Bernstein: Montage Technology’s fourth-quarter guidance strengthens: Interconnect chip revenue expected to double year on year at midpoint

What is the most important change to watch after the third quarter?

Montage Technology reported revenue of 2.08 billion yuan in the third quarter of 2026, up 46% year on year and 11% quarter on quarter. Strong server CPU demand and increased shipments of DDR5-related products drove the growth. Bernstein said results exceeded expectations from revenue through to profit, but the third-quarter results themselves were already largely anticipated after the preliminary announcement.
The new information concerns the fourth quarter: management expects interconnect chip revenue of 2.5 billion to 2.79 billion yuan, up 103% year on year at the midpoint, above the business’s 49% year-on-year growth in the third quarter. The company said the outlook is supported by secured supply and confirmed demand; Bernstein noted that the company rarely provides such explicit guidance for the next quarter.

Management is optimistic about the outlook for 2027: the number of memory channels in next-generation CPUs is expected to rise from the current 8 to 12 to 16, supporting growth in demand for interconnect chips.
AI agents and inference workloads require higher memory bandwidth. Second-generation MRDIMM offers twice the bandwidth of mainstream third-generation RDIMM and is therefore expected to meet such needs.
However, MRDIMM adoption remains at an early stage. Management expects demand in 2026 to come mainly from trials; cloud service providers have shown strong interest, while supporting CPU platforms from AMD and Intel are expected to ramp up in 2027, creating conditions for broader adoption.

On the strength of fourth-quarter order and shipment guidance, Bernstein raised its 2026 revenue forecast by 15.1% to 8.124 billion yuan, 6.8% above the market consensus cited in the report. The firm attributed the growth to strong demand for RDIMM interface chips and generational upgrades of DDR5 RDIMM products.
The firm also raised its gross margin assumptions for 2027 through 2028 because of an improving product mix, and increased its R&D expense forecasts because of a rich product pipeline. It now forecasts 2027 revenue of 14.279 billion yuan, 23% above market consensus; however, it expects a gross margin of 67.5%, below the consensus of 68.8%.
After accounting for share repurchases and cancellations, Bernstein slightly raised its earnings-per-share forecasts for 2027 through 2030 and maintained its outperform rating, with an A-share target price of 400 yuan and an H-share target price of 520 Hong Kong dollars.

The company plans to cancel 6.76 million previously repurchased A-shares, representing approximately 0.55% of total share capital, subject to shareholder approval. It also plans to repurchase 300 million to 500 million yuan worth of shares over the next two months for employee share ownership or equity incentives.
Based on the repurchase price cap of 280 yuan per share, the new plan would involve at least approximately 1.07 million to 1.79 million shares, or about 0.09% to 0.15% of total share capital. Bernstein considers the scale small but sees it as an incremental positive.