ASE Technology Holding Co., Ltd. Q1 FY2026 earnings call

• Business resilience: EMS had seasonality but ATM services demand didn't slow, LEAP services and traditional advanced packaging were strong. - Factory utilization: Blended factory utilization rate around 80%, but installation of LEAP capacities and consolidation of traditional capacities affected utilization. - Customer preference: Customers prefer manufacturing certainty, and uncertainties at key manufacturing points create supply chain risk. - ATM business: Revenue ahead of expectations, profitability improved but affected by Lunar New Year costs. - EMS business: Slowed due to product seasonality, gross margin and operating margin affected by product mix.

For the first quarter, consolidated net revenues were NT$173.7 billion, a 17% year-over-year increase and a 2% sequential decrease. On a U.S. dollar basis, sales decreased 4% sequentially and increased 22% year-over-year. ATM revenues for the first quarter of 2026 were NT$112.4 billion, up 2% sequentially and 30% annually, representing 65% of consolidated holding company revenue and 91% of operating profit. ATM gross profit was NT$29.2 billion, with a gross profit margin of 26%. EMS revenues were NT$61.9 billion, down 10% sequentially and 1% annually. EMS gross margin increased 0.5 percentage points sequentially to 9.5%.

• Second quarter consolidated revenue expected to grow 7%-9% sequentially. Consolidated gross margin to increase 20-100 basis points sequentially, operating margin to increase 50-120 basis points sequentially. - ATM second quarter revenue expected to grow 9%-11% sequentially, gross margin between 26%-27%. - EMS second quarter revenue to grow at least 10% year-over-year, operating margin similar to second quarter 2025. - Full year ATM LEAP services revenue expected 10% above prior guidance, reaching over US$3.5 billion. 2027 LEAP business expected stronger incremental growth. ATM gross margin to improve sequentially in second half, reaching upper end of structural gross margin range in second half.

• Uncertainties at key manufacturing points lead to customers perceiving supply chain risk. - Capacities finite with limited ability to be pulled forward. - Utilization fluctuation due to installation of LEAP capacities and consolidation of traditional capacities. - Higher running costs during Lunar New Year holidays.

Q: On LEAP, reason for 10% upside in 2026 and growth in 2027?

A: Stronger than anticipated demand, especially in LEAP part, and preparing for next year's Rambam, with 75% in assembly and 25% in tests for LEAP this year.

Q: On CPO, role of ASE and timeline of revenue contribution?

A: Working closely with upstream foundry and customer, no specific number yet, start with packaging part.

Q: On KPACs capital intensity?

A: Still in mega trend, making necessary investments, multiple cost-effective funding sources available.

Q: On non-AI semi demand?

A: PC and cell phone market softness continues but offset by AI peripheral chips, automotive and industrial segments recovering.

Q: On CAPEX and funding?

A: CapEx raised, funding gap for this year mostly by additional borrowing, likely to keep spending on CapEx into next year.