WNC's second-quarter results beat expectations, with LEO satellites, 800G switches, WiFi 7, and automotive connectivity supporting future growth

Overview

The report focuses on WNC's 2Q26 results, future revenue drivers, financing and capacity expansion plans, earnings forecast revisions, and valuation. Goldman Sachs believes LEO satellites, 800G switches, WiFi 7, and automotive connectivity will continue to drive growth, and therefore maintains its Buy rating and raises its target price.

Core views

WNC's 2Q26 revenue reached NT$39bn, up 35% QoQ and 43% YoY, exceeding Goldman Sachs' forecast and the Bloomberg consensus by 27% and 16%, respectively. Management attributed the strong growth to the service provider business, including LEO satellite solutions, as well as the WiFi 7 and automotive connectivity businesses. The 2Q26 gross margin was 13.0%, broadly in line with expectations, compared with 11.6% in 2Q25 and 13.8% in 1Q26. The operating expense ratio, however, was significantly better than expected at 7.8%, below Goldman Sachs' forecast of 9.3% and the Bloomberg consensus of 8.6%, mainly benefiting from greater revenue scale and improved operating efficiency. Goldman Sachs expects revenue to continue growing sequentially over the coming months and forecasts 3Q26 revenue growth of 29% QoQ. Key drivers include the ramp-up of 800G switches, increased WiFi 7 adoption, growing demand for automotive connectivity, and continued LEO satellite launches. Automotive connectivity applications include unmanned freight logistics, autonomous driving, and Robotaxi scenarios. The report also expects WNC to generate NT$16.9bn in revenue in August 2026, up 95% YoY, indicating that these growth drivers are likely to become more evident in monthly revenue. On August 5, 2026, the company announced an Rmb8bn convertible bond issuance plan to support future business expansion and capital expenditures for production facilities, such as capacity expansion in Vietnam. Goldman Sachs remains optimistic about the company's LEO satellite business and believes that new customer wins in the enterprise switch and automotive markets will provide additional sources of growth. After incorporating the 2Q26 results, Goldman Sachs raised its WNC earnings forecasts for 2026—2028 by 18%, 3%, and 3%, respectively. The revisions primarily reflect higher-than-expected revenue from the enterprise and LEO satellite businesses, as well as contributions from product specification upgrades. However, changes in the product mix are expected to weigh on gross margins, leading to reductions of 0.4—0.6 percentage points in gross margin forecasts over the same period. This means that upward revisions to revenue and profit levels will coexist with gross margin pressure, but the report believes the former will still have a positive net impact on earnings forecasts. Regarding valuation, Goldman Sachs raised its 12-month target price by 2%, from NT$364 to NT$371.0, continuing to use 2027E EPS and a target P/E multiple of 28.0x; the target multiple remains unchanged. The multiple is determined based on the correlation between peer-company P/E multiples and EPS growth. The 28.0x multiple is above the 16.3x represented by WNC's own historical average plus one standard deviation, but Goldman Sachs believes this valuation is not excessive given the sustainable growth driven by demand for LEO satellites and high-speed networking. Based on these growth and valuation assessments, the report maintains its Buy rating. The report explicitly identifies two downside risks: competition in satellite communications may be more intense than expected, and growth in the Wi-Fi 7 or 5G fixed wireless access businesses in the US and European markets may be slower than expected. These factors could weaken the revenue growth and valuation support underlying the report's conclusions.

Analysis framework

Goldman Sachs first compares 2Q26 revenue, gross margin, and operating expense ratio with its own forecasts, the Bloomberg consensus, and historical quarters to identify the sources of the positive surprise. It then develops monthly and quarterly revenue outlooks based on business developments in LEO satellites, 800G switches, WiFi 7, and automotive connectivity. The report subsequently incorporates the latest results, product specification upgrades, and product-mix changes into its earnings model, adjusting earnings and gross margin forecasts separately, and finally determines the 12-month target price using 2027E EPS and the relationship between peer P/E multiples and earnings growth.

