MediaTek Raises ASIC Targets; Data Centers Become Key Growth Drivers

Overview

This report is Bernstein's updated company research on MediaTek Inc following 1Q26. The report focuses on upward revisions to ASIC business targets, progress on data center projects, Smart Edge's support for short-term revenue, the potential recovery of the smartphone business in 2H26, and the resilience of gross and operating margin guidance. Despite the target price being below the current closing price, the report maintains an Outperform rating, believing that ASICs will be the primary growth driver.

Core views

The core views include: First, the outlook for ASICs has significantly improved, with the 2026 revenue contribution target raised to US$2B and the 2027 ASIC TAM forecast advanced to US$70-80B; Second, MediaTek is advancing multiple data center projects, some of which have entered the final discussion stage; Third, the company maintains a full-year gross margin target of 46%, indicating stronger-than-expected cost pass-through and pricing power; Fourth, smartphone demand remains weak, but the new flagship SoC and future Edge AI applications may drive a recovery; Fifth, the entry of CPUs/LPUs into the AI server market is still just a possibility, and the company is focusing more on XPU in the short term.

Analysis framework

The report combines the company's 1Q26 results, 2Q26 guidance, full-year revenue and gross margin targets, revenue trends by business segment, ASIC TAM and market share assumptions, P/E valuation framework, and relative valuation comparison against SOX/TWSE to assess whether earnings upgrades can support the current relatively high valuation.

Methodology notes

• Valuation methodsP/E Target Price Method

  17x forward Q5-Q8 EPS

  The report uses a 17x P/E multiple multiplied by forward Q5-Q8 EPS to estimate NT$132, resulting in a 12-month target price of NT$2,250.

• Revenue BreakdownRevenue Analysis by Business Segment

  Breakdown of Mobile, Smart Edge, Power IC, and AI ASIC revenues

  The report evaluates the impact of weak smartphone demand, Smart Edge growth, and new ASIC contributions on overall revenue and margins through year-on-year growth rates, revenue structure, and company guidance.

• Relative ValuationForward P/E vs. Relative P/E

  34x forward P/E and relative premium to SOX

  The report notes that MediaTek's current forward P/E is around 34x, higher than the historical average; its relative valuation against SOX is about 50% higher, but it believes that rapid earnings growth driven by ASICs can provide support.

Asset mapping & comparison

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

• MediaTek Inc / 2454.TT

  Research Subject

  Strengths

  Upward revision of ASIC revenue targets, progress on data center projects, increased Smart Edge market share, full-year gross margin guidance maintained at 46%, and potential for new revenue from Edge AI.

  Weaknesses

  Smartphone shipments in 2026 are expected to decline by 15%; Mobile revenue in 2Q26 faces quarter-on-quarter pressure; current valuation at around 34x forward P/E is relatively high.

  Comparison

  Compared to ASIAX, 2454.TT's absolute return over the past 12 months was 93.3%, with relative performance of 51.2%; its valuation against SOX is about 50% higher, and the report suggests that this needs to be supported by ASIC earnings growth.

  Risks

  Increased competition in the 5G market from Qualcomm, slower adoption of 5G, weaker global smartphone demand, slower diversification outside smartphones, and a downturn in the semiconductor industry.

• ASIAX

  Rating Benchmark

  Strengths

  As a relative performance benchmark for Asian stocks excluding Japan, used to explain the Outperform rating framework.

  Weaknesses

  Does not reflect the company's fundamentals, only used for relative performance comparison.

  Comparison

  The report shows that 2454.TT's relative performance against ASIAX over the past 12 months was 51.2%.

  Risks

  Fluctuations in regional indices could affect performance judgments within the relative rating framework.

Key data

• Report Date2026-04-30Both First Published and Completion Date are April 30, 2026, 11:43 UTC.
• RatingOutperformBernstein brand rating, based on a 12-month relative performance framework.
• Target PriceNT$2,250.00Based on a 17x P/E multiple and forward Q5-Q8 EPS of NT$132.
• Closing PriceNT$2,610.00Closing price of 2454.TT on April 30, 2026.
• Implied Upside/Downside(14)%Table shows Upside/(Downside).
• 2026 ASIC Revenue Contribution TargetUS$2BRaised from over US$1B.
• 2027 ASIC TAMUS$70-80BAdvanced from 2028 to 2027.
• 2027 ASIC Revenue EstimateUS$11-12BBased on a 15% market share target remaining unchanged.
• 1Q26 RevenueNT$149,151mnDown 0.7% from 4Q25, higher than Bernstein and consensus expectations.
• 1Q26 Gross Margin46.3%Up 0.2 percentage points from 4Q25.
• 1Q26 Operating Margin15.3%Up 0.8 percentage points from 4Q25.
• 2Q26 Revenue GuidanceNT$140,200mn-149,200mnMidpoint down about 3% quarter-on-quarter.
• Full-Year Gross Margin Target46%The report considers this guidance more resilient than expected.
• F26E EPSNT$63.22Shown in the report table.
• F27E EPSNT$119.96Shown in the report table, reflecting strong earnings growth expectations.

Impact & implications

The report implies that the market's focus on MediaTek is shifting from the traditional smartphone SoC cycle toward incremental growth from AI ASICs, data centers, and Edge AI. If the ASIC projects materialize and maintain profitability and EPS expansion, the current valuation—above the historical average—could be digested through earnings upgrades; conversely, if smartphone demand remains weak, ASIC progress falls short of expectations, or the semiconductor cycle turns downward, the target price and rating logic could come under pressure.

Risks

• Increased competitive pressure from Qualcomm in the 5G market.
• Slower pace of 5G adoption, especially in China.
• Global smartphone demand weaker than expected.
• Slower-than-expected diversification of businesses beyond smartphones.
• The broader semiconductor market entering a downturn.
• ASIC projects failing to meet reported assumptions regarding market share or profitability.
• Current valuation is relatively high; if earnings upgrades fall short, valuation digestion could fail.

What to watch

• Whether the 2026 ASIC revenue contribution can reach the US$2B target.
• Whether the 2027 ASIC TAM will expand as early as the report predicts to US$70-80B.
• Whether new data center projects will move from the final discussion stage to actual orders.
• Whether the new flagship SoC in 2H26 can drive a recovery in the Mobile business.
• Whether Smart Edge's double-digit growth after excluding AI ASICs can continue.
• Whether the company can deliver on its full-year 46% gross margin target.
• Whether MediaTek is ready when CPO becomes essential in 2028/29.
• Whether Edge AI can generate new revenue in terminals such as mobile phones, cars, wearables, and PCs within 2-3 years.