Winbond 3Q26 Earnings: Revenue Rose 38% on Price Alone as DRAM Shipments Fell

Winbond is a Taiwan memory chipmaker that runs its own 12-inch fabs in Taichung and Kaohsiung. It sells specialty DRAM, which it calls Customized Memory Solutions (CMS), and code-storage flash (NOR and SLC NAND), the chips that hold start-up software in servers, cars, phones and factory equipment. It also consolidates Nuvoton, a listed microcontroller designer that forms its Logic IC segment. Its DRAM is in older standards such as DDR4 and LPDDR4, which management names as its 2027 focus.

Winbond reported 3Q26 revenue of NT$82,331m, up 37.6% QoQ and 278.2% YoY. Gross profit rose 46.6% to NT$58,101m and operating profit rose 51.1% to NT$43,784m. Net income attributable to shareholders was NT$35,422m, up 45.7%, and EPS was NT$7.58, against NT$5.40 in 2Q26 and NT$0.65 a year earlier.

Non-operating income fell to NT$77m from NT$1,039m, which held net income growth below operating profit growth. The tax charge of NT$8,723m was 19.9% of pre-tax profit. Nine-month EPS reached NT$15.32, against NT$0.88 for all of 2025.

Against our preview, gross margin of 70.6% and net income of NT$35.4bn landed inside our 68-72% and NT$34-39bn ranges. Operating expenses of NT$14.3bn ran above our NT$12-13.5bn range, and with the drop in non-operating income they kept EPS of NT$7.58 just under our NT$7.6-8.7 range.

Of the NT$22.5bn of added revenue, CMS supplied NT$15.8bn and Flash NT$6.7bn, while Logic IC fell slightly. CMS revenue rose 50% QoQ. Its bit shipments fell by a high-single-digit percentage, and its blended selling price in US dollars, in the company's words, "Increased approx. sixties%". Flash revenue rose 34.0% on flat bit shipments and a blended price up by a low-thirties percentage. A weaker Taiwan dollar added 1.3%.

The fabs were full: memory utilization was about 100% in 3Q26, as in 2Q26 and 3Q25. With output roughly fixed, fewer bits shipped suggests part of the output went into stock, and inventory rose NT$3.6bn, or 13.9%, to NT$29.4bn. We read this as Winbond holding back bits while contract prices rise each quarter, which costs it little when the next quarter's price is higher.

CMS rose to 58% of revenue from 30% a year earlier, and Logic IC, which is Nuvoton, fell to 9% from 33%. Nuvoton's revenue fell 1.1% QoQ to NT$7,856m and it lost NT$559m. Every memory end market grew: revenue from computers rose 66% QoQ and from communication 55%, against 35-36% for consumer and for car and industrial.

Gross profit rose NT$18.5bn on NT$22.5bn of added revenue, an 82% incremental gross margin. A higher price on the same number of bits adds revenue without adding wafer cost, so most of it lands in gross profit. Memory gross margin rose 3.6pp to 73.9%, while Nuvoton's fell to 37.4%, and Nuvoton's smaller share of revenue also lifted the group figure.

Operating expenses rose NT$3.7bn, or 34.2%, to NT$14,317m, and fell to 17.4% of revenue from 17.8%. Memory operating expenses rose 50.2%, almost exactly in step with memory operating income, up 51.2%. Memory R&D rose to NT$5,914m from NT$4,067m, and memory selling and administration to NT$4,954m from NT$3,312m.

We read the matching growth rates as employee profit-sharing. Taiwan companies set aside a share of profit for staff compensation, and Winbond's memory costs rose with memory profit while wafer output held flat. If so, opex should keep rising with profit, and operating margin should rise more slowly than gross margin from here.

Capex was NT$15.9bn in 3Q26, against NT$5.2bn in 2Q26, and NT$23.4bn for the first nine months. The company estimates 2026 memory capex at about NT$39.5bn, with production equipment about 95% of it, which leaves about NT$16.1bn for the fourth quarter. The 2026 figure is seven times 2025's NT$5.5bn.

On 3 November the board approved NT$73,163m to expand the Kaohsiung 12-inch fab and buy equipment, spent from November 2026 and funded from its own cash and bank loans. Management plans to break ground on Kaohsiung Module B in late 2026, with cleanroom space planned for 50-60k wafers a month, and is negotiating long-term agreements with customers for that output.

Until Module B produces, bit growth has to come from the 16nm DRAM process, which began ramping in 3Q26 with significant revenue expected from 2027. A smaller process fits more bits on each wafer than the 20nm that drives sales today, so 16nm adds volume without new cleanroom space.

