ASE Technology Holding FY26 Q1&Q2 Earnings Comparison

AI Infrastructure Dissection Series · Company Briefing

ASE TECHNOLOGY HOLDING CO., LTD. (NYSE: ASX · TWSE: 3711)

The Company Doing the Assembly Work Behind the AI Boom

 

Sources: ASE Technology Holding Co., Ltd. Q1 & Q2 2026 Unaudited Consolidated Financial Results; Q1 & Q2 2026 Earnings Conference Transcripts; Form 6-K exhibit filed with the U.S. Securities and Exchange Commission · August 2026

Five Things That Matter

1. ASE isn't limited by demand anymore — it's limited by how fast it can pour concrete. Management said outright this quarter that growth is now gated by how quickly the company can install equipment and finish buildings, not by customer orders.

 

2. One division is doing almost all the earning. ASE's advanced packaging and testing business now brings in two-thirds of revenue but 94% of operating profit — up from 87% a year ago. The electronics manufacturing side is growing too, but its margins moved the wrong way this quarter.

 

3. Reported profit growth is flattered by a one-time gain. Net income rose 49% quarter over quarter, but roughly half of that came from an unrealized mark-to-market gain on investments, not from packaging and testing more chips.

 

4. The company is spending more than it's making. Capital spending outpaced operating cash flow by a wide margin in the second quarter, and the CFO said the negative cash flow situation would persist. Debt is rising to cover the gap.

 

5. Guidance keeps climbing, but two key businesses remain undisclosed. Packaging revenue guidance was raised twice in six months. At the same time, management still won't put a number on coherent optics or full-process packaging — both described only as "on track."

Key Metrics

Q2 2026 REVENUE

NT$191.1B

+27% YoY · +10% QoQ

Q2 2026 NET INCOME

NT$21.1B

+180% YoY · +49% QoQ

ATM SHARE OF OP. PROFIT

94%

on 66% of revenue

Q2 2026 FREE CASH FLOW

−NT$32.8B

estimated, widened from Q1

Q3 2026 REVENUE GUIDANCE

+21–22%

quarter over quarter

2026 CAPEX (RAISED)

~US$10.5B

raised twice this year

Source: ASE Technology Holding Co., Ltd., Q1 2026 and Q2 2026 Unaudited Consolidated Financial Results (April 29, 2026; July 30, 2026); Q2 2026 Form 6-K exhibit, SEC EDGAR. Free cash flow figure is an estimate (operating cash flow minus capital expenditure), not a company-reported line item.

Consolidated Revenue and Operating Margin, Q1 2025–Q2 2026

Source: ASE Technology Holding Co., Ltd., Q1 2026 and Q2 2026 Unaudited Consolidated Financial Results.

ASE's second quarter looked, on the surface, like an unambiguous win. Revenue came in at NT$191.1 billion, up 10% from the first quarter and 27% from a year earlier. Net income reached NT$21.1 billion, roughly half again as much as the previous quarter. Basic earnings per share climbed to NT$4.80 (ASE Technology Holding Co., Ltd. 2026c, Summary of Consolidated Statement of Income Data).

 

Look one line down the income statement and the picture gets more interesting. Non-operating income jumped from NT$0.7 billion in the first quarter to NT$4.6 billion in the second — a six-fold increase in a single quarter. Most of that came from a NT$4.2 billion unrealized mark-to-market gain on the company's own investment portfolio, plus another NT$1.5 billion in foreign-exchange hedging gains (ASE Technology Holding Co., Ltd. 2026e). Neither figure reflects how many chips ASE actually packaged and tested that quarter.

 

TERM: UNREALIZED MARK-TO-MARKET GAIN

A gain that shows up on the books because the market value of something a company owns — stock, other investments — has gone up. Nobody actually sold anything to collect real cash; it's an accounting snapshot of value at this moment. If the market value falls back next quarter, the gain shrinks or turns into a loss just as easily.

Strip the unrealized gain out and apply the quarter's actual 16.4% tax rate, and diluted EPS comes to roughly NT$3.83 rather than the reported NT$4.61 — still solid growth from the first quarter's NT$3.08, but closer to a 24% increase than the headline 50%. (This is an estimate derived from the reported figures, not a company-published number.)

 

None of this makes the quarter bad. Operating income — the number that actually reflects the packaging and testing business — grew 21% sequentially and doubled year over year, with operating margin expanding a full percentage point to 11.1% (ASE Technology Holding Co., Ltd. 2026c). That part is real. It's just a smaller number than the one on the headline.

