ASE Technology Surges 169% YTD: Should You Still Buy the Stock?

• ASX reported record Assembly, Testing and Materials revenues of NTD 112.4 billion in Q1 2026, up 30% year-over-year, with Leading Edge Advanced Packaging (LEAP) revenues expected to exceed $3.5 billion in 2026 (raised 10% from prior outlook)
• Gross margins improved to 26% in Q1 2026 (up 340 basis points year-over-year) driven by higher factory utilization and increased LEAP mix, with management expecting margins to reach the upper end of the 26-27% structural range
• The stock trades at a P/S ratio of 4.36X, significantly below the industry average of 16.09X and peers like Lam Research (20.38X) and Applied Materials (16.60X), while consensus estimates project revenue growth of 19.6% in 2026 and 22.4% in 2027

ASE Technology Market Summary

Key Performance Metrics

ASE Technology (ASX) has delivered exceptional returns with a 169% year-to-date surge through May 2026, significantly outperforming the Zacks Electronics-Semiconductors industry's 42.7% return. The stock has also exceeded peers including FormFactor (FORM), Lam Research (LRCX), and Applied Materials (AMAT).

Financial Highlights

• Q1 2026 ATM revenues: NTD 112.4 billion, up 2% sequentially and 30% year-over-year
• ATM gross margin: 26%, representing a 340 basis point increase year-over-year
• LEAP revenue projection: Expected to exceed $3.5 billion in 2026 (10% increase in outlook)
• Revenue growth estimates: 19.6% for 2026 and 22.4% for 2027

Business Drivers

ASE Technology is capitalizing on surging AI chip packaging demand, with its Leading Edge Advanced Packaging (LEAP) business serving as the primary growth engine. The company is experiencing record performance in its Assembly, Testing and Materials (ATM) segment, driven by AI accelerators and related power management, connectivity, and edge devices.

The company has increased its 2026 capital expenditure plan to expand capacity, with new production lines expected to contribute from Q4 2026. Management anticipates ATM gross margins reaching 26-27% as LEAP services comprise a larger revenue mix.

Valuation & Technical Analysis

ASX trades at an attractive 4.36X trailing P/S ratio, well below the industry average of 16.09X and peers (FormFactor: 11.69X, Lam Research: 20.38X, Applied Materials: 16.60X). The stock maintains a bullish technical signal, trading above its 50-day and 200-day moving averages.

Currently rated Zacks Rank #1 (Strong Buy), the stock presents a compelling opportunity for investors seeking exposure to AI infrastructure growth.