ASX Q2 Earnings Beat Estimates on AI-Driven LEAP, ATM Growth

Results reflected robust artificial intelligence (AI)-driven demand for advanced packaging and testing services, with Assembly, Testing and Materials (ATM) revenues surging 36.3% year over year and the company's Leading-edge Advanced Packaging (LEAP) portfolio maintaining strong momentum.

ASX ATM Growth Accelerates

ATM revenues totaled NT$126.15 billion, increasing 12.2% sequentially and 36.3% year over year. Packaging revenues rose 35% to NT$100.32 billion, while testing revenues advanced 42% to NT$23.67 billion.

Management cited strong demand across both leading-edge advanced packaging services, known as LEAP and general semiconductor services. Wire bonding, wafer sort and final test capacity remained tight, while blended ATM utilization was between 80% and 85%.

ASX Revenue Mix Shifts Toward Computing

Computing represented 30% of ATM revenues, up from 24% in the year-ago quarter. Communication’s contribution declined to 41% of the mix from 46%, while automotive, consumer and other applications accounted for 29%.

By service type, bumping, flip-chip, wafer-level packaging and system-in-package services contributed 49% of ATM revenues. Wire bonding accounted for 24%, testing represented 19%, other services contributed 6%, and materials made up 2%.

ASE Technology’s EMS Results Stay Mixed

Electronic Manufacturing Services revenues increased 11.9% year over year and 6.3% sequentially to NT$65.79 billion. Communication applications represented 30% of EMS revenues, computing contributed 16% and consumer products accounted for 28%.

EMS gross margin declined 60 basis points sequentially to 8.9%, while operating margin fell to 2.4% from 3% in the prior quarter. Product-mix changes and higher component costs weighed on profitability, partly offsetting the benefit of higher revenues.

ASE Technology Margins Expand

Consolidated gross profit increased 56% year over year to NT$40.15 billion. Gross margin expanded 400 basis points to 21%, reflecting higher ATM loading, structural efficiency gains and a more favorable New Taiwan dollar environment.

Operating income more than doubled to NT$21.13 billion, while the operating margin improved 430 basis points to 11.1%. Operating expenses rose to NT$19.02 billion mainly due to higher labor costs and increased research and development spending for LEAP initiatives. ATM operating margin reached 15.7%, up from 9.5% a year earlier.

ASX Investment Spending Moves Higher

Equipment capital expenditures totaled $1.70 billion during the second quarter, including $840 million for packaging operations, $804 million for testing, $49 million for EMS operations and $2 million for interconnect materials operations and other activities. 

The company invested $658 million in buildings and facilities during the quarter as it continued expanding manufacturing capacity. Management said investments remain focused on addressing semiconductor supply bottlenecks and supporting the growing AI build-out, with additional spending directed toward advanced capacity, automation and smart factory infrastructure to support long-term growth.

ASX Balance Sheet Remains Healthy

As of June 30, 2026, ASE Technology held NT$107.37 billion in cash, cash equivalents and current financial assets. Total interest-bearing debt increased to NT$306.23 billion, while unused credit facilities totaled NT$396.20 billion. The net debt-to-equity ratio was 0.47. 

For the second quarter of 2026, net cash generated from operating activities was NT$47.01 billion.

ASX Outlook Remains Strong

For the third quarter, management expects consolidated revenues to increase 21%-22% sequentially in New Taiwan dollar terms. Gross margin is projected to be between 20.5% and 21.5%, while operating margin is expected to be in the 11.5%-12.5% range. ATM revenues are forecast to grow 11%-13% sequentially, with gross margin between 28% and 29%. EMS revenues are projected to increase approximately 40% sequentially, with operating margin expected to be between 3.2% and 3.4%. 

Management now expects full-year ATM revenues to increase 35%, while general ATM services are projected to grow 20%, above the previous estimate of 13%. LEAP revenues are tracking ahead of the prior $3.5 billion target, supported by sustained AI demand across industrial, connectivity, storage and data center applications. Management reiterated its view that AI represents a multiyear technology transition, with advanced packaging becoming an increasingly important part of semiconductor system architecture.

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 include Kimball Electronics KE, Datadog DDOG and Onto Innovation ONTO. Each stock currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Kimball Electronics have lost 11.7% in the year-to-date period. KE is set to report the fourth quarter of fiscal 2026 results on Aug. 12.

Shares of Datadog have surged 97.5% in the year-to-date period. DDOG is slated to report second-quarter 2026 results on Aug. 6.

Onto Innovation shares have gained 58.7% in the year-to-date period. ONTO is set to report first-quarter fiscal 2027 results on Aug. 6.

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