Advantech Earnings Call: Q3 Revenue Expected to Rise Both Quarterly and Yearly, Reaching New Highs; Margins Projected Stable

Industrial computer leader Advantech (2395-TW) held its earnings briefing today (5th). Chen Ching-Hsi, General Manager of Integrated Management and CFO, stated that July orders hit a new record high, with the Book-to-Bill (BB) ratio rising to 1.64 from 1.44 in Q2. Q3 revenue is expected to grow both sequentially and year-over-year, reaching a new high, while gross and operating margins are projected to remain stable compared to last quarter.

Chang Chia-Hao, General Manager of Advantech's Embedded Business Group, noted that AI development is transitioning from large-scale model training to practical industrial applications, with Edge AI playing a pivotal role. The company continues to deepen its presence in established sectors such as smart manufacturing, healthcare, transportation, and retail, while expanding into emerging verticals like energy and robotics, accelerating the extension of AI from Edge AI to Physical AI applications.

Chang further highlighted that AI-related business momentum continues to strengthen in 2023. Revenue from edge servers and cloud infrastructure products has doubled year-over-year, while edge AI computing products maintain growth between 30% and 50%. AI-related product revenue accounted for 15% of total sales in 2022, rising to 22.5% in the first half of 2023, with a full-year target of 30%.

Regarding robotics, Chang noted that the number of related projects has increased from over 130 to more than 150, covering autonomous mobile robots (AMRs), collaborative robots, and humanoid robots. While the initial forecast was for 100% year-over-year growth in robotics-related revenue, the first half alone achieved 250% growth. However, the revenue contribution remains small at this stage.

Tsai Shu-Yen, General Manager and COO of Advantech's Intelligent Systems Group, pointed out that global investment in AI infrastructure continues to rise, with semiconductor equipment, AI data centers, and smart grids entering long-term growth cycles. AI is not only driving demand for high-performance computing but also accelerating the upgrade of advanced manufacturing, data centers, and energy infrastructure.

On component supply issues, Tsai noted shortages and price increases in memory, CPU/GPU, and PCBs, with PCBs being particularly tight. In response to rising component costs in the second half, Advantech plans to implement a second round of price adjustments.

On production capacity, Chen stated that Kunshan’s utilization rate reached 100% in the first half, with Taiwan and Japan maintaining high levels at 94%. With strong order momentum continuing, Q3 will rely on overtime and outsourced capacity, with Kunshan and Taiwan expected to reach 105–110% utilization, and Japan 95–100%.

Advantech’s new North American site is scheduled to officially launch on October 20. So far, 33 projects have shifted to local production and shipment, with an estimated $60 million in products to be shipped locally in 2023. The new Huaya plant in Taiwan involves a total investment of nearly 4 billion TWD, with completion expected in Q1 2028. The Kitakyushu factory in Japan is undergoing a 5.5 billion JPY renovation, also scheduled for completion in 2028, further strengthening Advantech’s global manufacturing footprint.