報告_Citi_聯發科2454_20261030

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[讀者資訊已遮蔽] citi

30 Oct 2026 12:03:59 ET │ 18 pages

Mediatek (2454.TW)

Solid AI ASIC momentum; Structural OPM expansion ahead

CITI'S TAKE

Mediatek's 3Q26 earnings of NT$27.9bn (up 15% QoQ, 11% YoY) with GM/OPM of 46.3%/16.1% beat market expectation but were lower than our estimate. We see MediaTek entering a structural growth phase, driven by accelerating AI ASIC adoption, expanding customer engagement and strengthening technology capabilities. The sharp revenue ramp in 4Q26 and management's confidence in achieving the high end of its 2027 AI ASIC revenue target highlight strong demand visibility. Despite near-term gross margin dilution, improving operating leverage should support operating margin expansion beyond 20% in 2027. Looking ahead, second-generation ASIC production and additional customer wins in 2028, alongside NVIDIA NVLink Fusion and advanced packaging capabilities, should reinforce MediaTek's competitive positioning and sustain earnings growth.

Better AI ASIC revenue in 4Q26 - MediaTek expects significant revenue acceleration in 4Q26, guiding sales of NT$210.1-221.8bn, representing 25-32% QoQ and 40-48% YoY growth. Management raised its 2026 data center revenue to approximately US$2.5bn from US$2bn, with most of the contribution concentrated in 4Q26. The upward revision reflects stronger customer demand and successful coordination with supply chain partners to secure additional capacity. 4Q GM/Opex is guided at 45% ±1.5ppt/26% ± 2ppt, reflecting the increasing contribution from AI ASICs, in line with our estimates.

Second-generation ASIC on track for 1Q28 production, with a second customer confirmed - Management reiterated that its second AI accelerator project remains on schedule for high-volume production in 1Q28, despite market concerns regarding design complexity, advanced packaging yields and potential delays. Importantly, MediaTek also confirmed a separate design win with a second, non-Chinese data center customer, with initial revenue expected in 2028. The company is already collaborating with its existing customer on subsequent-generation products, although specifications are still being finalized. Management expects another year of strong revenue growth in 2028 but raised its 2027E AI ASIC revenue to US$16bn (vs previous US$12-16bn and our estimate of US$18bn).

Earnings Summary

Source: Powered by dataCentral

See Appendix A-1 for Analyst Certification, Important Disclosures and Research Analyst Affiliations.

n Buy

Short-Term View: Upside

Price (30 Oct 26 13:30) NT$3,915.00

Target price NT$6,800.00

Expected share price

return

73.7%

Expected dividend yield

1.4%

Expected total return

75.0%

Market Cap NT$6,283,389M

US$192,701M

Price Performance (RIC: 2454.TW, BB: 2454 TT)

Laura (Chia Yi) Chen AC

+886-2-8726-9090 laura.cy.chen@citi.com

Jack Chen +886-2-8726-9091 jack1.chen@citi.com

Nicholas Lai +886-2-8726-9093

nicholas.lai@citi.com [讀者資訊已遮蔽] [讀者資訊已遮蔽] Structural OPM upward trend - Management expects 4Q26 to mark the beginning of a structural improvement in OPM, supported by rapidly scaling data center ASIC revenue and operating leverage. Management indicated that the OPM could exceed 20% in 2027. Meanwhile, selective pricing adjustments across traditional businesses should help offset rising supply chain costs. Beyond data centers, Smart Edge should benefit from new AI PCs, AI tablets, automotive platforms and networking applications, including continued collaboration with NVIDIA on next-generation AI computing products. While smartphone demand remains relatively subdued, management expects the expanding AI business to increasingly dominate MediaTek's overall growth and earnings trajectory.

Second-Generation ASIC on Track for 1Q28 Production, with a Second Customer

Management expressed increasing confidence in achieving the upper end of its 1520% market share target for the estimated US$80bn data center AI accelerator ASIC market in 2027, implying approximately US$16bn in potential revenue. This represents a substantial increase from the revised US$2.5bn target for 2026, supported by strong demand visibility and continued supply chain expansion. Management emphasized that securing adequate foundry, packaging and other critical component capacity remains essential to meeting customer requirements. Importantly, the revenue opportunity reflects MediaTek's increasing participation in the value chain, encompassing advanced process technologies, packaging, highspeed interconnects and custom silicon integration. Despite recent market concerns over AI infrastructure financing and CSP capital expenditure sustainability, management remains confident that AI compute demand will continue growing over the next several years, particularly for customized accelerators offering superior performance per watt and total cost of ownership.

Figure 1. Mediatek - 3Q26 results overview

© 2026 Citigroup Inc. No redistribution without Citigroup's written permission.

Source: Citi Research, Bloomberg

Management reiterated that its second AI accelerator project remains on schedule for high-volume production in 1Q28, despite market concerns regarding design complexity, advanced packaging yields and potential delays. The new accelerator is expected to deliver multiple times the performance per watt of the first-generation product, significantly improving customer TCO and strengthening MediaTek's competitive positioning. Management acknowledged manufacturing challenges associated with its U.S. IDM packaging partner but highlighted progress in identifying key yield constraints and implementing corrective measures, expressing high confidence in further yield improvements. Importantly, MediaTek also confirmed a separate design win with a second, non-Chinese data center [讀者資訊已遮蔽] customer, with initial revenue expected in 2028. The company is already collaborating with its existing customer on subsequent-generation products, although specifications are still being finalized. Management expects another year of strong revenue growth in 2028 but declined to provide specific revenue guidance or customer contribution estimates.

