Ase Technology Holding ((ASX)) has held its Q2 earnings call. Read on for the main highlights of the call.
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ASE Technology Holdings’ recent earnings call presented a balanced sentiment, highlighting both achievements and challenges. The company reported notable revenue growth and strong momentum in its testing business, yet faced obstacles such as foreign exchange impacts, increased operating expenses, and declining EMS revenues. This mixed performance reflects both positive developments and significant financial pressures.
Strong Unconsolidated Revenue Growth
ASE Technology Holdings reported a 9% year-on-year growth in unconsolidated revenue for the first half of 2025, with ATM revenues increasing by an impressive 18%. This growth underscores the company’s robust performance in its core operations, despite broader market challenges.
Significant Growth in Testing Business
The testing business emerged as a standout performer, achieving a remarkable 31% year-on-year growth in the first half of 2025. This momentum is expected to persist into the latter half of the year, signaling a strong demand for ASE’s testing services.
Increased CapEx Investment
ASE’s commitment to future growth is evident in its substantial capital expenditure, with USD 1.9 billion allocated to machinery and USD 0.9 billion to building factory facility automation. This investment is driven by advancements in packaging and testing, positioning the company for long-term success.
Positive Outlook for Second Half 2025
Looking ahead, ASE anticipates continued momentum in its ATM business into the third and fourth quarters of 2025. The company targets a USD 1 billion increase in revenue from leading-edge advanced packaging and testing, reflecting a positive outlook for the remainder of the year.
Overall Revenue Increase
Consolidated net revenues reached TWD 150.8 billion, marking a 2% sequential and 7% year-over-year increase. This growth highlights ASE’s ability to navigate market fluctuations and sustain its revenue trajectory.
Negative Impact of Foreign Exchange Fluctuations
The appreciation of the NT dollar by 4.9% against the USD posed challenges, negatively impacting gross and operating margins by 1.5 and 2.2 percentage points, respectively. This currency fluctuation remains a significant hurdle for ASE.
Decline in EMS Business Revenue
EMS revenues experienced a decline of 6% sequentially and 7% year-over-year, attributed primarily to device seasonality. This downturn underscores the volatility in the EMS sector and its impact on ASE’s overall performance.
Increased Operating Expenses
Operating expenses rose by TWD 0.3 billion sequentially and TWD 1.5 billion year-over-year, driven by higher R&D staffing and labor-related costs. This increase reflects ASE’s investment in innovation and workforce expansion.
Flat or Decreasing Operating Margins
Operating margins showed minimal improvement, rising by only 0.3 percentage points sequentially and 0.4 percentage points year-over-year. Future pressure from currency impacts is expected to challenge margin expansion.
Pressure on Gross Margins Due to Currency
ASE anticipates a decrease in gross margins by 1 to 1.2 percentage points quarter-over-quarter in Q3 2025, primarily due to the appreciation of the NT dollar. This currency pressure continues to weigh on ASE’s profitability.
Guidance for Q3 2025
Looking forward, ASE Technology Holdings projects consolidated revenue growth of 12% to 14% quarter-over-quarter in U.S. dollar terms for Q3 2025, with a 6% to 8% increase in New Taiwan dollar terms. Despite a projected decrease in gross and operating margins, the company remains optimistic about its ATM and EMS business growth, while navigating foreign exchange challenges. Management is confident in returning to structural margin levels by 2026.
In summary, ASE Technology Holdings’ earnings call highlighted a mixed performance, with strong revenue growth and testing business momentum countered by financial pressures from currency fluctuations and increased expenses. The company’s forward-looking guidance suggests continued growth, albeit with challenges ahead. Investors will be keenly watching ASE’s ability to manage these pressures while capitalizing on its growth opportunities.