works. He identified IDC and cybersecurity as the two most profitable ICT services, both largely recurring with long-term contracts, with IDC benefiting from strong market leadership in Taiwan and cybersecurity margins supported by in-house expertise rather than hardware resale.

Q: What does the contract liability on the balance sheet represent, and how should we think about future revenue visibility? A: CFO Wen-Hsin Hsu explained that contract liability mainly represents prepaid revenue from customers, reflecting future and secured revenue, and that a portion of the large order intake already secured is reflected there. He added that recurring revenue is expected to play a larger role going forward, especially as AIDC capacity comes online serving confirmed customers under long-term contracts.

Q: What is the outlook for AIDC recurring revenue and the GPU leasing business? A: Angela Tsai, Assistant Vice President of Finance, said more recurring revenue will come from AIDC as additional capacity rolls out and occupancy rates rise. On GPUs, she noted Chunghwa Telecom has its own GPU resources available for clients to rent, though most clients also use their own GPU resources within the AIDC. CFO Wen-Hsin Hsu added that the current focus is on AIDC infrastructure services, with other business models to be evaluated based on market demand.

Q: Do you plan to help enterprise customers deploy AI models such as Gemini in their own data centers, and what is the level of interest from Taiwanese enterprises? A: CFO Wen-Hsin Hsu reported strong interest from Taiwanese enterprises, especially in the financial and public sectors, where customers want advanced AI models while keeping sensitive data in their own environment or within Taiwan. He said the company can combine AIDC and IDC facilities, private cloud, and network capabilities to host AI models securely, while subsidiary CHT Invent AI provides AI governance and Agent Hub services, and the expanded Google collaboration will continue to bring advanced AI models to enterprise customers.

Q: What drove the strong third-quarter financial results, and how does the company view full-year guidance? A: CFO Wen-Hsin Hsu reported consolidated revenue of NT$67.59 billion, up 16.7% year over year, with operating income up 27.1%, net income up 29.5%, and EPS of NT$1.57all exceeding the upper end of Q3 guidance and marking the highest third quarter since 2009. Growth was driven by a one-time asset revitalization contribution, strong product sales including handsets and AI-related demand at Chunghwa Precision Test, and steady core telecom and ICT growth. President Rong Lin expressed confidence the company will exceed its full-year forecast.

Q: How is the 5G rollout progressing, and what are the key mobile market metrics? A: President Rong Lin said stand-alone 5G population coverage is expected to exceed 50% by the end of 2026, mainly in metropolitan areas and along high-speed rail routes, with nationwide coverage in 2027 and network slicing functionality expected in 2027. Mobile revenue market share reached a record 41.2%, 5G market share stood at 39.4% (number one in Taiwan), 5G penetration among smartphone users rose to 49.6% as of September, and the average monthly fee uplift from 5G migration remained stable at 40%.

Q: What were the key drivers of the international business group's performance? A: President Rong Lin reported that international subsidiaries delivered 8% year-over-year revenue growth, with the U.S. market up 27% on AI supply chain equipment deployment in California and Southeast Asia up 3% on Vietnam construction projects. Satellite-related revenue rose 9.8% year over year, IPOC revenue grew 33%, and a new Guatemala branch launched in October, securing a data center construction project from the Guatemala government.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .