Alchip Technologies (3661) Q3 2025 earnings summary

Executive summary

• Q3 2025 revenue declined due to the end-of-life for 5nm AI accelerator shipments and capacity shortages in the cryptocurrency segment, with limited revenue from other projects.

• Net income reached TWD 44.3 million, with EPS at NTD 16.4, and operating expenses decreased due to expense control and reduced ESOP amortization.

• Gross margin improved significantly, driven by a higher NRE revenue mix and disciplined cost management.

• Significant progress was made with the most important customer, with M3 design tape-out verified and high-volume 3nm production on track for Q2 next year.

• The company is expanding its open ecosystem strategy, collaborating with partners and diversifying business and design resources outside China.

Financial highlights

• Q3 2025 revenue was TWD 223 million (or $222.99M), down 25% sequentially and 51.5% year-over-year.

• Operating income was TWD 38.8 million, up 3.2% quarter-on-quarter but down 33.6% year-over-year.

• Net income increased 3.1% sequentially but fell 20.3% year-over-year.

• Gross margin rose to 28% from 21% in the previous quarter, with NRE revenue contributing 30%-40% of total sales.

• HPC remains the largest revenue contributor, with nearly 90% of revenue from leading-edge process nodes (7nm, 5nm, 3nm, 2nm).

Outlook and guidance

• Q4 revenue is expected to decline further, but gross margin is projected to improve due to higher NRE revenue.

• Q4 is a traditional peak season for NRE, with expectations for record quarterly earnings for the year.

• Significant revenue growth is anticipated from Q2 next year as the 3nm accelerator project enters high-volume production.

• 2nm projects are expected to begin contributing revenue in Q4, with production scale increasing for each new generation.

• Management expects continued volatility in the semiconductor industry, with product life cycles subject to greater uncertainty.