Bernstein: MediaTek raises ASIC revenue targets: aims for US$16 billion in 2027 as handset business remains under pressure

Where did third-quarter growth come from?

MediaTek’s revenue for the third quarter of 2026 was NT$168.058 billion, up 10.4% quarter over quarter and above Bernstein’s forecast by 5.9% and the market consensus by 0.9%; operating profit was NT$27.102 billion, up 18.5% quarter over quarter.
Smart Edge revenue grew 63% year over year, offsetting weakness in the handset business; power management chip revenue rose 18% year over year. Handset revenue fell 17% year over year as high memory chip prices weighed on demand, and its share of total revenue fell to 37%.

The company raised its 2026 ASIC revenue target to US$2.5 billion from more than US$2 billion previously, and raised its 2027 target to US$16 billion.
The company had previously expected to capture a 15% to 20% share of a potential market worth US$70 billion to US$80 billion. Bernstein believes the new US$16 billion target corresponds to both market size and share reaching the upper ends of their previous ranges.
The company expects fourth-quarter total revenue of NT$210.1 billion to NT$221.8 billion, with the midpoint approximately 28% above the third quarter; the guidance implies full-year revenue growth of approximately 13% year over year.

Several chips for the first customer’s second ASIC project have completed tape-out, and yield bottlenecks in key parts of the supply chain have been identified. Management is confident of proceeding on schedule but is still finalizing supply arrangements.
The company says the second project will deliver severalfold improvements in performance and total cost of ownership compared with the first, and demand is strong. An ASIC project for another non-Chinese customer has begun and is expected to contribute revenue starting in 2028; including the first customer’s second project, the company expects another year of strong growth in 2028.
The 448 Gbps SerDes high-speed data transmission technology has completed tape-out and passed validation. Management says it is no longer on the critical path for existing customer projects.

The midpoint of the company’s fourth-quarter gross margin guidance is 45%, below the third quarter’s 46.3%, partly due to slight dilution from the ASIC business and rising costs; however, the operating margin guidance midpoint is approximately 19%, above the third quarter’s 16.1%.
Bernstein attributes the margin improvement to rapid revenue growth and operating leverage in the ASIC business: as revenue expands, operating profit grows faster than revenue. Management expects an operating margin above 20% in 2027.
Bernstein has an Outperform rating and a one-year price target of NT$5500; the firm notes that ASIC shipments below expectations, intensified competition including from customers’ in-house teams, and weaker smartphone demand could all affect this assessment.