Phison 3Q26 Preview: Street's Full Year Leaves the Fourth Quarter Below September's Pace
Phison's July, August and September filings put 3Q26 revenue up 27% QoQ and 375% YoY, with September a monthly record of NT$30.6bn. The release therefore turns on margins and profit rather than sales.
Management said in August that the benefit of inventory bought at lower prices will fade and that gross margin cannot keep rising in a straight line. The street's FY26E operating profit still implies a 2H26E operating margin of about 41%, above 38% in 1H26.
The street's FY26E revenue of NT$280.1bn leaves NT$85.1bn for 4Q26E, 1% below 3Q26. Holding September's NT$30.6bn for three months would give NT$91.9bn.
The shares, at NT$1,845, are 19% below their NT$2,280 close on 13 August, the day of the 2Q26 results. NAND makers trade at a median 5.0x forward earnings and controller designers at 24.5x.
Company snapshot
Phison Electronics (8299 TT) is a Taiwan-based designer of NAND flash controllers, the chips that manage how data is written to and read from flash memory, listed on the Taipei Exchange. It buys NAND from memory makers and sells most of it as finished storage modules built around its own controllers. In 2Q26, AI-ecosystem modules, including Pascari enterprise SSDs and boot drives, were 38% of revenue, embedded modules for phone and PC makers 33%, industrial modules 16% and controllers sold on their own 6% (Exhibit 2). Because Phison holds large NAND inventories, its gross margin rises and falls with NAND prices.
Expectations snapshot
Phison is expected to report 3Q26 results in early November; it reported 3Q25 results, together with October revenue, on 7 November last year. It files revenue every month, so the quarter's sales are already known, and it gives no numeric guidance. The table sets the reported figures against the street's numbers.
| Metric | 3Q26 | 4Q26E | FY26E | FY27E |
|---|---|---|---|---|
| Revenue | Reported monthly: NT$86.1bn (+27% QoQ, +375% YoY) | Street implied NT$85.1bn; not guided | Street NT$280.1bn (+285%); Zero One in line | Street NT$370.0bn (+32%); Zero One in line |
| Gross margin | Not guided (2Q26: 65.3%) | Not guided | Not guided (1H26: 63.8%) | Not guided |
| Operating profit | Not guided (2Q26: NT$26.4bn) | Street implied 2H26E NT$69.5bn | Street NT$110.7bn (1H26: NT$41.2bn) | Street NT$74.2bn (-33%) |
| Net profit | Not guided (2Q26: NT$26.2bn) | Street implied 2H26E NT$52.6bn | Street NT$94.0bn (1H26: NT$41.4bn) | Street NT$62.9bn (-33%) |
| Reported to date | July-September revenue filed | n/a | 9M26 revenue NT$194.9bn (+291% YoY) | n/a |
Recent developments
- Second-quarter revenue, margin and profit all set records. Revenue was NT$67.9bn, up 65.7% QoQ, gross margin 65.3% and net profit NT$26.2bn, or NT$118.57 per share. Profit included equity-method investment gains worth about NT$14.2 per share, while an inventory write-down on work in progress cut gross margin by about 1.1 percentage points (company presentation, 13 August).
- Management expects tight NAND supply to last. CEO K.S. Pua said NAND supply and demand will be hard to balance in 2027 and 2028, because new capacity takes years to reach mass production. He also said the benefit of low-cost inventory will fade as NAND prices rise, so gross margin cannot keep climbing in a straight line (Anue, 13 August).
- Inventory and borrowing rose with sales. Inventory reached NT$91.8bn at the end of June, up from NT$72.2bn in March, while inventory days fell to 297 from 315. Management said most of it is set aside for enterprise, embedded, ODM and industrial customers. Bonds payable rose to NT$25.4bn from NT$5.1bn after new convertible bond issues (company presentation, 13 August).
- The enterprise SSD brand is widening its customer list. Pascari ships to 21 customers out of 30 active accounts, with nine more in qualification (StorageNewsletter, 13 October). Phison planned to show its first PCIe Gen6 enterprise SSD in November (Anue, 13 August).
- The shares fell after the 2Q26 results and have not recovered. They dropped as much as 8% during trading on 14 August despite the records, Commercial Times linked the fall to rising short positions and to a local brokerage that cut its target price and forecast 3Q26 gross margin of 56.7% (Commercial Times, 14 August). At NT$1,845 on 2 November they are 19% below the NT$2,280 close on results day.
Third-quarter revenue already reported, up 27% QoQ
Third-quarter revenue is settled. The three monthly filings add up to NT$86.1bn, the seventh straight quarter of growth, and September set a monthly record.
| Month | Revenue (NT$m) | MoM | YoY |
|---|---|---|---|
| July 2026 | 27,162 | +9.3% | +377.6% |
| August 2026 | 28,276 | +4.1% | +376.5% |
| September 2026 | 30,639 | +8.4% | +370.3% |
| 3Q26 total | 86,076 | +26.8% QoQ | +374.6% |
- Revenue for the first nine months of 2026 reached NT$194.9bn, 2.7 times all of FY25.
- The street's FY26E revenue of NT$280.1bn leaves NT$85.1bn for 4Q26E, an average of NT$28.4bn a month, 7% below September.
- Holding September's NT$30.6bn for October, November and December would give 4Q26 revenue of NT$91.9bn and FY26 revenue of NT$286.8bn, 2% above the street.
October revenue, released with the 3Q results last year, is the first test of whether the fourth quarter holds September's pace.
No numeric guidance; the street expects 2027 profit to fall 33%
Phison gives no revenue or margin guidance. Its direction comes from management commentary: in August it expected NAND supply to stay tight into 2027 and 2028, and warned that gross margin would not keep rising as cheaper inventory is used up (Anue, 13 August).
