ASE Technology 3Q26 Preview: Packaging and Test Revenue Grew 20% Against an 11-13% Guide
ASE's core packaging and test business (ATM) filed NT$151.5bn of 3Q26 revenue, 6.3% above the NT$142.5bn top of its guide. Group revenue of NT$244.2bn rose 27.8% QoQ against a 21-22% guide, at an exchange rate in line with the guide's assumption.
Management guided 28-29% for 3Q26 and said the fourth quarter would likely break through 30%, the ceiling of its long-term range. With revenue 6% above the guide top, we expect 29.0-30.0% and EPS of NT$5.6-6.5, against NT$4.80 in 2Q26.
The street's FY26E revenue of NT$840.7bn leaves NT$231.8bn for the fourth quarter, 5% below the third. Management guided electronics manufacturing (EMS) revenue roughly flat in 4Q26, and we expect group revenue of NT$240-252bn.
In July ASE raised 2026 capex to a record US$10.5bn and its 2027 target for leading-edge advanced packaging (LEAP) revenue to at least US$7.5bn, about double 2026. Management said capacity, not demand, limits growth, so the first 2027 capex signal matters more to the shares than the third-quarter margin.
The shares closed at NT$654 on 23 October, 14% below the 12 October record of NT$762, after a market-wide selloff on 15 October. At 34.3x the street's FY26E EPS they trade at 1.7 times the 20.1x median of four packaging and test peers on the same year.
Company snapshot
ASE Technology (3711 TT, ASX US) is the world's largest outsourced chip packaging and testing company. After a foundry such as TSMC makes a chip, ASE packages it, connecting it to the circuit board, and tests it. Packaging, testing and materials (ATM) was 65.5% of 2Q26 revenue; electronics manufacturing services (EMS) through its USI subsidiary, which assembles modules and systems, made up most of the rest. Revenue was NT$645.4bn in 2025.
Expectations snapshot
ASE reports 3Q26 results at the end of October. All three months of revenue are already filed, so the table carries the company's July guide, the filed figures, the street's numbers and ours.
| Metric | 3Q26 | 4Q26E | FY26E | FY27E |
|---|---|---|---|---|
| Revenue | Guided +21-22% QoQ (NT$231.2-233.1bn); filed NT$244.2bn (+27.8% QoQ, +44.8% YoY) | Street implied NT$231.8bn; Zero One NT$240-252bn | Street NT$840.7bn (+30%); Zero One NT$849-861bn | Not guided; street NT$1,057.9bn (+26%); Zero One NT$1,057.9bn |
| ATM revenue | Guided +11-13% QoQ (NT$140.0-142.5bn); filed NT$151.5bn (+20.1% QoQ) | Zero One NT$152-159bn | Guided +35% in US$ (2025: US$12.5bn) | LEAP guided at least US$7.5bn |
| Gross margin | Guided 20.5-21.5%, ATM 28-29%; Zero One 21.0-22.0%, ATM 29.0-30.0% | ATM guided likely above 30% | Not guided | Not guided |
| Operating margin | Guided 11.5-12.5%; Zero One 12.3-13.5% | Not guided | Not guided | Not guided |
| Net profit | Not guided (2Q26: NT$21.1bn, EPS NT$4.80); Zero One NT$24.8-28.5bn, EPS NT$5.6-6.5 | Street implied about NT$21bn after our 3Q26 midpoint; Zero One NT$25.5-30.5bn (EPS NT$5.8-6.9) | Street NT$83.1bn (EPS about NT$18.9); Zero One NT$85.5-94.2bn | Street NT$125.9bn (EPS about NT$28.7) |
| Reported to date | All three months filed (NT$244.2bn) | October due around 10 November | Jan-Sep NT$608.9bn (+30.3% YoY), 72% of the street figure; 1H26 EPS NT$8.03 | n/a |
Recent developments
- Revenue set monthly records in July, August and September. Group revenue was NT$73.8bn in July, NT$82.2bn in August and NT$88.1bn in September, up 45.5% YoY. Packaging and test reached NT$52.7bn in September, up 50.5% (monthly revenue filings, 10 August, 9 September and 12 October).
- 2026 capex raised to a record US$10.5bn. At the 30 July conference ASE added US$2bn to its US$8.5bn plan. Press reports put about US$4bn on new plants and infrastructure and US$6.5bn on equipment, across 13 new plant projects and 8 expansions (Economic Daily News and TechNews via TrendForce, 31 July).
- LEAP targets raised for 2026 and 2027. Management said 2026 LEAP revenue was already ahead of its US$3.5bn target and raised the 2027 target to at least US$7.5bn from US$5.5bn (TechNews via TrendForce, 31 July). Computing chips rose to 30% of ATM revenue in 2Q26 from 27% in 1Q26 (2Q26 presentation).
- Memory prices inflated EMS revenue. CFO Joseph Tung attributed most of the guided 40% QoQ rise in EMS revenue to higher component prices, especially memory, passed through to customers. Excluding them, growth was seasonal and the operating margin guide would be 3.7-3.8% rather than 3.2-3.4%; he expected fourth-quarter EMS revenue roughly flat (Storm Media, 30 July).
