Will Strong ATM Momentum Continue to Fuel ASX's Margin Growth?

• ATM revenues grew 36% year-over-year to TWD 126.1 billion in Q2 2026, with full-year 2026 growth expected at 35%, driven by LEAP advanced packaging and testing services
• ATM gross margin improved 5.4 percentage points to 27.3% in Q2 2026, with operating margin reaching 15.7% (up 6.2 points), and Q4 2026 margin expected to exceed 30%
• ATM now represents 66% of consolidated revenues and 94% of operating profit, up from 61% and 87% respectively in the prior year, reflecting shift toward higher-margin advanced packaging

Summary

ASE Technology Holding (ASX) is experiencing robust growth in its Advanced Technology and Manufacturing (ATM) business, driven by strong demand for advanced packaging and testing services.

Key Financial Highlights

In Q2 2026, ATM revenues reached a record TWD 126.1 billion, representing a 36% year-over-year increase and 12% sequential growth. The company expects full-year 2026 ATM revenue growth of 35% year-over-year.

ATM gross margin improved significantly to 27.3% in Q2 2026, up 5.4 percentage points year-over-year, driven by higher operating leverage and increased contribution from LEAP (advanced packaging) services. ATM gross profit reached TWD 34.5 billion, while operating margin jumped 6.2 percentage points to 15.7%.

Forward Outlook

ASX projects Q3 2026 ATM revenue growth of 11-13% sequentially, with gross margins between 28-29%. Management expects Q4 2026 ATM gross margin to exceed 30% as LEAP and testing services expand. The Zacks Consensus Estimate indicates revenue growth of approximately 27.9% in 2026 and 22.5% in 2027.

Business Mix and Market Position

ATM now accounts for 66% of consolidated revenues (up from 61% year-ago) and 94% of operating profit (up from 87%). ASX currently trades at a forward P/E of 21.82X, above the semiconductor industry average of 13.77X, and carries a Zacks Rank #1 (Strong Buy).

Competitors include Amkor Technology (Q2 2026 revenues of $1.9 billion, up 26% year-over-year) and Intel, which is expanding its advanced packaging capabilities through foundry services.