ASE Technology posted record third-quarter revenue and sharply higher profit as full-capacity advanced packaging operations drove margins higher, prompting the chip services group to raise its 2026 capital-spending plan.
ASE Technology Holding reported record third-quarter results on Wednesday as demand for advanced packaging and testing services continued to run ahead of supply, lifting revenue, margins and profitability across its core operations. The Taiwan-based chip packaging and testing group said consolidated revenue reached TWD244.2 billion, up 28% from the previous quarter and 45% from a year earlier, while net income rose to TWD27 billion, a 148% increase year on year, according to its earnings presentation.
The company’s advanced testing, assembly and materials business, known as ATM, remained the main driver of performance. It generated TWD151.5 billion of revenue in the quarter, accounting for 62% of group sales and 91% of operating profit. That segment’s gross margin rose to 30.6%, helped by higher utilisation, operating leverage and a richer mix of leading-edge advanced packaging, or LEAP, services. The group’s overall gross margin improved to 22.1%, while operating margin climbed to 13.6%, more than doubling from roughly 6.5% six quarters earlier, according to an investor presentation cited by Investing.com.
Ken Hsiang, head of investor relations, said ATM capacity was operating at or near full utilisation and that the quarter outperformed the company’s own expectations because installation of LEAP capacity progressed faster than planned. He told investors that demand for ASE’s services continued to exceed its ability to supply them in both LEAP and non-LEAP lines. Chief financial officer Joseph Tung said the company now regards its earlier structural gross-margin ceiling as more of a base level, as profitability increasingly depends on the proportion of higher-value LEAP work.
Management also pointed to a strong outlook for the next two years, especially in computing applications, which rose 39% in the quarter and remain the largest source of LEAP demand. ASE lifted its 2026 LEAP revenue forecast to more than $4 billion from the $3.7 billion guide it gave last quarter, and reiterated expectations that LEAP revenue will double in 2027. Full-process business is still expected to contribute about $300 million this year and more than $1 billion next year, while co-packaged optics, or CPO, is now projected to bring in more than $500 million in 2027. Tung said CPO mass production began in the fourth quarter and will continue into 2027, alongside near-packaged optics, with customer adoption depending on performance needs.
Outside ATM, the company’s electronics manufacturing services business also grew quickly, with revenue up 42% sequentially to TWD93.5 billion. That segment, however, saw gross margin ease to 8.3% as pass-through component costs tied to the rapid build-out of artificial intelligence infrastructure weighed on profitability after they were netted out. Tung said AI-related high-performance computing represented roughly the mid-teens share of EMS revenue and was expanding rapidly.
ASE raised capital spending to support the build-out. It spent $2.1 billion on machinery and equipment in the third quarter and another $1.8 billion on facilities and land, bringing year-to-date capital expenditure to $8 billion. The company now plans to spend $11.5 billion in 2026, up from a previous estimate of $10.5 billion, with half of the extra $1 billion earmarked for facilities and half for equipment. ASE said 22 building projects are under way in Taiwan, with more than half expected to begin contributing revenue between now and 2027. Interest-bearing debt rose to TWD406.5 billion, pushing net debt to equity to 66%, which management described as a near-term peak expected to ease in the fourth quarter.
For the final quarter of 2026, ASE guided to consolidated revenue growth of 6% to 8% sequentially, gross margin of 23% to 24%, and operating margin of 14.5% to 15.5%. It expects ATM revenue to rise by 11% to 13%, with ATM gross margin improving by 100 to 200 basis points, while EMS revenue should be broadly flat. MarketBeat had reported before the results that analysts were expecting EPS of 34 cents on revenue of about $7.3 billion, underscoring how closely the market was watching the company’s advanced packaging momentum.
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