Nine-month revenue was NT$180,427m and net income attributable to shareholders NT$69,853m. FY26 consensus of NT$278,436m and NT$115,587m implies 4Q26 revenue of NT$98.0bn, up 19.0% QoQ, and net income of NT$45.7bn, up 29.1%. Net margin would rise to 46.7% from 43.0%.

Monthly revenue would need to average NT$32.7bn, 15.6% above September's NT$28.2bn. Revenue has stepped up at the start of each quarter as new contract prices take effect, with July 30.0% above June, and management pointed to further upside in fourth-quarter contract prices. Bit output cannot grow much before 16nm ramps.

We expect 4Q26 revenue at or above the consensus-implied NT$98.0bn. If opex stays at NT$14.3bn, the net income figure needs gross margin of 72.3%, with 81% of the added revenue reaching gross profit, close to the third quarter's 82%. Each NT$1bn of extra opex lifts the gross margin needed by about 1pp. October revenue, due around 10 November, is the first check: it needs to be about NT$32bn.

Winbond does not give numeric guidance. Its outlook slides said that high-density NOR "remains tight, with robust demand supporting a positive pricing momentum into 2027", that SLC NAND has a favorable pricing outlook into 2027, and that CMS has "Further upside potential in 4Q contract pricing", with supply tight into 2027.

Management named two risks to demand: inflation and interest rates could weigh on consumer and traditional electronics, and it noted the market debate over cloud providers' capex. DDR4 and LPDDR4 will be the 2027 focus. CUBE, its high-bandwidth DRAM for edge AI devices, should enter mass production in 2027, and the purchase of Infineon's NOR Flash and F-RAM business is expected to close in 2H27, subject to approvals.

Each AI server holds several NOR flash chips, one for each block of firmware: host boot code, GPU and accelerator firmware, the baseboard management controller, network cards and switches. Winbond estimates server NOR demand at 240m units in 2027, up 48%, a 33% annual growth rate over 2025-2028, and expects chips of 512Mb or more to make up 65% of 2027 demand.

Winbond's own server NOR bit shipments grew 46% in 2025, and it expects 112% in 2026 and 67% in 2027. Bits grow faster than units because each server generation uses higher-density chips. High-density NOR revenue and shipments reached record highs in 3Q26, and 24nm flash continued to gain share of flash revenue.

Operating cash flow was NT$45,868m and capex NT$15,948m, so free cash flow was NT$29,920m, against NT$18,134m in 2Q26 and NT$1,468m a year earlier. Capex took 34.8% of operating cash flow. Winbond repaid NT$6,063m of bank loans, and cash and hedging assets rose NT$23.0bn to NT$84,856m.

Total liabilities fell to NT$110,763m from NT$119,492m, and equity rose NT$52.0bn to NT$225,538m, so liabilities fell to 0.49 times equity from 0.69. Book value per share was NT$46.04. Receivables rose NT$11.9bn with revenue.

The board declared a first-half dividend of NT$2.00 a share, NT$9.4bn in total, or 27% of first-half net income attributable to shareholders. The shares go ex-dividend on 18 November, with payment on 17 December.

At NT$146, the 3 November close, Winbond's 4,720m shares are worth NT$689bn, 6.0x FY26 consensus net income of NT$115.6bn and 2.9x FY27 consensus of NT$238.4bn. The price is 3.2x book value of NT$46.04 a share and 37.5% below the 52-week high of NT$233.5.

The shares fell 9.9% on 3 November, before the results came out after the close. Nanya Technology fell 10.0%, Macronix 8.2% and the TAIEX 3.6% the same day. On FMP consensus, Winbond's forward P/E of 5.6x compares with a 5.1x peer median, and its forward EV/EBITDA of 4.0x with a 3.9x median.

A 2.9x multiple on FY27 consensus implies that net income near NT$238.4bn would not last long. We do not rate Winbond and carry no target price. The quarter bears on value through how long prices stay high: management expects supply to stay tight into 2027, and Module B adds volume after that.

Price. All of the 3Q26 growth came from price. If DDR4 and LPDDR4 contract prices stop rising, revenue stalls, because the fabs are full, and a price fall would come straight off gross profit in the same way the 82% incremental margin came in.

Demand. Management flagged inflation and interest rates as a risk to consumer and traditional electronics demand, alongside the debate over cloud providers' capex. Consumer products were 26% of memory revenue in 3Q26.

Chinese supply. Chinese DRAM makers such as CXMT produce the same DDR4 and LPDDR4 standards. More Chinese output in these standards would cap prices for Winbond's main 2027 products.

Spending. The NT$39.5bn of 2026 capex, the NT$73.2bn Kaohsiung approval and the Infineon purchase all come while prices are high. If prices fall before Module B output is sold under long-term agreements, new capacity would arrive into a weaker market.