Bank of America: Montage Technology’s fourth-quarter delivery orders exceed expectations as product upgrades improve gross margin

How did third-quarter results change?

In the third quarter of 2026, Montage Technology reported revenue of 2.08 billion yuan, up 46% year on year and 11% quarter on quarter. Net profit was 1.24 billion yuan, up 162% year on year and 8% quarter on quarter. Both were in line with the company’s previous earnings guidance.
Growth came mainly from interconnect chips: revenue from the business was 2.047 billion yuan, up 49% year on year and 21% quarter on quarter. Meanwhile, revenue from the Jintide server platform and other businesses fell from 180 million yuan to 32 million yuan quarter on quarter, offsetting part of the increase in interconnect chip revenue.

As of 26 October, the company had interconnect chip orders worth 2.5 billion to 2.79 billion yuan scheduled for delivery in the fourth quarter. On that basis, Bank of America estimates that the business will grow 22% to 36% quarter on quarter from the third quarter, above the market consensus of approximately 10% quarter-on-quarter growth.
The orders improved visibility into near-term growth and also prompted Bank of America to raise its net profit forecasts for 2026 through 2028 by 14.5%, 11.9% and 11.9%, respectively, to 4.471 billion yuan, 6.498 billion yuan and 8.599 billion yuan.

A rising share of third- through fifth-generation DDR5 register clock driver chips (RCDs), together with the continued ramp-up of new high-margin products, lifted the interconnect chip gross margin to 68.4% in the third quarter, up 2.7 percentage points year on year and 0.9 percentage points quarter on quarter.
Bank of America expects greater penetration of later-generation DDR5 RCDs and a larger scale for new high-margin products to continue supporting gross margin. The company’s overall third-quarter gross margin was 67.6%, up 5.7 percentage points quarter on quarter; its net margin fell 1.7 percentage points quarter on quarter to 59.6%.

Management noted that server CPU deployments are increasing and memory configuration density is rising in the era of agentic AI; an increase in memory channels from 12 to 16 will increase demand for memory interface chips. Over the longer term, the transition from DDR5 to DDR6 is also expected to increase the number of RCDs used per server.
This thesis depends on both server shipments and customers upgrading their CPU and memory platforms. Bank of America cautions that intensified competition from peers or new entrants, trade restrictions and delays in new CPU launches by other manufacturers could all affect growth.
Bank of America maintained its buy rating and raised its discounted cash flow-based price target from 293 yuan to 300 yuan. Its model uses a weighted average cost of capital of 9% and a perpetual growth rate of 3%.