ASE Technology HoldingASX reported third-quarter 2026 earnings of 37 cents per ADS, which increased 125.3% year over year and beat the Zacks Consensus Estimate by 8.8%.
Revenues surged 44.8% year over year and 27.8% sequentially to NT$244.16 billion. In U.S. dollar terms, revenues of $7.64 billion surpassed the Zacks Consensus Estimate by 3.3%. Results reflected robust artificial intelligence (AI)-driven demand for Leading-edge Advanced Packaging (LEAP) services, with Assembly, Testing and Materials (ATM) revenues climbing 51% year over year.
ASX ATM Growth Accelerates on LEAP Demand
ATM revenues totaled NT$151.49 billion, up 20.1% sequentially and 51% year over year. Packaging revenues surged 52.5% to NT$122.95 billion, while testing revenues advanced 42.8% to NT$26.30 billion.
Management cited strong demand across LEAP and conventional semiconductor services, with capacity operating at or near full utilization. Faster-than-expected installations of LEAP capacity supported revenue growth, while demand continued to exceed available supply across advanced and mainstream packaging operations.
ASE Technology Holding Co., Ltd. Price, Consensus and EPS Surprise
ASE Technology Holding Co., Ltd. price-consensus-eps-surprise-chart | ASE Technology Holding Co., Ltd. Quote
ASE Technology Revenue Mix Shifts Toward Computing
Computing represented 34% of ATM revenues, up from 25% in the year-ago quarter. Communication's contribution declined to 38% from 45%, while automotive, consumer and other applications accounted for 28%.
By service type, bumping, flip-chip, wafer-level packaging and system-in-package services contributed 51% of ATM revenues. Wire bonding accounted for 24%, testing represented 17%, other services contributed 6%, and materials made up 2%.
Management expects computing applications to remain a major growth driver through 2027 and 2028, supported by increasing LEAP adoption in high-performance computing and other advanced semiconductor applications.
ASE Technology's EMS Results Stay Mixed
Electronic Manufacturing Services (EMS) revenues increased 35.4% year over year and 42.1% sequentially to NT$93.47 billion. Consumer applications represented 41% of EMS revenues, computing contributed 21%, and communication accounted for 19%.
EMS gross margin declined 60 basis points sequentially to 8.3%, reflecting higher pass-through component costs and product-mix changes. However, operating margin improved to 3.3% from 2.4% in the prior quarter, supported by operating expense leverage.
Management noted that growing demand for AI accelerators contributed to computing revenue expansion, while elevated component costs continued to weigh on profitability.
ASE Technology Margins Expand
Consolidated gross profit increased 86.9% year over year to NT$53.97 billion. Gross margin expanded 500 basis points to 22.1%, reflecting stronger ATM revenues, favorable LEAP product mix and currency benefits.
Operating income surged 151% to NT$33.14 billion, while operating margin improved 580 basis points to 13.6%. Operating expenses increased to NT$20.82 billion, mainly due to higher headcount, profit-sharing expenses and research and development spending.
ATM gross margin reached 30.6%, up from 22.6% a year earlier, while operating margin expanded to 20% from 10.8%. Management indicated that increasing LEAP contributions have pushed profitability beyond the segment's previous structural margin ceiling.
ASX Investment Spending Moves Higher
Equipment capital expenditures totaled $2.10 billion during the third quarter, including $991 million for packaging operations, $1.07 billion for testing, $41 million for EMS and $5 million for interconnect materials and other activities.
The company additionally invested approximately $1.8 billion in facilities and land during the quarter. Management raised its 2026 capital expenditure budget to $11.5 billion from $10.5 billion, reflecting continued investment in semiconductor capacity expansion.
ASE Technology has 22 ongoing building projects in Taiwan, with more than half expected to begin supporting revenues by 2027. Management anticipates higher capital expenditures in 2027 as capacity constraints persist.
ASX Balance Sheet Remains Healthy
As of Sept. 30, 2026, ASE Technology held NT$107.94 billion in cash, cash equivalents and current financial assets. Total interest-bearing debt increased to NT$406.46 billion, while unused credit facilities totaled NT$457.28 billion. The net debt-to-equity ratio was 0.66.
Net cash generated from operating activities reached NT$50.46 billion during the quarter.
ASX Outlook Remains Strong
For the fourth quarter of 2026, management expects consolidated revenues to increase 6-8% sequentially in New Taiwan dollar terms. Gross margin is projected between 23% and 24%, while operating margin is expected in the 14.5-15.5% range. ATM revenues are forecast to grow 11-13% sequentially, with gross margin improving 100-200 basis points. EMS revenues are expected to remain relatively flat, with operating margin around 2%.
Management raised its 2026 LEAP revenue outlook to more than $4 billion and expects LEAP revenues to double in 2027. Full-process packaging revenues are projected to exceed $1 billion in 2027, while co-packaged optics revenues are expected to surpass $500 million, supported by sustained demand for advanced semiconductor technologies.
ASX Zacks Rank & Other Stocks to Consider
ASE Technology Holding currently flaunts a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the broader Zacks Computer and Technology sector are Analog DevicesADI, AutodeskADSK and Cisco SystemsCSCO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
Shares of Analog Devices have rallied 85.3% year to date. The Zacks Consensus Estimate for ADI's fiscal 2026 earnings is pegged at $13.00 per share, up by 4 cents over the past 30 days, indicating an increase of 66.9% year over year.
Shares of Autodesk have plunged 19.6% year to date. The Zacks Consensus Estimate for ADSK's fiscal 2027 earnings is pegged at $12.62 per share, unchanged over the past 30 days, indicating a rise of 21% year over year.
Cisco Systems shares have surged 50.5% year to date. The Zacks Consensus Estimate for CSCO's fiscal 2027 earnings is pegged at $5.11 per share, unchanged over the past 30 days, indicating an increase of 18% year over year.
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