ASE Technology Holding ASX shares have rallied 82% in the past six months, outperforming the Zacks Electronics - Semiconductors industry's return of 28.8%. The stock also outperformed its industry peers, including FormFactor FORM, Lam Research LRCX and Applied Materials AMAT. Shares of FormFactor, Lam Research and Applied Materials have returned 29.7%, 38.5% and 70.2%, respectively, year to date.
The outperformance of ASE Technology’s shares raises the question: Does it still have room to run, or is it time for investors to consider taking profits? Let’s find out.
6-Month Price Return Performance
Image Source: Zacks Investment Research
Strong LEAP Demand Boosts ASX's Growth Momentum
ASE Technology is seeing strong demand for its leading-edge advanced packaging and testing (LEAP) services, driven by growing AI infrastructure needs. In the first half of 2026, the company’s ATM revenues increased 35% year over year, with leading-edge advanced packaging and testing growing faster than the overall business. ASX expects this momentum to continue in the second half of 2026 and now projects ATM revenues to grow 35% for full-year 2026.
LEAP services are a key driver of this growth. ASX previously expected LEAP revenues of $3.5 billion in 2026. Following strong demand, management now expects LEAP revenues to be a couple of hundred million dollars above this level. The company is also aiming to double LEAP revenues in 2027. Management said customer demand remains strong and it has clear visibility into the capacity needed for next year. Both assembly and testing are seeing strong demand, while the expansion of full-process packaging is expected to provide another growth opportunity.
ASX is spending more to add capacity and meet demand. The company raised its 2026 capital expenditure plan by $2 billion to about $10.5 billion. Of the $6.5 billion planned for equipment, about 70% is for leading-edge operations. If ASX can bring new capacity online as planned, strong LEAP demand should continue to support its revenue growth and margin expansion. The Zacks Consensus Estimate for 2026 and 2027 indicates revenue growth of around 19.6% and 22.4%, respectively.
Image Source: Zacks Investment Research
Strong ATM Momentum Fuels ASX’s Margin Growth
Strong ATM growth is also improving ASX’s profitability. ATM gross profit increased to TWD 34.5 billion in the second quarter, while gross margin rose 5.4 percentage points year over year to 27.3%. The improvement was mainly driven by higher operating leverage and a better revenue mix, including a higher contribution from LEAP services. ATM operating profit increased 124% year over year, while operating margin rose 6.2 percentage points to 15.7%.
The ATM business is also becoming a larger contributor to ASX’s overall profits. In the second quarter, ATM accounted for 66% of consolidated revenues, up from the year-ago quarter's 61% of revenues. Similarly, ATM accounted for 94% of operating profit, up from the year-ago quarter's 87% of operating profit. Management attributed much of this change to the growth of LEAP services over the past few years. Higher utilization and continued investment in automation are also helping improve operating efficiency.
ASX expects ATM profitability to improve further in the second half of 2026. For the third quarter of 2026, the company expects ATM revenues to increase 11-13% sequentially, with gross margin between 28% and 29%. Management also expects fourth-quarter 2026 ATM gross margin to exceed its current structural ceiling of 30%, supported by the growing contribution from LEAP and testing services.
Valuation: ASX Trades Below Industry and Peers
ASX is currently trading at a lower price-to-sales (P/S) multiple, far below the Zacks Electronics – Semiconductors industry. ASX’s trailing 12-month P/S ratio sits at 3.64X, significantly lower than the Zacks industry’s trailing 12-month P/S ratio of 13.99X.
ASE TTM 12-Month P/S Ratio
Image Source: Zacks Investment Research
ASX stock also trades at a lower P/S multiple compared with other industry peers, including FormFactor, Lam Research and Applied Materials. At present, FormFactor, Lam Research and Applied Materials have P/S multiples of 9.60X, 15.93X and 14.27X, respectively.
Key Technical Indicator Signals Bullish Trend for ASX
ASX shares are trading above their 200-day moving average, a bullish technical signal that indicates the potential for continued upward momentum in the near term.
ASX 200-day Simple Moving Average
Image Source: Zacks Investment Research
Conclusion: Buy ASX Stock Right Now
ASE Technology continues to benefit from strong demand for AI chip packaging, supported by strong demand from AI and high-performance computing. The company is also expanding capacity to meet growing customer demand, while a higher mix of LEAP services and better factory utilization are helping expand margins. These factors support the outlook for continued growth.
Further, the company’s reasonable valuation offers downside protection as well, making the stock an attractive buy for investors looking for stability and steady upside. Currently, ASE Technology sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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