Nanya Technology 2Q26 slightly beat expectations, with server mix and LTAs supporting mid-term earnings

Overview

This report is J.P. Morgan's 2Q26 earnings review of Nanya Technology (2408.TW). The report believes the company slightly beat expectations in 2Q26, mainly driven by a sharp rise in DRAM ASP; against the backdrop of tight industry supply-demand conditions, a higher share of server revenue, continued product diversification including LPDDR5X, and increasing multi-year LTAs, the medium-term risk-reward remains favorable, and therefore the Overweight rating is maintained.

Core views

The core views include: first, 2Q26 revenue of NT$82.5bn, operating profit of NT$60.8bn, and OPM of 74% were stronger than expected, reflecting operating leverage from price increases; second, short-term price momentum for DDR4 is stronger than for DDR5, and both still have upside in 2H26E; third, the higher revenue mix from server and AI infrastructure is expected to improve earnings quality and reduce exposure to consumer electronics; fourth, LTA structures range from volume lock-ins and price lock-ins to combinations of both, helping improve planning visibility and reduce cyclicality; fifth, higher capex signals easing supply bottlenecks but also represents a medium- to long-term investment burden that needs monitoring.

Analysis framework

The report combines earnings decomposition, management Q&A, supply-demand cycle assessment, product mix analysis, and valuation methodology, with a focus on evaluating the impact of ASP, bit shipments, gross margin, capex, server product mix, LTA terms, and tight industry supply-demand conditions on earnings and valuation.

Methodology notes

• equity_researchearnings_review

  Analysis of earnings beat

  Compares revenue, gross margin, operating profit, net profit, and EPS against J.P. Morgan forecasts and Bloomberg consensus to identify the sources of the beat.

• industry_cyclesupply_demand_analysis

  DRAM supply-demand cycle

  Assesses whether the tightness in the memory cycle will persist through AI/server demand, DDR4/DDR5 supply constraints, peer capacity expansion, and customer LTAs.

• Valuation methodsprice_to_earnings

  FY27E EPS multiple valuation

  The Jun-27 target price of NT$710 is based on 8x FY27E EPS, in line with Korean DRAM makers' valuations, reflecting a higher-for-longer memory price view.

Asset mapping & comparison

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

• Nanya Technology（2408.TW）

  Core covered name, with J.P. Morgan maintaining an Overweight rating.

  Strengths

  Strong DRAM ASP increases, a higher server revenue mix, LTA progress, continued tight memory supply-demand conditions, and product upgrade opportunities from LPDDR5X and custom DRAM projects.

  Weaknesses

  Capex is increasing significantly, short-term share price sentiment is volatile, DDR5 revenue mix is still only about 10%, and the commercialization pace of AI-related products still depends on customer projects.

  Comparison

  The stock rose 114% in 2Q26, significantly outperforming the TWSE's 39%; however, it pulled back 17% from its high, similar to the sentiment-driven decline among global memory peers.

  Risks

  Traditional DRAM spot price momentum could be weaker than expected, the shift from DDR4 to DDR5 could be faster than expected, AI-related memory product development could fail, and CXMT DDR5 yield improvement could be faster than expected.

• DDR4/LPDDR4

  Currently the main revenue-contributing products.

  Strengths

  Tighter supply and stronger pricing momentum, with DDR4 and LPDDR4 together accounting for about 60%-70% of revenue.

  Weaknesses

  There is a medium- to long-term cyclical risk of customers migrating from DDR4 to DDR5.

  Comparison

  In 2Q26, DDR4 pricing momentum was stronger than DDR5, and this trend is expected to continue in the short term.

  Risks

  A shorter-than-expected lifecycle for D4 16Gb die in the consumer market could weaken pricing from late 2026 into 2027.

• DDR5/LPDDR5X and server-related products

  Direction of medium- to long-term product mix improvement.

  Strengths

  Strong AI and server demand; LPDDR5X stacked solutions may help the company enter the server ARM CPU supply chain and increase server exposure.

  Weaknesses

  DDR5 currently accounts for only about 10% of revenue, is constrained by capacity, and product progress depends on customer project timelines.

  Comparison

  Compared with traditional consumer applications, server and AI-related applications are expected to deliver more stable pricing and profitability.

  Risks

  If AI-related memory product development fails, it could lead to a valuation downgrade.

Key data

• 2Q26 revenueNT$82.5bnUp 684.2% YoY, about 2% above J.P. Morgan's forecast.
• 2Q26 operating profitNT$60.8bnOperating margin was about 74%, around 3% above J.P. Morgan's forecast.
• 2Q26 net profitNT$50.2bnNet margin was about 61%, around 1% above J.P. Morgan's forecast.
• 2Q26 EPSNT$14.55Basically in line with market expectations and significantly improved from NT$8.41 in 1Q26.
• DRAM ASPup more than 60% QoQ in 2Q26Bit shipments were essentially flat, and earnings improvement mainly came from ASP increases.
• Revenue share of server and AI infrastructure>20%Higher than the historical 10%-15% share of server-computing-related revenue.
• 2026E capex guidanceNT$52bnThe company maintained its guidance; cash spending in 1H26 was NT$6.9bn, with 2H26 spending expected to increase significantly.
• Long-term capacity planpeak capacity of 45k wspm, with total capex expected at NT$480bnThe first phase of the new fab expansion plan is expected to reach 30k wspm by 2028.
• Target priceNT$710.00Based on 8x FY27E EPS, with a target date of Jun-27.

Impact & implications

The report's investment implication for Nanya Technology is positive: in the short term, the share price may fluctuate due to CSP capex guidance, Meta-related news, and memory sector sentiment, but in the medium term, continued upside in DDR4/DDR5 prices, a higher server mix, stronger demand visibility from LTAs, and progress in AI-related products are all expected to improve earnings stability and valuation support.

Risks

• Traditional DRAM spot price upside momentum in 2H26 could be shorter than expected.
• Consumer customers may shift from DDR4 to DDR5 faster than expected, causing D4/LPD4 pricing to be weaker than expected.
• AI-related memory product development may fail, or next-generation technology migration may fail.
• CXMT DDR5 yield improvement may be faster than expected, increasing competitive pressure.
• Capex may be higher than expected; if demand or pricing falls short of expectations, returns may be pressured.
• If signals of increased CSP hardware capex are not confirmed, short-term sentiment toward memory stocks may continue to fluctuate.

What to watch

• Updates on CSP hardware capex and AI commercialization progress.
• Comments from Asian memory peers on supply-demand and pricing for 2H26 and 2027.
• Monthly price changes for DDR4 and DDR5.
• Medium-term business plans of Chinese memory competitors after their IPOs.
• Progress of Nanya Technology's server, LPDDR5X, custom DRAM, and HBM-related projects.
• The cash payment pace of the NT$52bn 2026 capex and the ramp-up progress of the new fab capacity.