Nomura: Delta Electronics: Strong AI power-supply demand, but component shortages weigh on revenue and profit

Why did third-quarter growth still fall short of expectations?

Delta Electronics’ third-quarter 2026 revenue was 197.059 billion New Taiwan dollars, up 7.5% quarter on quarter, below market expectations of around 15% growth. Nomura attributed the shortfall to severe shortages of components including discrete power devices and power-management chips, as well as delays in ramping up some new AI systems.
Profit was under greater pressure: third-quarter net profit was 23.495 billion New Taiwan dollars, 24% below Nomura’s forecast; gross margin was 34.1%, down 1.6 percentage points quarter on quarter. Increased inventory write-downs and a one-off supplier quality issue also weighed on gross margin.

Nomura estimates that the gap between customer orders and the quantity Delta can deliver may exceed 30%. The bank believes unmet demand and unshipped inventory may be deferred to subsequent quarters, with the pace of release depending on the supply of key components.
Based on this assessment, Nomura expects the company’s revenue to grow quarter on quarter in every quarter of 2027, with no seasonal decline in the first quarter. Management is more optimistic about the AI demand outlook through 2030, but issues including shortages of electricity and qualified labor and community opposition to data-center construction could also make project deployment and company performance more volatile.

Nomura agrees that high-voltage direct-current transmission (HVDC) and solid-state transformers are promising technological approaches to improving data-center power efficiency. Delta began shipping ±400V DC products in small volumes in the third quarter of 2026, and Nomura expects volumes from related projects to ramp up more noticeably at the end of 2026 or the beginning of 2027.
Management believes 800V DC data centers require more development time, partly because of a shortage of licensed electricians needed for construction. The company also announced Penang, Malaysia, as its next major base, aiming to expand it to the scale of its Thailand base over the next five years.

Taking into account data-center deployment delays and rising uncertainty over component shortages, Nomura cut its earnings forecasts for 2026 through 2028 by 9.2%, 8.8% and 8.6%, respectively. Its new model forecasts 2027 revenue of 970.909 billion New Taiwan dollars and net profit of 153.061 billion New Taiwan dollars.
Nomura maintained its Buy rating but lowered its target price from 2,650 New Taiwan dollars to 2,180 New Taiwan dollars. The new target applies a price-to-earnings multiple of 27 to forecast 2028 earnings per share of 80.75 New Taiwan dollars, compared with the previous multiple of 30 applied to 88.33 New Taiwan dollars.