- A US$1bn convertible bond priced. On 3 August ASE priced US$1bn of zero-coupon convertible bonds due 2031 to repay subsidiary borrowings and buy materials priced in foreign currency (company filing, 3 August). The issue equals about 1.1% of ASE's current market value.
- The shares fell by the 10% daily limit on 15 October. They closed at NT$673 as the TAIEX fell 1,656 points and foreign investors sold a record NT$302.6bn of Taiwan shares. The local press attributed the selling to inflation concerns weighing on AI-related valuations (Economic Daily News; Mirror Media, 15 October).
Packaging and test revenue is filed 6% above the top of its guide
Third-quarter revenue is filed, and packaging and test delivered most of the beat. ATM revenue rose 20.1% QoQ to NT$151.5bn against an 11-13% guide, while the rest of the group, mostly EMS, rose about 43% against a guide of about 40%. The exchange rate averaged NT$31.95 per US dollar against the guide's 31.9, so the beat came from volume, not currency.
| Month | Group 2026 (NT$m) | Group YoY | ATM 2026 (NT$m) | ATM YoY |
|---|---|---|---|---|
| July | 73,784 | +43.2% | 47,524 | +49.5% |
| August | 82,247 | +45.7% | 51,287 | +53.1% |
| September | 88,130 | +45.5% | 52,674 | +50.5% |
| Third quarter | 244,161 | +44.8% | 151,485 | +51.0% |
| QoQ, filed | +27.8% | +20.1% | ||
| QoQ, guided | +21-22% | +11-13% |
- The guide implied NT$231.2-233.1bn of group revenue and NT$140.0-142.5bn for ATM. Filed revenue beat the tops by 4.7% and 6.3%.
- In US dollars ATM revenue reached US$4.74bn, up 40.6% YoY. January to September ATM revenue of US$12.3bn is already 98% of 2025's US$12.5bn, so a fourth quarter flat on the third would give 36% growth for 2026, above the 35% guided in July.
- The street's FY26E of NT$840.7bn, up 30%, leaves NT$231.8bn for 4Q26E: 5% below 3Q26 and 30% above 4Q25. October revenue is due around 10 November.
Management said in July that capacity, not demand, limited growth, with existing lines near full. A 20% quarter therefore points to new equipment entering production faster than the guide assumed, and that capacity stays in place for the fourth quarter.
Management guided ATM gross margin above 30% by the fourth quarter
ASE guided 3Q26 in July at an exchange rate of NT$31.9 per US dollar: group revenue up 21-22% QoQ, gross margin of 20.5-21.5% and operating margin of 11.5-12.5%. For ATM it guided revenue up 11-13% and gross margin of 28-29%; for EMS, revenue up about 40% and operating margin of 3.2-3.4% (2Q26 presentation, 30 July).
For the full year, management expected ATM revenue to grow 35% in US dollars, with LEAP revenue above US$3.5bn and the rest of packaging and test up 20%, against 13% previously. It said ATM gross margin should improve each quarter in the second half and would likely break through 30% in the fourth quarter, and that it would revisit its long-term margin range, most likely upward (2Q26 presentation; Storm Media, 30 July).
The street expects FY26E revenue of NT$840.7bn and net profit of NT$83.1bn, then FY27E revenue of NT$1,057.9bn, up 26%, and net profit of NT$125.9bn (FMP consensus, 17 analysts). That puts FY27E EPS at about NT$28.7, against about NT$18.9 for FY26E.
We expect 4Q26E revenue of NT$240-252bn: ATM of NT$152-159bn, flat to up 5% QoQ as new capacity ramps, and EMS roughly flat as guided. That puts FY26E at NT$849-861bn, up 31-33% and 1-2% above the street's NT$840.7bn. For FY27E we carry the street's NT$1,057.9bn. The two FY26E numbers converge if monthly revenue falls back toward NT$77bn, close to the July and August average of NT$78bn.
On that revenue, an ATM gross margin of 30-31% and operating expenses of NT$21-22bn, we expect 4Q26E net profit of NT$25.5-30.5bn, EPS of NT$5.8-6.9. With our 3Q26 range, that puts FY26E net profit at NT$85.5-94.2bn, 3-13% above the street's NT$83.1bn. The street's figure, after our 3Q26 midpoint, leaves about NT$21bn for the fourth quarter.
We expect ATM gross margin of 29-30% and EPS of NT$5.6-6.5
- ATM gross margin of 29.0-30.0%, above the 28-29% guide. ATM revenue came in 6% above the guide top, and fixed costs such as depreciation and labor were spread over more output. On NT$151.5bn of revenue that is NT$43.9-45.4bn of ATM gross profit, against NT$34.5bn in 2Q26.
- Group gross margin of 21.0-22.0%. EMS grew faster than ATM, and memory passed through at cost carries almost no margin, so the group margin rises less than the ATM margin. The guide was 20.5-21.5%.
