Bank of America: Victory Giant’s third-quarter revenue misses expectations; BofA bets on new platform to drive fourth-quarter recovery

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

Revenue in the third quarter of 2026 was 6.831 billion yuan, up 11.8% quarter on quarter and 34.3% year on year, but 17.4% and 20.5% below BofA’s forecast and the market consensus, respectively. BofA said the ramp-up and shipments of the Vera Rubin platform were slightly delayed, slowing revenue and adding to costs.
Gross margin rose 2.1 percentage points quarter on quarter to 34.2%. BofA attributed the improvement to the company passing higher copper-clad laminate costs on to customers; however, operating margin remained at 25.1%, unchanged from the previous quarter and below BofA’s forecast of 26.7%.

Third-quarter net profit was 527 million yuan, down 66% quarter on quarter and 52% year on year, and 72% and 74% below BofA’s forecast and the market consensus, respectively. The quarter included 195 million yuan in donations and more than 500 million yuan in fair value losses.
Adjusted profit was 1.2 billion yuan, up 5% quarter on quarter and 16% year on year, at the low end of the buy-side expectation range of 1.2 billion–1.5 billion yuan. The adjusted growth shows that special items had a significant impact, but both revenue and operating profit also fell short of institutional forecasts.

The company said yields for the Vera Rubin platform improved significantly over the past one to two months, and capacity utilization at its Thailand A1 plant also reached a high level in October, exceeding BofA’s expectations. On that basis, the bank expects the new platform’s ramp-up to drive a quarter-on-quarter recovery in the fourth quarter, with fourth-quarter revenue of 10.076 billion yuan in its model, up about 47% from the third quarter.
For optical modules, management said current yields are close to 80% and capacity has been fully booked by two customers. The company plans to add another 20 billion yuan of mSAP capacity in 2027, but not all of that capacity will be used for optical modules.
BofA believes new customers and upgrades to product layer counts, materials and manufacturing processes could support long-term growth. Higher specifications also consume more capacity, so expansion will help the company maintain its industry position.

Taking account of third-quarter results and expansion costs, BofA cut its net profit forecasts for 2026–2028 by about 11%–27%, to 5.648 billion, 12.894 billion and 19.114 billion yuan, respectively, approximately 28%, 14% and 9% below market consensus for the same periods.
The bank cut its price target from 367 yuan to 302 yuan, corresponding to a 2027 estimated price-to-earnings ratio of 23 times, down from the 25 times previously used. The lower multiple reflects recent weak sentiment toward the AI supply chain and the cost burden of continued expansion. BofA maintained its buy rating.
Expansion also affects cash flow: BofA forecasts capital expenditure of 18 billion yuan and negative free cash flow of 4.809 billion yuan in 2026; in 2027, capital expenditure is expected to fall to 10 billion yuan and free cash flow to turn positive at 3.521 billion yuan.