TERM: ATM AND EMS

ATM (Assembly, Testing, and Materials) is ASE's core packaging and testing business — the step between a finished silicon wafer and a chip ready to go into a device. EMS (Electronics Manufacturing Services) builds and assembles complete electronic products and modules for other companies. The two used to be closer to equal partners inside ASE. They aren't anymore.

ATM: Revenue reached NT$126.1 billion in the second quarter, up 12% sequentially and 36% year over year — a record. Gross margin expanded to 27.3%, and operating margin hit 15.7%, both meaningfully ahead of the first quarter (ASE Technology Holding Co., Ltd. 2026e). Management credited this to higher factory utilization and a growing mix of LEAP business — the company's term for advanced-packaging services built around AI accelerators and high-bandwidth memory.

 

EMS: Revenue grew too — 6% sequentially, 12% year over year, to NT$65.8 billion. But gross margin actually fell here, down 0.6 points to 8.9%, and operating margin dropped to 2.4%. Management pointed to product mix and rising component costs (ASE Technology Holding Co., Ltd. 2026c). That second point matters: ASE's own third-quarter guidance calls for EMS revenue to jump about 40% quarter over quarter, and the company was upfront that this isn't organic growth — it's memory-chip prices spiking and passing straight through the P&L. Strip that pass-through out, management said, and EMS growth looks like a normal season.

 

ATM vs. EMS: Revenue and Operating Margin, Q1 2026 vs. Q2 2026

Source: ASE Technology Holding Co., Ltd., Q2 2026 Form 6-K exhibit, slides 5–11.

Metric	ATM, Q2 2026	EMS, Q2 2026
Revenue	NT$126.1B	NT$65.8B
QoQ growth	+12.2%	+6.3%
Gross margin	27.3% (+1.3 pt QoQ)	8.9% (−0.6 pt QoQ)
Operating margin	15.7% (+1.6 pt QoQ)	2.4% (−0.6 pt QoQ)

Put the two together and the shift in the company's center of gravity becomes obvious. In the second quarter of 2025, ATM was 61% of consolidated revenue and 87% of operating profit. A year later: 66% of revenue, 94% of profit (ASE Technology Holding Co., Ltd. 2026e). EMS is still growing in dollar terms, but it's contributing almost nothing to the bottom line relative to its size, and this quarter it went slightly backward on margin.

This is where the quarter's real story lives.

 

ASE is building capacity as fast as it physically can. Management disclosed 13 simultaneous greenfield construction projects, plus a brownfield acquisition count the company's own executives didn't agree on. On the same earnings call, the COO said "we just bought another seven brownfields," while the CFO later said "we have another eight brownfield projects." Both figures come directly from ASE management; neither source lets us verify which is correct, so both are reported here rather than silently picking one (ASE Technology Holding Co., Ltd. 2026d).

 

TERM: GREENFIELD AND BROWNFIELD

A greenfield project means building on undeveloped land, starting from nothing — site prep, foundation, construction, all from scratch. A brownfield project means buying an existing building, usually one built for some other purpose, and converting it to fit. Greenfield takes longer but gives full control over the design; brownfield gets you running faster but locks you into whatever the building already is.

Machinery and equipment spending alone came to US$1.7 billion in the second quarter, on top of another US$658 million for facilities. The company raised its full-year 2026 capital expenditure budget twice — once on the first-quarter call, again on the second — adding another US$2 billion to bring the total to roughly US$10.5 billion, split roughly US$4 billion for buildings and US$6.5 billion for equipment (ASE Technology Holding Co., Ltd. 2026d).

 

TERM: FREE CASH FLOW

Cash generated from a company's operations, minus what it spends on capital equipment and facilities. Negative free cash flow means a company is spending more building its business than that business is currently bringing in — the gap has to be covered by debt, existing cash, or new financing.

Free Cash Flow by Quarter (Estimated), Q1–Q2 2026

Estimated: operating cash flow minus capital expenditure, calculated from ASE Technology Holding Co., Ltd. Q1 and Q2 2026 financial results. Not a company-reported figure.

That spending is outrunning what the business generates in cash. Operating cash flow was NT$47.0 billion in the second quarter; capital spending was NT$79.8 billion. The gap — free cash flow — was negative by roughly NT$32.8 billion, far worse than the first quarter's already-negative NT$7.7 billion. As a share of revenue, that's a swing from a 4% deficit to a 17% deficit in one quarter.

