Why did third-quarter revenue exceed guidance?

  • MediaTek’s third-quarter 2026 revenue reached 168 billion New Taiwan dollars, above the company’s guidance range of 152.2 billion to 159.8 billion New Taiwan dollars. HSBC believes this was because the company brought forward price increases that might otherwise have been implemented in the fourth quarter.
  • Profitability data are still pending disclosure in the full financial report. HSBC expects third-quarter gross margin to be 46.5%, within the company’s guidance range of 44.5% to 47.5%; earnings per share are expected to be 17.09 New Taiwan dollars, above the market consensus of 16.13 New Taiwan dollars.

What will support fourth-quarter growth?

  • HSBC expects fourth-quarter revenue in 2026 to grow about 37% quarter over quarter, above the market consensus of about 30%, primarily because AI custom chips, or ASICs, will begin making a substantial revenue contribution. Although there had previously been market rumors of delayed sample deliveries for some V8 projects, the bank believes the formal target for ramping V8 into mass production remains 2026.
  • HSBC expects full-year AI ASIC revenue of 2.25 billion US dollars, above the company’s outlook of more than 2 billion US dollars. The bank also expects fourth-quarter price increases for consumer products to offset the dilution to gross margin from ASIC volume ramp-up, bringing overall gross margin to 46%.

Why does V9 affect the 2028 revenue outlook?

  • HSBC says design modifications to Google’s TPU V9 Core A slowed MediaTek’s work on the Core B and input/output designs; Intel’s EMIB-T packaging also faces yield issues, including differences in material thermal expansion and bubbles formed during bonding.
  • The bank expects the initial tape-out to be delayed from the end of 2026 to January 2027, with mass production in the first half of 2028. Visibility into CoWoS capacity, Intel’s packaging ramp-up and HBM procurement will also affect the supply cadence of V9.
  • HSBC’s forecast for 2028 ASIC revenue is 34 billion US dollars, below the market consensus of 42 billion US dollars. Its model assumes shipments of about 3.98 million chips that year, at an average selling price of about 8536 US dollars; capacity and the mass-production schedule will affect this forecast.

Why cut the target price despite raising earnings forecasts?

  • Taking MediaTek’s pricing power into account, HSBC raised its earnings-per-share forecasts for 2027 and 2028 by about 3% each, to 144.63 and 278.95 New Taiwan dollars, respectively, but they remain about 1% and 4% below market consensus, respectively.
  • HSBC lowered the target P/E multiple for the ASIC business in 2027 from 43 times to 40 times to reflect execution risks in the V9 ramp-up; the core business remains valued at 14 times. The target price was cut from 4200 to 4000 New Taiwan dollars. HSBC maintained its Hold rating, citing a valuation that already reflects near-term ASIC progress and continuing uncertainty over the collaboration with Intel.