Expanding competitive advantages through advanced node design/packaging, SerDes and NVIDIA NVLink Fusion

MediaTek continues investing in advanced technology capabilities, including 448G SerDes, advanced packaging, HBM integration and co-packaged optics (CPO), to establish a competitive advantage in increasingly complex AI infrastructure designs. Management emphasized that its differentiation comes not from individual technologies but from integrating them into high-performance, powerefficient and commercially viable solutions. More importantly, its partnership with NVIDIA through NVLink Fusion enables customers to integrate custom XPUs into NVIDIA's rack-scale ecosystem, while its support for UALink and Ethernet-based architectures provides greater deployment flexibility. MediaTek is expanding beyond individual silicon components toward subsystems and rack-level solutions, shortening customers' development cycles and accelerating time to revenue. Management indicated encouraging engagement with multiple potential customers and expects broader adoption opportunities. The 448G SerDes development is progressing well and is expected to support both existing accelerator programs and future customers, with management not anticipating it to become a critical schedule bottleneck.

Structural OPM expansion trend; Reiterate Buy

Management expects 4Q26 to mark the beginning of a structural improvement in operating profitability, supported by rapidly scaling data center ASIC revenue and operating leverage. Although ASIC gross margins are expected to remain below MediaTek's traditional corporate average, the significantly larger revenue contribution and more favorable operating expense leverage should drive meaningful operating margin expansion. Management indicated that the operating margin could exceed 20% in 2027, potentially somewhat higher, compared with its historical mid-teen level. Meanwhile, selective pricing adjustments across traditional businesses should help offset rising supply chain costs, although these increases are primarily intended to preserve profitability rather than expand gross margins. Beyond data centers, Smart Edge should benefit from new AI PCs, AI tablets, automotive platforms and networking applications, including continued collaboration with NVIDIA on next-generation AI computing products. While smartphone demand remains relatively subdued, management expects the expanding AI business to increasingly dominate MediaTek's overall growth and earnings trajectory.

Given MediaTek's better operating leverage, we lift our earnings projection for 2027/2028 5%/5%, mainly reflecting better OPM. We maintain our Buy rating with an unchanged TP of NT$6,800, implying 29x our 2027/28 EPS estimates.

[讀者資訊已遮蔽]

Figure 2. Mediatek - Estimates Revisions

© 2026 Citigroup Inc. No redistribution without Citigroup's written permission.

Source: Citi Research

Figure 3. Mediatek - Forward P/E band

© 2026 Citigroup Inc. No redistribution without Citigroup's written permission. Source: Citi Research, company data

© 2026 Citigroup Inc. No redistribution without Citigroup's written permission. Source: Citi Research, company data [讀者資訊已遮蔽]

Figure 5. Mediatek - Forecast Summary

© 2026 Citigroup Inc. No redistribution without Citigroup's written permission.

Source: Citi Research, company data [讀者資訊已遮蔽]

Adding Upside 90-Day Short-Term View on Mediatek (2454.TW)

Direction:

Duration:

Upside

Within 90 Days

Category:

Thematic driven

We see Mediatek's comments on its AI ASIC development to support its share price performance in the coming months.

[讀者資訊已遮蔽]

Bull/Bear: Mediatek (2454.TW)

BULL Assumptions

• Higher than expected AI ASIC development
• Stronger than expected margins expansion
• Bull case TP is based on its peak cycle valuation of 32x PER to 2027/28E EPS

BASE Assumptions

• 2027/28E GM of >44%
• 2027/28E OPM of >16%

BEAR Assumptions

• Lower than AI ASIC development
• Worse than expected margins declines
• Bear case TP is based on 16x PER (the mid-point of its historical valuation) to 2027/28E EPS

[讀者資訊已遮蔽]

Mediatek

Company description

Mediatek (MTK) is a fabless IC company that designs SoC for smartphone, smart TV, and digital media devices. It also develops chips for connectivity, networking, smart home gadgets, and automotive sectors. It was founded in 1997, is listed on the Taiwan Stock Exchange, and is headquartered in Taiwan. It has sales and research subsidiaries in mainland China, Singapore, India, the US, Japan, Korea, Denmark, and England. It primarily sells its products in China and other emerging-market countries.

Investment strategy

We rate Mediatek shares as Buy. We expect Mediatek to ride on 5G migration in emerging markets and market share gain of its high-end Dimensity series in China market as well. In particular, we see strong growth potential from its AI ASIC, NTN-satellite business in the long term. We believe solid fundamentals and strong operating leverage will support Mediatek's margins outlook.

Valuation

Our NT$6,800 target price (rounded) for Mediatek is based on 29x P/E to 2027/2028 EPS, which is 1-std above its five-year average forward P/E given the promising outlook from its AI ASIC business starting from 2H26. We believe our target PE is also justified by Mediatek's global and regional peers' trading at an average of c32x PER. AI ASIC development with CSPs should provide more upside from 2027 onwards. We also see Mediatek as well prepared for 6G and 6G+NTN Satellite communication. Despite lukewarm smartphone overall deamand, we expect Mediatek to benefit from 5G migration in emerging markets and its Dimensity series should also gain shares in flagship models. Non-smartphone business is also seeing stabilizing TV and IoT demand with Mediatek outgrowing the overall market on its better technology in WiFi 7 and connectivity.

Risks

Key downside risks that could prevent the shares from reaching our target price include: 1) weaker-than-expected growth from AI ASIC business; 2) more severe competition in the smartphone segment; 3) slower overall demand related to macroeconomic risks, especially for smartphone demand; and 4) further price hikes from foundries.

[讀者資訊已遮蔽] If you are visually impaired and would like to speak to a Citi representative regarding the details of the graphics in this document, please call USA 1-888-500-5008 (TTY: 711), from outside the US +1-210-677-3788

Appendix A-1