- Operating margin of 12.3-13.5%, above the 11.5-12.5% guide. We expect operating expenses of NT$20.5-21.5bn, against NT$19.0bn in 2Q26, for operating profit of NT$30.0-33.0bn. The guide applied to filed revenue would give NT$28.1-30.5bn.
- Net profit of NT$24.8-28.5bn, for EPS of NT$5.6-6.5. That compares with NT$21.1bn and EPS of NT$4.80 in 2Q26, which included NT$4.6bn of non-operating income; we assume NT$0.5-2.0bn this quarter.
- A fourth-quarter guide that keeps ATM growing. We expect ATM revenue guided flat to up 5% QoQ, an ATM gross margin guide above 30%, as flagged in July, and EMS revenue about flat.
What investors should watch: margin, the fourth quarter and 2027 capacity
Third-quarter revenue is filed. Three issues in the release decide the fourth-quarter and 2027 numbers; for each we give our expectation and the specific thing to check.
- Does ATM gross margin cross 30%, and does the long-term range move up? We expect 29.0-30.0% for 3Q26 and a fourth-quarter guide above 30%. Check the 3Q26 ATM margin against the 28-29% guide, the 4Q26 ATM margin guide, and any new long-term range. An ATM margin below 28.5% on 6% more revenue than guided would mean new capacity is costing more to ramp than the guide assumed.
- Does fourth-quarter revenue hold near NT$244bn? The street carries NT$231.8bn; we expect NT$240-252bn. Check the 4Q26 ATM revenue guide, the EMS guide against "roughly flat", and whether management still says capacity rather than demand limits growth. October revenue, due around 10 November, is the first data point.
- Is 2027 capex sized for a US$7.5bn LEAP business? Check the first 2027 capex indication against 2026's US$10.5bn, any change to the LEAP target, the timing of the panel-level packaging line due in 1Q27, and computing's share of ATM revenue (30% in 2Q26). Interest-bearing debt rose to NT$306.2bn at the end of 2Q26 from NT$265.3bn a quarter earlier, and net debt to 0.47x equity from 0.40x, so check operating cash flow against capex.
Valuation and peer comparables: 1.7 times the peer median on FY26E earnings
At NT$654 ASE trades at 34.3x FMP's FY26E EPS consensus, 31-34x our FY26E net profit of NT$85.5-94.2bn, and 22.8x the street's FY27E net profit of NT$125.9bn, NT$28.7 a share. Forward EV/EBITDA is 16.0x on FY26E (Exhibit 6).
Against packaging and test peers the shares trade at a premium. The four-peer median forward P/E is 20.1x, from Amkor at 15.1x to King Yuan, a testing specialist with AI-chip exposure, at 30.7x. ASE's 34.3x on FY26E is 1.7 times that median; its 22.8x on FY27E, a year further out, is close to it.
The FY27E multiple depends on net profit rising 52% next year on revenue up NT$217bn. If LEAP doubles to the US$7.5bn target, the increase of about US$3.75bn, roughly NT$120bn at NT$32 per US dollar, supplies about 55% of that revenue growth. A release that confirms an ATM margin above 30% and capacity additions for 2027 supports that estimate; a fourth-quarter guide pointing to revenue near NT$232bn, or an ATM margin below 28.5%, would leave more of the FY27E estimate to prove.
| Company | Mkt cap (US$bn) | P/E (TTM) | P/E (Fwd) | EV/Sales (TTM) | EV/Sales (Fwd) | EV/EBITDA (TTM) | EV/EBITDA (Fwd) |
|---|---|---|---|---|---|---|---|
| US-Listed | |||||||
| Amkor Technology | 9.8 | 17.5x | 15.1x | 1.4x | 1.4x | 7.7x | 7.0x |
| Taiwan-Listed | |||||||
| King Yuan Electronics | 10.4 | 34.9x | 30.7x | 9.0x | 7.7x | 17.4x | 16.0x |
| Powertech Technology | 5.6 | 24.6x | 19.6x | 2.3x | 2.1x | 8.2x | 6.0x |
| ChipMOS Technologies | 2.0 | 30.0x | 20.6x | 2.6x | 2.3x | 9.6x | 7.5x |
| Peer median (all peers) | 27.3x | 20.1x | 2.5x | 2.2x | 8.9x | 7.2x | |
| ASE Technology† | 88.3 | 47.0x | 34.3x | 4.3x | 3.7x | 20.0x | 16.0x |
Source: FMP market data and consensus estimates, Zero One Investment Research. Prices at the latest Taipei and US closes before publication. Forward multiples use each company's next unreported fiscal year per FMP consensus (December 2026 for all six). P/E shown as n.m. where net margin is below 5% or the multiple exceeds 150x. ASE Technology market cap is NT$2,876bn at NT$654, converted at the FMP rate. † FMP operating-income defect adjudicated; EBIT-derived trailing multiples treated with caution. P/B is not shown for this capital-intensive group.