Global Data Centers And AI Applications Will Drive Expansion

Key Takeaways

• Diversified growth in advanced packaging, automation, and new technologies is driving higher-margin potential and positioning ASE as a key industry player for next-generation demands.
  
• Margin pressures from costs and foreign exchange are expected to ease as automation ramps and value-added services enable more stable, resilient, and diversified earnings.
  
• Persistent currency volatility, capacity constraints, rising leverage, market cyclicality, and geopolitical risks collectively threaten ASE's margins, scaling ability, earnings stability, and global competitiveness.

Catalysts

Provides semiconductor manufacturing services in assembly and testing in the United States, Taiwan, Europe, Asia, and internationally.

• ASE is experiencing strong, multi-year demand driven by the expansion of global data centers, proliferation of AI applications, and increasing semiconductor content per device across end-markets. This should support sustained revenue growth into 2026 and beyond as advanced packaging and testing needs accelerate.
  
• Investments in leading-edge technologies (3D IC, chiplet, system-in-package, silicon photonics) and aggressive capacity expansion-especially in advanced packaging/test and fully automated lines-position ASE as a key player to meet next-generation requirements, enabling higher-margin mix and long-term operating margin expansion.
  
• The increasing pace of digital transformation in automotive, industrial, and networking segments is boosting high-margin demand for ASE's services outside traditional consumer electronics, supporting more stable and resilient earnings and diversifying revenue streams.
  
• Margins are temporarily pressured by foreign exchange headwinds and early ramp-up costs, but management anticipates a return to structural margin levels by 2026 as utilization improves, cost efficiencies from automation ramp, and pricing recalibrates to reflect value-added capabilities, benefiting future net margins and earnings.
  
• Tight capacity environment and high CapEx investments today are largely customer-driven, with long-term orders and ecosystem partnerships in place. As these capacity additions come online and resource optimization initiatives take effect, ASE can better leverage scale, capture incremental volume, and realize improved returns on capital, positively impacting future operating and net margins.

ASE Technology Holding Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming ASE Technology Holding's revenue will grow by 10.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.5% today to 8.7% in 3 years time.
• Analysts expect earnings to reach NT$72.4 billion (and earnings per share of NT$15.63) by about September 2028, up from NT$34.1 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.1x on those 2028 earnings, down from 20.0x today. This future PE is lower than the current PE for the US Semiconductor industry at 31.1x.
• Analysts expect the number of shares outstanding to grow by 0.23% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.41%, as per the Simply Wall St company report.

ASE Technology Holding Future Earnings Per Share Growth

Risks

• Persistent foreign exchange volatility, particularly NT dollar appreciation against the US dollar, is having a significant and direct negative impact on ASE's gross and operating margins; this currency risk remains a structural threat that could continue to erode profitability and reported earnings if left unmitigated.
  
• The company is facing substantial resource constraints-including execution risk, human talent shortages, land, facility, and machine delivery issues-that are limiting its ability to rapidly scale capacity to meet surging demand, potentially resulting in missed revenue opportunities and higher operational pressure.
  
• Ongoing, heavy capital expenditures funded through rising debt are increasing financial leverage and net debt-to-equity ratios; if anticipated returns or market growth do not materialize as planned, this creates long-term pressure on net margins and could limit financial flexibility.
  
• There are signs of market disparity and potential cyclicality, with non-AI segments (such as PC, smartphone, and general EMS) described as slow or inconsistent; over-reliance on the AI and advanced packaging/testing wave exposes ASE to earnings volatility if there is a pause or slowdown in that domain.
  
• Geopolitical risks and regulatory controls-including evolving tariffs, BIS restrictions, and worldwide deglobalization trends-may require costly overseas investments, resource diversion, or loss of market access, all of which threaten revenue growth and global competitiveness in the longer term.

Valuation

• The analysts have a consensus price target of NT$172.765 for ASE Technology Holding based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NT$190.0, and the most bearish reporting a price target of just NT$150.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NT$832.9 billion, earnings will come to NT$72.4 billion, and it would be trading on a PE ratio of 14.1x, assuming you use a discount rate of 10.4%.
• Given the current share price of NT$157.0, the analyst price target of NT$172.76 is 9.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.