Gross margin rose from 32.4% in 3Q25 to 65.3% in 2Q26 (Exhibit 5), as NAND prices rose faster than the cost of the inventory Phison had already bought. Inventory days of 297 mean much of what Phison sells in a quarter was bought around three quarters earlier.
The street expects FY26E revenue of NT$280.1bn, up 285%, operating profit of NT$110.7bn and net profit of NT$94.0bn (FMP consensus, ten analysts). For FY27E it expects revenue up 32% to NT$370.0bn but net profit down 33% to NT$62.9bn, a net margin of 17% against 34% in FY26E.
Our model carries FY26E and FY27E revenue in line with the street. The street's 2027 profit decline assumes NAND costs catch up with selling prices; management's August outlook of tight supply into 2027 and 2028 is the main argument against it.
We expect gross margin below the 65.3% record on already-reported revenue
- Revenue of about NT$86.1bn, already reported. The consolidated figure in the release should sit close to the sum of the three monthly filings, as it did in 2Q26.
- Gross margin below the 65.3% record. One local brokerage expected NAND prices to rise a further 10-20% in 3Q26, after more than 50% in 2Q26, which still supports selling prices (Commercial Times, 14 August). Against that, management expects the benefit of low-cost inventory to fade, and the same brokerage forecast gross margin of 56.7%. Each percentage point of gross margin on NT$86.1bn of revenue is worth about NT$0.86bn of pre-tax profit, or about NT$3.3 per share after tax at the 2Q26 tax rate.
- Operating expenses up again. They rose 75% QoQ to NT$18.0bn in 2Q26, led by research and development on advanced-node controllers, chip masks and AI storage, and management described the investment as ongoing.
- A smaller non-operating line. 2Q26 profit included equity-method investment gains worth about NT$14.2 per share. A quarter without a similar gain would show slower profit growth than revenue growth even at an unchanged operating margin.
What investors should watch: gross margin, October revenue and enterprise mix
Three issues in the release bear on the 2026 and 2027 numbers; for each we name the specific thing to check.
- Where does gross margin land, and what does management say about 4Q26? Check 3Q26 gross margin against 65.3%, any inventory valuation gain or write-down, and inventory against NT$91.8bn and 297 days. A margin near the 56.7% one brokerage forecast would leave the street's 2H26E operating margin of about 41% hard to reach.
- Does October hold September's NT$30.6bn? The street's FY26E needs an average of NT$28.4bn a month in the fourth quarter. Check October revenue and management's description of fourth-quarter orders and NAND supply.
- Is enterprise storage still the fastest-growing line? AI-ecosystem modules were 38% of 2Q26 revenue. Check their 3Q26 share, Pascari customer numbers beyond the 21 shipping today, and management's view of NAND supply and pricing for 2027, which decides whether the street's 33% FY27E profit decline holds.
Valuation and peer comparables: 4.5x FY26E earnings, 6.5x the street's FY27E
At NT$1,845 Phison trades at 4.5x the street's FY26E earnings and 3.6x forward EV/EBITDA, against a peer median of 5.1x and 4.1x (Exhibit 7). On the street's FY27E net profit of NT$62.9bn, it trades at 6.5x.
The peer median blends two very different groups. Controller designers Silicon Motion, Realtek and Marvell trade at a median 24.5x forward earnings; NAND makers Micron, SanDisk and Kioxia at 5.0x. Phison sits with the NAND makers, which matches a business that now earns most of its revenue from modules built on NAND it buys from memory makers.
The multiple prices 2026 as a peak year. If gross margin stays above 60% into 2027 as enterprise sales grow, the street's 33% profit decline would prove too steep; if margin falls back as cheaper inventory runs out, the shares stay priced with the memory makers.
| Company | Mkt cap (US$bn) | P/E (TTM) | P/E (Fwd) | EV/Sales (TTM) | EV/Sales (Fwd) | EV/EBITDA (TTM) | EV/EBITDA (Fwd) |
|---|---|---|---|---|---|---|---|
| Controller designers | |||||||
| Silicon Motion | 7.0 | 5.6x | 15.6x | 4.5x | 3.7x | 17.8x | 41.0x |
| Realtek Semiconductor | 12.4 | 27.1x | 24.5x | 2.9x | 2.7x | 22.9x | 18.4x |
| Marvell Technology | 172.0 | 64.4x | 46.6x | 18.3x | 14.4x | 36.4x | 27.6x |
| NAND makers | |||||||
| Micron Technology | 1,001.0 | 11.7x | 5.0x | 7.3x | 3.5x | 8.9x | 3.9x |
| SanDisk | 166.3 | 8.7x | 5.1x | 5.6x | 3.2x | 7.4x | 4.4x |
| Kioxia | 117.4 | 7.0x | 3.3x | 3.1x | 1.8x | 4.1x | 2.2x |
| Taiwan module makers | |||||||
| ADATA Technology | 3.5 | 4.1x | 1.8x | 1.6x | 1.1x | 4.7x | 1.7x |
| Transcend Information | 3.7 | 4.9x | 3.5x | 2.4x | 1.3x | 3.5x | 2.4x |
| Peer median (all peers) | 7.8x | 5.1x | 3.8x | 3.0x | 8.1x | 4.1x | |
| Phison Electronics | 12.5 | 8.4x | 4.5x | 2.7x | 1.5x | 8.1x | 3.6x |
Source: FMP market data and consensus estimates, Zero One Investment Research. Prices at the latest quotes on 2 Nov 2026. Forward multiples use each company's next unreported fiscal year per FMP consensus. Multiples above 100x or below zero shown as n.m. Medians over the peers shown, Phison excluded. Innodisk omitted (inconsistent vendor data) and Maxio Technology omitted (no vendor data). P/B is not shown for this group.