 

Management isn't dressing this up. Asked directly whether free cash flow was turning negative, the CFO said yes, and added that "the negative cash flow situation will remain for some time" (ASE Technology Holding Co., Ltd. 2026e). The gap is being covered by borrowing: total interest-bearing debt rose from NT$265.3 billion to NT$306.2 billion in the quarter, and net debt-to-equity climbed from 40% to 47%. Management describes this as manageable, pointing to roughly NT$396 billion in unused credit lines and multiple funding sources. It is also, by any definition, a company leaning harder on debt than it was six months ago.

It would be easy to write this section as "new risks emerged this quarter." That's not quite accurate, and the difference is worth being precise about, because it changes what a reader should actually watch for going forward.

 

Already flagged, now confirmed or worse

Negative free cash flow — raised as a possibility by a JPMorgan analyst on the first-quarter call; confirmed by the second quarter as an ongoing fact with no defined end date.

 

Capacity as the binding constraint — the CFO said as early as the first-quarter call that "the suitable new factory or facility is one of the gating factors for us to expand." By the second quarter, the COO was calling hardware infrastructure "the new bottleneck" the industry hasn't seen in 40 years. Same constraint, louder language.

 

Rising capital expenditure — flagged as a possibility in the first quarter ("I wouldn't preclude that there will be further need"), and it materialized exactly as flagged: another US$2 billion added in the second quarter.

 

Genuinely new this quarter

EMS margin reversal tied to memory prices. First-quarter EMS margin actually improved on favorable product mix. By the second quarter, margin fell on the same "product mix" language plus a new factor — component cost inflation, specifically in memory — that wasn't part of the story three months earlier.

 

Construction scale jumped. Two facility acquisitions in the first quarter became 13 greenfield projects and seven-to-eight brownfield acquisitions by the second — a real escalation in execution risk, not just restated language.

 

2026 LEAP Revenue Guidance: Two Upward Revisions in Six Months

Source: ASE Technology Holding Co., Ltd., Q1 and Q2 2026 Earnings Conference Transcripts.

Advanced-packaging revenue guidance for 2026 was raised roughly 10% on the first-quarter call, then raised again on the second quarter's call to about US$3.7 billion. Mainstream packaging growth guidance jumped from 13% to roughly 20% for the year. And 2027 advanced-packaging revenue is now guided to double — a target management wouldn't put a number on three months earlier, framing it only as "stronger than this year" (ASE Technology Holding Co., Ltd. 2026b, 2026d).

 

TERM: CPO (COHERENT PLUGGABLE OPTICS)

A technology that transmits data between chips using light rather than electrical signals, intended to handle the bandwidth demands of next-generation AI systems.

Still genuinely unresolved, not just under-disclosed

CPO got the same answer on both calls: no revenue number, no timeline beyond "we'll know more in a couple of quarters." Full-process advanced packaging, where ASE handles the entire chip assembly rather than a single step, is similarly still pending detail. Neither is stalled — management describes both as "on track" — but a reader shouldn't mistake company confidence for company disclosure. There is a real difference between the two here.

Source Credibility Assessment

Source	Type	Notes
Q1 2026 Unaudited Consolidated Financial Results	Company press release / SEC 6-K exhibit	Company-published, SEC-filed
Q2 2026 Unaudited Consolidated Financial Results	Company press release / SEC 6-K exhibit	Company-published, SEC-filed
Q2 2026 Form 6-K exhibit (earnings slide deck)	SEC EDGAR direct filing	Most upstream source for segment-level data
Q1 2026 Earnings Conference transcript	Official company transcript (PDF)	Company letterhead, verbatim
Q2 2026 Earnings Conference transcript	Official company transcript (PDF)	Company letterhead, verbatim

All adjusted or derived figures in this briefing — free cash flow, adjusted EPS — are calculated from the sources above and are not company-published metrics. They are labeled as estimates throughout the text.

References

ASE Technology Holding Co., Ltd. 2026a. First Quarter 2026 Unaudited Consolidated Financial Results. Taipei, April 29, 2026.

 

ASE Technology Holding Co., Ltd. 2026b. First Quarter 2026 Earnings Conference Transcript. Taipei, April 29, 2026.

 

ASE Technology Holding Co., Ltd. 2026c. Second Quarter 2026 Unaudited Consolidated Financial Results. Taipei, July 30, 2026.

 

ASE Technology Holding Co., Ltd. 2026d. Second Quarter 2026 Earnings Conference Transcript. Taipei, July 30, 2026.

 

ASE Technology Holding Co., Ltd. 2026e. Second Quarter 2026 Earnings Release (Form 6-K exhibit). Filed with the U.S. Securities and Exchange Commission, July 30, 2026.