ASE Technology Q2 Earnings Call Highlights

ASE Technology NYSE: ASX reported second-quarter 2026 results marked by strong growth in its assembly, testing and materials business, driven by demand for leading-edge packaging and testing services as semiconductor customers expand AI-related hardware capacity.

Consolidated net revenue rose 10% sequentially and 27% year over year to TWD 191.1 billion. Net income reached TWD 21.1 billion, up 49% from the prior quarter and 180% from a year earlier. Fully diluted earnings per share were TWD 4.61, while basic EPS was TWD 4.80.

Chief Operating Officer Dr. Tian Wu said consolidated revenue increased 24% year over year during the first half, while assembly, testing and materials, or ATM, revenue rose 35%. Leading-edge services, advanced packaging and testing outpaced the company’s overall growth, he said.

ATM Business Drives Profitability

ATM revenue reached a quarterly record of TWD 126.1 billion, rising 12% sequentially and 36% year over year. The segment accounted for 66% of consolidated holding company revenue and 94% of operating profit during the quarter.

ATM gross profit totaled TWD 34.5 billion, while gross margin improved to 27.3%, up 1.3 percentage points sequentially and 5.4 percentage points from the prior-year period. The company attributed the expansion to higher utilization, operating leverage and a more favorable mix of leading-edge advanced packaging, which it calls LEAP services.

ATM operating profit increased 25% sequentially and 124% year over year to TWD 19.8 billion. Its operating margin expanded to 15.7% from 14.1% in the first quarter and 9.5% a year earlier.

Management said capacity was tight across the ATM business. Non-LEAP capacity, including wire bonding and traditional advanced packaging, was constrained, while wafer-sort and final-test lines were operating near full utilization. The blended utilization rate was between 80% and 85%, with incremental growth dependent on installing additional equipment and completing facilities.

Ken Hsiang, head of investor relations, said legacy wire-bond assembly services were growing more strongly than expected. While the company had expected testing—particularly wafer sort—to grow faster than assembly this year, it now expects assembly and testing to expand at similar rates.

EMS Margins Decline on Mix and Component Costs

ASE’s electronics manufacturing services, or EMS, revenue increased 6% sequentially and 12% year over year to TWD 65.8 billion. However, gross margin declined 0.6 percentage point sequentially to 8.9%, while operating margin fell to 2.4% from 3.0% in the first quarter.

The company cited product mix and a higher component-cost environment for the margin pressure. EMS operating profit was TWD 1.6 billion, down TWD 0.3 billion sequentially but up TWD 0.1 billion from a year earlier.

Management said growth in the EMS computing category was largely related to AI accelerator products. It also said it continues to pursue system-level development opportunities combining ATM and EMS capabilities, particularly in optical interconnects, power delivery and thermal management.

Capital Spending Expands for LEAP Capacity

ASE spent $1.7 billion on machinery and equipment during the second quarter, including $840 million for packaging and $804 million for testing. It also spent TWD 658 million on facilities during the quarter.

For the first half, machinery capital expenditures totaled $2.7 billion, while spending on buildings, facilities and automation was $1.4 billion. Chief Financial Officer Joseph Tung said the company will add another $1 billion each for facilities and equipment in 2026, bringing total capital expenditures to about $10.5 billion, including $4 billion for factories and facilities and $6.5 billion for equipment.

Of equipment spending planned for the year, Tung said about 56% is allocated to assembly and 40% to testing, with roughly 70% of equipment capital expenditure directed toward leading-edge operations.

The company is managing 13 greenfield projects and eight brownfield projects, according to management. Tung said the current construction program is expected to provide capacity through 2028 and potentially into part of 2029.

Wu said customer demand is not the primary uncertainty; rather, the company’s ability to execute on building, equipment installation, yields and capacity ramp-up will determine its progress. ASE expects full-year ATM revenue to grow 35%, while its general segment is now expected to grow 30%, compared with prior guidance of 13% growth.

Third-Quarter Outlook and LEAP Growth

For the third quarter, ASE projected consolidated revenue growth of 21% to 22% sequentially in New Taiwan dollar terms. Consolidated gross margin is expected to range from 20.5% to 21.5%, while operating margin is expected to be 11.5% to 12.5%.

• ATM revenue is forecast to rise 11% to 13% sequentially.
• ATM gross margin is expected to be between 28% and 29%.
• EMS revenue is expected to increase about 40% sequentially, largely reflecting component price increases, particularly in memory.
• EMS operating margin is projected at 3.2% to 3.4%.

Tung said LEAP revenue is tracking about $200 million above the company’s earlier $3.5 billion target for 2026. ASE aims to double LEAP revenue in 2027, supported by expanding assembly and testing capacity as well as full-process packaging services.

The company expects sequential ATM margin improvement through the remainder of 2026 and said fourth-quarter ATM gross margin could exceed its prior structural ceiling of 30%. Management said it would review its long-term margin range if that threshold is surpassed.

Wu described AI as a long-term hardware and semiconductor packaging opportunity, arguing that increasingly complex computing, memory, connectivity, power and optical requirements are elevating packaging’s role in system architecture. He said ASE is developing automated panel-level packaging production, with its 310-by-310 format line scheduled to begin production in the first quarter of 2027.

About ASE Technology (NYSE:ASX)

ASE Technology Holding Co, Ltd. NYSE: ASX, commonly referred to as ASE, is a Taiwan-based provider of semiconductor assembly and testing services. The company focuses on back-end semiconductor manufacturing and related services that prepare integrated circuits and other semiconductor devices for final use. Its core activities include advanced IC packaging, final testing, wafer probing, and related engineering and supply-chain support for semiconductor customers.

ASE offers a range of products and technical capabilities designed to meet increasingly complex packaging and system-in-package requirements.

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