Methodology notes

• Valuation MethodologyPE/PEG valuation

  Valuation based on the correlation between forward P/E multiples and peer earnings growth

  Based on 2027E EPS, the report applies a target P/E multiple of 28.0x to calculate the 12-month target price. The target multiple references the correlation between peer P/E multiples and EPS growth, while also considering the reasonableness of the valuation in light of WNC's long-term satellite and high-speed networking demand.

• Company Fundamentals and Financial Framework

  Performance variance analysis and earnings forecast revisions

  The report first compares actual results with Goldman Sachs' forecasts and market consensus, then incorporates enterprise and LEO satellite business revenue, product specification upgrades, and product-mix changes into the model to adjust the 2026—2028 earnings and gross margin forecasts separately.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• WNC (6285.TW)

  Demand for LEO satellites, 800G switches, WiFi 7, and automotive connectivity is viewed by the report as the primary driver of the company's future revenue and earnings growth.

  Strengths

  2Q26 revenue significantly exceeded Goldman Sachs' and market expectations, while increased revenue scale and improved operating efficiency resulted in a better-than-expected operating expense ratio; enterprise and LEO satellite business revenue and product specification upgrades support the upward earnings forecast revisions.

  Weaknesses

  Product-mix changes led Goldman Sachs to lower its 2026—2028 gross margin forecasts by 0.4—0.6 percentage points, while expansion and production facility construction require additional financing support.

  Comparison

  The 28.0x target P/E multiple is determined based on the correlation between peer P/E multiples and EPS growth and is above the 16.3x represented by WNC's own historical average plus one standard deviation.

  Risks

  Competition in satellite communications may intensify more than expected, while growth in Wi-Fi 7 or 5G FWA businesses in the US and Europe may be slower than expected.

Key data

• 2Q26 RevenueNT$39bnUp 35% QoQ and 43% YoY; exceeded Goldman Sachs' forecast and the Bloomberg consensus by 27% and 16%, respectively.
• 2Q26 Gross Margin13.0%Broadly in line with expectations; 11.6% in 2Q25 and 13.8% in 1Q26.
• 2Q26 Operating Expense Ratio7.8%Better than Goldman Sachs' forecast of 9.3% and the Bloomberg consensus of 8.6%.
• 3Q26 Revenue Growth Forecast+29% QoQExpected to be driven by 800G switches, WiFi 7, automotive connectivity, and the LEO satellite business.
• August 2026 Revenue ForecastNT$16.9bnExpected to grow 95% YoY.
• Convertible Bond Issuance PlanRmb8bnAnnounced on August 5, 2026, to support business expansion and capital expenditures, including production facilities in Vietnam.
• 2026—2028 Earnings Forecast Adjustments+18% / +3% / +3%Primarily due to higher-than-expected revenue from the enterprise and LEO satellite businesses and product specification upgrades.
• 2026—2028 Gross Margin Forecast Adjustments-0.4 to -0.6 percentage pointsLowered due to changes in the product mix.
• 12-Month Target PriceNT$371.0Raised 2% from the previous NT$364, based on a 28.0x 2027E P/E multiple.
• Target P/E Multiple28.0xAbove the 16.3x represented by the company's historical average plus one standard deviation.

Impact & implications

The report believes that the simultaneous ramp-up of multiple networking and connectivity businesses will drive WNC's revenue and earnings growth, while increased scale will also help improve the operating expense ratio. At the same time, product-mix changes create gross margin pressure, while capacity expansion plans require financing through convertible bonds. The target price increase primarily reflects higher earnings forecasts, while the valuation support implied by the 28.0x target P/E multiple depends on sustained growth in satellite and high-speed networking demand.

Risks

• Competition in satellite communications may be more intense than expected.
• Growth in Wi-Fi 7 or 5G fixed wireless access businesses in the US and European markets may be slower than expected.

What to watch

• Whether revenue can continue to grow sequentially over the coming months and achieve the forecast of 29% QoQ growth in 3Q26.
• The pace of business ramp-up driven by 800G switches, WiFi 7, automotive connectivity, and LEO satellite launches.
• Progress on the Rmb8bn convertible bond issuance and capital expenditures for production facilities in Vietnam and elsewhere.