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Can Higher LEAP Mix Drive ASE Technology's Margin Expansion?
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Key Takeaways
ASE Technology's ATM gross margin expanded 340 bps in Q1 2026 driven by higher LEAP mix.
ASX expects ATM margins to reach the upper end of its 26-27% structural margin range.
ASX raised its 2026 LEAP revenue outlook above $3.5 billion with stronger growth expected in 2027.
ASE Technology Holding (ASX - Free Report) is seeing better profitability as advanced packaging becomes a larger part of its business. In the first quarter of 2026, the company's Assembly, Testing and Materials (ATM) gross margin increased to 26%, up 340 basis points from a year ago. Management said the improvement was mainly driven by higher factory utilization and a higher mix of Leading Edge Advanced Packaging (LEAP) services. Strong demand for AI and high-performance computing applications also supported the better margin performance.
LEAP continues to be an important growth driver for ASE's ATM business. The company reported record ATM revenues of NTD 112.4 billion in the first quarter, up 2% sequentially and 30% year over year. Management said higher equipment utilization and a richer product mix helped improve profitability. Demand also remained strong for traditional advanced packaging and wirebond services, supporting the overall ATM business.
ASE is also investing to support future growth, even though these investments are creating some near-term cost pressure. The company expects depreciation expenses to increase as new LEAP production lines are installed and qualified before they begin generating meaningful revenues. Most of the new capacity is expected to contribute from the fourth quarter of 2026. Despite these higher costs, management expects ATM margins to improve sequentially and reach the upper end of the company's structural margin range of 26% to 27%.
Looking ahead, ASE expects demand for LEAP services to remain strong. ASE has raised its 2026 LEAP revenue outlook to more than $3.5 billion and expects even stronger growth in 2027. Management also said demand for advanced packaging remains strong and the pricing environment continues to be favorable for ASX. As LEAP contributes a larger share of revenue and AI demand continues to grow, ASE is well-positioned to support further margin expansion over the long term.
How Competitors Fare Against ASE Technology
ASE Technology faces stiff competition from the likes of Amkor Technology (AMKR - Free Report) and Intel (INTC - Free Report) in advanced semiconductor packaging.
Amkor Technology is a leading outsourced semiconductor assembly and test service provider, benefiting from strong demand for AI/HPC packaging. In the first quarter of 2026, AMKR’s gross profit surged 51.7% year over year, while gross margin expanded 230 bps on a year-over-year basis.
Intel is also increasing its focus on advanced packaging through Intel Foundry. In the first quarter of 2026, Intel Foundry witnessed robust growth in its backlog for advanced packaging services. In the first quarter of 2026, INTC’s non-GAAP gross profit surged 12.3% year over year, while non-GAAP gross margin expanded 180 bps on a year-over-year basis.
ASX's Price Performance, Valuation & Estimates
Shares of ASX have surged 138.5% year to date compared with the Zacks Electronics - Semiconductors industry’s return of 34.9%.
ASX YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ASX trades at a forward price-to-earnings ratio of 32.77X, higher than the industry’s average of 29.99X.
ASX Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ASX’s 2026 and 2027 earnings per share (EPS) implies year-over-year growth of 47.4% and 73.2%, respectively. EPS estimates for 2026 and 2027 have been revised up by 2.4% and 23.9%, respectively, over the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Can Higher LEAP Mix Drive ASE Technology's Margin Expansion?
Key Takeaways
ASE Technology Holding (ASX - Free Report) is seeing better profitability as advanced packaging becomes a larger part of its business. In the first quarter of 2026, the company's Assembly, Testing and Materials (ATM) gross margin increased to 26%, up 340 basis points from a year ago. Management said the improvement was mainly driven by higher factory utilization and a higher mix of Leading Edge Advanced Packaging (LEAP) services. Strong demand for AI and high-performance computing applications also supported the better margin performance.
LEAP continues to be an important growth driver for ASE's ATM business. The company reported record ATM revenues of NTD 112.4 billion in the first quarter, up 2% sequentially and 30% year over year. Management said higher equipment utilization and a richer product mix helped improve profitability. Demand also remained strong for traditional advanced packaging and wirebond services, supporting the overall ATM business.
ASE is also investing to support future growth, even though these investments are creating some near-term cost pressure. The company expects depreciation expenses to increase as new LEAP production lines are installed and qualified before they begin generating meaningful revenues. Most of the new capacity is expected to contribute from the fourth quarter of 2026. Despite these higher costs, management expects ATM margins to improve sequentially and reach the upper end of the company's structural margin range of 26% to 27%.
Looking ahead, ASE expects demand for LEAP services to remain strong. ASE has raised its 2026 LEAP revenue outlook to more than $3.5 billion and expects even stronger growth in 2027. Management also said demand for advanced packaging remains strong and the pricing environment continues to be favorable for ASX. As LEAP contributes a larger share of revenue and AI demand continues to grow, ASE is well-positioned to support further margin expansion over the long term.
How Competitors Fare Against ASE Technology
ASE Technology faces stiff competition from the likes of Amkor Technology (AMKR - Free Report) and Intel (INTC - Free Report) in advanced semiconductor packaging.
Amkor Technology is a leading outsourced semiconductor assembly and test service provider, benefiting from strong demand for AI/HPC packaging. In the first quarter of 2026, AMKR’s gross profit surged 51.7% year over year, while gross margin expanded 230 bps on a year-over-year basis.
Intel is also increasing its focus on advanced packaging through Intel Foundry. In the first quarter of 2026, Intel Foundry witnessed robust growth in its backlog for advanced packaging services. In the first quarter of 2026, INTC’s non-GAAP gross profit surged 12.3% year over year, while non-GAAP gross margin expanded 180 bps on a year-over-year basis.
ASX's Price Performance, Valuation & Estimates
Shares of ASX have surged 138.5% year to date compared with the Zacks Electronics - Semiconductors industry’s return of 34.9%.
ASX YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ASX trades at a forward price-to-earnings ratio of 32.77X, higher than the industry’s average of 29.99X.
ASX Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ASX’s 2026 and 2027 earnings per share (EPS) implies year-over-year growth of 47.4% and 73.2%, respectively. EPS estimates for 2026 and 2027 have been revised up by 2.4% and 23.9%, respectively, over the past 30 days.
Image Source: Zacks Investment Research
ASX currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.