Can Strong LEAP Momentum Boost ASE Technology's Long

Can Strong LEAP Momentum Boost ASE Technology's Long-Term Growth?

ASE Technology Holding ASX is seeing strong demand for its leading-edge advanced packaging (LEAP) services as the growth of AI increases demand for more complex semiconductor packaging and testing. LEAP revenues are tracking ahead of the company’s earlier 2026 target of $3.5 billion. Management now expects to add another few hundred million dollars to this year's LEAP revenues and is targeting a doubling of LEAP revenues in 2027.

The company has clear visibility into customer demand and the capacity needed to support this growth. ASE plans to add facilities and equipment to expand LEAP capacity, with another $2 billion of CapEx added to its 2026 plans. Management said the company expects to continue making heavy investments in both advanced packaging and testing to support customer demand.

The growth is already showing up in ASE's results. In the second quarter of 2026, ATM revenues rose 36% year over year to TWD 126.1 billion. Higher LEAP volumes also helped lift ATM gross margin to 27.3% from 21.9% a year earlier. Management expects LEAP and test businesses to remain margin accretive and sees ATM gross margin moving above 30% in the fourth quarter of 2026.

Still, execution remains a key factor. ASE said its near-term growth is limited by how quickly it can install equipment and complete new facilities. ASE is working on 13 greenfield and eight brownfield projects. These projects are expected to provide capacity through 2028 and into part of 2029. However, managing so many projects at the same time might create execution risks, particularly around construction, equipment installation and meeting required timelines.

Nonetheless, strong AI-related demand, expanding capacity and higher-margin LEAP services give ASE a solid base for growth. Its target to double LEAP revenues in 2027 looks achievable, but timely capacity expansion and execution will be important for the company to meet that goal. The Zacks Consensus Estimate for 2026 and 2027 indicates revenue growth of around 27.9% and 22.5%, respectively.

How Competitors Fare Against ASE Technology

ASE Technology faces stiff competition from the likes of Amkor Technology AMKR and Intel INTC in advanced semiconductor packaging.

Amkor Technology is also expanding its advanced packaging business to benefit from AI and high-performance computing demand. In the second quarter of 2026, Amkor reported record revenues of $1.9 billion, up 26% year over year. Management said it advanced key AI and HPC customer programs and continued to expand advanced packaging and test capacity. Amkor also announced a multiyear, $1.5 billion partnership with NVIDIA in July to expand advanced packaging and testing capabilities in the United States. These investments could help Amkor compete more directly for AI-related packaging demand.

Intel is another competitor with a growing focus on advanced packaging. The company views advanced packaging as an important part of its foundry strategy as AI systems move toward more complex systems-in-package designs. In the second quarter of 2026, management said interest in its EMIB-T technology remains high, with a growing backlog and plans to ramp the technology into high-volume production in 2027. Intel also highlighted its ability to combine wafer manufacturing and advanced packaging, giving it an integrated offering that differs from the pure-play OSAT model used by ASX and AMKR.

ASX's Price Performance, Valuation & Estimates

Shares of ASX have surged 155.9% year to date compared with the Zacks Electronics - Semiconductors industry’s return of 32.1%.

ASX YTD Price Return Performance

From a valuation standpoint, ASX trades at a forward price-to-earnings ratio of 23.31X, higher than the industry’s average of 13.95X. ASX has a Value Score of D.

The Zacks Consensus Estimate for ASX’s 2026 and 2027 earnings per share (EPS) implies year-over-year growth of 115.8% and 57.3%, respectively. EPS estimates for 2026 have been revised up by 2 cents over the past 30 days, while the same for 2027 have remained unchanged over the past 30 days.

ASX currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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ASE Technology Holding Co., Ltd. (ASX): Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).