Accton Q2 Revenue Beats Expectations; Trainium 3 Ramp-up to Boost H2 Growth; Optical Switch Layout for 2027

Overview

This report, published by UBS, focuses on tracking Accton Technology's operational performance in Q2 2026 and future growth drivers. The core conclusion is that Accton's Q2 revenue outperformed expectations, mainly due to strong demand for 800G cloud switches from a new customer. Looking ahead to H2, with the production ramp-up of Trainium 3 AI accelerator cards and the migration of key customers from 400G to 800G switches, Q3 revenue is expected to achieve over 20% QoQ growth. In the long term, the company demonstrated deep technical reserves in Optical Wavelength Switches (OWS) and CPO switches at Computex, which are expected to start generating substantial revenue contributions in 2027. Based on high-growth EPS expectations, UBS maintains a 'Buy' rating with a target price of NT$3,400.

Core views

Q2 Revenue Beats Expectations, Gross Margin Improves: Accton's May revenue reached NT$28.6bn, up 5% MoM and surging 57% YoY. As of the report date, quarter-to-date sales reached NT$56bn, already achieving 67-68% of UBS and consensus estimates. Assuming June revenue remains stable, overall Q2 revenue is expected to grow 21% QoQ, exceeding the original 18-19% expectation. This outperformance is primarily driven by strong shipments of 800G cloud switches to a new social media customer. Product mix optimization and economies of scale also drove further QoQ improvement in Q2 gross margin from Q1's 19.5%. Clear H2 Growth Engines: Trainium 3 and 800G Migration: According to Alchip's comments at the pre-Computex Corporate Day, Trainium 3 accelerators will start contributing to sales in May, ramp up rapidly in June-July, and continue sequential growth in August. UBS believes Accton is the primary assembler for Trainium 3 AI accelerator cards, estimating a market share exceeding 85%. With the H2 volume ramp of Trainium 3, coupled with its higher ASP compared to last year's Trainium 2 due to increased UBB complexity, and the migration of key customers from 400G to 800G switches, Q3 revenue is expected to be supported to achieve over 20% QoQ growth. Cutting-edge Technology Layout: Potential of Optical Switches and CPO: At Computex, Accton showcased its Optical Wavelength Switch (OWS) based on LCoS (Liquid Crystal on Silicon) technology from its Korean subsidiary InLC, as well as the Nvidia Spectrum 6 CPO switch. The OWS consumes only 150W (vs. 2000W for conventional switches), features high integration, and is being used in smart city applications in cooperation with local government agencies, alongside next-generation IOWN network collaboration with NTT. UBS speculates that Accton is working with partners as an assembler to provide OCS (Optical Circuit Switches) to leading hyperscalers. For the Nvidia Spectrum 6 CPO switch, featuring total bandwidth of 102.4T/s targeting scale-out applications, UBS believes Accton is collaborating with the new social media customer on this platform, with potential revenue contributions likely emerging from 2027.

Analysis framework

UBS's analytical logic follows the framework of 'Short-term Performance Verification -> Medium-term Driver Confirmation -> Long-term Technology Option Assessment'. First, cross-verify Q2 revenue guidance through high-frequency monthly revenue data (May data and QTD progress) to confirm the short-term earnings beat and the underlying product structure reasons (increased mix of 800G switches). Second, derive H2 revenue growth momentum by combining upstream supply chain information (e.g., Alchip's comments on Trainium 3 shipment pace) and Accton's high market share (>85%) in AI accelerator card assembly. Finally, assess medium-to-long-term technological competitiveness and new growth points by examining cutting-edge products (OWS, CPO) showcased at industry events (Computex) and partnerships (NTT, hyperscalers), incorporating these expectations into 2027-2028 earnings forecasts, and ultimately determining the target price via PE valuation.

Methodology notes

• Valuation MethodologyPE/PEG valuation

  Valuation based on historical PE range and future EPS growth rate

  UBS adopts the Price-to-Earnings (PE) valuation method, selecting an average 27x PE for 2027-2028E as the target valuation multiple. This multiple sits in the upper half of Accton's historical 10-31x PE range, reflecting a premium recognition for its high growth profile (2025-28E EPS CAGR of 47%). This is a common relative valuation method for growth technology stocks.

• Industry/Sector Analysis FrameworkSupply Chain Upstream-Midstream-Downstream Transmission

  Inferring midstream assembler performance via upstream chipmaker shipment pace

  The report cites comments from upstream chip/component manufacturers (e.g., Alchip) regarding Trainium 3 accelerator shipment timing to infer the revenue recognition pace of the midstream assembler (Accton). This method of cross-validating information across the supply chain improves the accuracy of short-term performance forecasts for manufacturing companies.

• Company Fundamentals & Financial FrameworkVolume-price decomposition

  Distinguishing contributions to revenue from volume ramp-up vs. unit price increases

  When analyzing H2 growth, UBS clearly distinguishes between 'volume' factors (Trainium 3 volume ramp-up, quantity increase from 800G switch migration) and 'price' factors (ASP uplift for Trainium 3 due to increased complexity). This volume-price decomposition helps to understand the sources and quality of revenue growth more granularly.

Asset mapping & comparison

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

• Accton Technology (2345.TW)

  Beneficiary: As the primary assembler for Trainium 3 (>85% share) and a leading supplier of 800G/1.6T switches, directly benefiting from AI data center build-outs and bandwidth upgrades.

  Strengths

  High market share in AI accelerator card assembly; Strong demand for 800G switches; Leading technology reserves in optical switches/CPO (low-power advantage of LCoS technology).

  Risks

  Data center switch demand below expectations; 800G/1.6T switch ramp-up slower than expected; Loss of market share in AI accelerator card business; Gross margins below expectations.

Key data

• May RevenueNT$28.6bnMoM +5%, YoY +57%
• Q226 Revenue Forecast+21% QoQBeat expectations (prev. 18-19%), mainly driven by 800G cloud switches
• Q126 Gross Margin19.5%Q2 expected to improve further QoQ due to product mix optimization and economies of scale
• Trainium 3 Market Share>85%Estimated share for Accton as primary assembler
• Q326 Revenue Forecast>20% QoQ GrowthSupported by Trainium 3 ramp-up and 400G to 800G migration
• OWS Power Consumption Comparison150W vs 2000WLow power advantage of LCoS Optical Wavelength Switch vs. conventional switches
• 2025-28E EPS CAGR47%Core growth metric supporting valuation
• Target Valuation Multiple27x PE (2027-28E avg)In the upper half of historical 10-31x range

Impact & implications

For Accton Technology, the short-term earnings beat validates its competitiveness in the 800G switch sector and strengthens investor confidence in sustained high growth in H2. Its high share in Trainium 3 establishes its core position in the AI hardware supply chain. In the long term, the showcase of optical switch and CPO technologies indicates the company is actively positioning itself for next-generation data center interconnect technologies; successful commercialization in 2027 would open new growth ceilings and support a re-rating of valuation multiples. UBS believes the stock price should re-rate upwards in H226.

Risks

• Data center switch demand weaker than expected
• Ramp-up of 800G and 1.6T data center switches slower than expected
• Loss of market share in AI accelerator card business
• Gross margins below expectations

What to watch

• Actual shipment ramp-up of Trainium 3 accelerators during Jun-Aug
• Progress of key customers migrating from 400G to 800G switches
• Customer certification and order acquisition progress for Optical Wavelength Switches (OWS) and CPO switches prior to 2027
• Whether Q3 revenue achieves >20% QoQ growth