Novatek Microelectronics Q3 Profit Rises, Margin Pressure Emerges

Novatek Microelectronics reported a substantial 66.26% year-over-year increase in Q3 net income, reaching TWD 6.08 billion, though this growth was accompanied by a concerning decline in gross margin. The results, disclosed in a filing on November 6th, show revenue climbed 26.03% year-over-year to TWD 30.97 billion, driven by strong demand from mobile phone clients entering a pre-order season.

Despite the top-line growth, Novatek’s gross margin decreased to 40.89% in Q3, down 1.53 percentage points from 42.42% in the previous quarter. This margin contraction, even as it remains 4.6 percentage points above the same period last year, suggests rising input costs or increased competitive pressure are offsetting the benefits of higher sales volume. Operating expenses saw a slight dip to TWD 5.58 billion, compared to TWD 5.69 billion in Q2, but were still up from TWD 5.06 billion in Q3 2025. This resulted in an operating profit of TWD 7.09 billion.

Earnings per share (EPS) reached TWD 9.99 in Q3, contributing to a cumulative EPS of TWD 26.58 through the first three quarters of the year. Looking ahead to Q4, Novatek forecasts revenue between TWD 28.0 billion and TWD 29.2 billion, with a projected gross margin range of 37% to 39% and an operating profit margin between 17% and 19%. This guidance confirms the expectation that margin pressure will persist into the final quarter of the year, even as revenue remains robust.

The narrowing margin, despite significant revenue gains, suggests Novatek is experiencing a trade-off between sales volume and profitability. The company's ability to maintain margins in the face of rising costs, especially as competitor Reliance Industries demonstrates strong profitability in related sectors, will be a key factor to watch in the coming quarters.