September revenue rose 87%: why cut forecasts anyway?

  • Wistron’s revenue in September 2026 was NT$380.8 billion, up 87% year over year but down 17% month over month and 18% below Goldman Sachs’ previous forecast. Goldman attributed the shortfall to fluctuations in shipment timing for high-priced AI products: their delivery schedules can materially affect revenue in a single month.
  • The shortfall also extended to the quarter: third-quarter revenue was about NT$1.15 trillion, 7% below Goldman Sachs’ previous forecast. After incorporating the September data, Goldman cut its 2026 revenue forecast by 5% to about NT$4.2 trillion, and reduced its 2027 and 2028 forecasts by 1% each.

What will restore growth in the fourth quarter, and how large is the drag from PCs?

  • Goldman Sachs expects shipments of new GPU AI server racks to ramp up in the fourth quarter, lifting average selling prices; strong AI spending and an expanding customer base support demand. The growth case rests on customer expansion, higher shipment volumes and product specification upgrades.
  • In its model, Goldman expects revenue to rise month over month by 5%, 8% and 10%, respectively, from month 10 through December. Fourth-quarter revenue is forecast at about NT$1.31 trillion, up 14% quarter over quarter. Second-half revenue is expected to rise 41% from the first half.
  • The PC business is weakening. PC shipments in September were 1.5 million units, up 7% month over month and down 32% year over year. Goldman Sachs believes advance purchases amid high memory costs affect subsequent demand and expects second-half PC shipments to be lower than in the first half. Whether the AI rack ramp-up proceeds as expected will determine whether it can offset this drag.

Why were net profit forecasts raised despite lower revenue estimates?

  • The key lies in expense assumptions. Goldman Sachs lowered its expense ratio assumptions because of reduced R&D spending and raised its 2026–2028 net profit forecasts by 4%, 3% and 4%, respectively. Its 2026 net profit forecast rose to NT$55.2 billion, and its operating margin forecast increased from 3.2% to 3.6%, even though its gross profit forecast for the same period was trimmed.
  • But the full-year earnings upgrade does not mean fourth-quarter margins will rise as well. In Goldman Sachs’ model, fourth-quarter gross margin falls to 4.9% from 5.7% in the third quarter, and operating margin falls to 3.3% from 3.9%; while revenue rises 14% quarter over quarter, operating profit is expected to fall 2%. Revenue expansion from racks and its conversion into profit need to be assessed separately.

Why did the target price still fall to NT$291 after the earnings upgrade?

  • Goldman Sachs maintained its Buy rating but cut its 12-month target price from NT$295 to NT$291, because it lowered the 2027 forward price-to-earnings multiple it applies from 13.2 times to 12.6 times. The lower valuation multiple offset the effect of the earnings forecast upgrade.
  • The multiple is based on the relationship between peers’ earnings growth and price-to-earnings ratios; Goldman Sachs continues to recognize Wistron’s leading position in AI server contract manufacturing. An important condition for the thesis is that AI server demand ramps up as expected, while a weak PC recovery and insufficient demand for general-purpose servers would also weigh on growth.