<TXC Outlook> AI and Automotive Product Mix Drives July Gross Margin Recovery to 36%

Taiwan-based frequency component manufacturer TXC (3042-TW) has seen its operating gross margin recover for three consecutive quarters after reaching a trough of 31.17% in the third quarter of 2025. By the second quarter of 2026, the margin had rebounded to 33.11%. TXC CEO Wan-Hsing Lin announced during the company's earnings call today (19th) that the single-month gross margin returned to 36% in July 2026, primarily due to a favorable shift in product mix. This trend underscores the growing importance of AI and automotive applications for the company’s future.

TXC's operations have entered their traditional peak season in Q3. In July, shipments of 5G and automotive-related products performed strongly, generating NT$1.366 billion in revenue. The company self-reported a pre-tax profit of NT$292 million for July 2026, representing a 49.4% year-on-year increase. Earnings per share before tax stood at NT$0.86 for the month. For the cumulative period from January to July 2026, pre-tax profit reached NT$1.512 billion, up 28.1% year-on-year, with EPS before tax at NT$4.45.

Although TXC issued price hike notices to customers in Q2 due to rising costs of precious metals and other materials, CEO Lin emphasized today that TXC values long-term partnership with clients, and price adjustments are implemented only after existing supply contracts conclude. The July gross margin recovery to 36% was mainly driven by an improved product portfolio, as demand for AI and automotive applications continues to grow.

Additionally, robust demand from optical communication has positively impacted order intake for related quartz oscillators (XOs). Revenue from XOs used in servers, optical communication, and optical modules now accounts for 14–15% of total sales. Shipping schedules are already booked through 2027. Beyond current 1.6T applications, TXC is also sampling 3.2T application products.

Regarding H2 2026 operations, while new flagship smartphone launches by major brands may temporarily alter product mix, Lin noted that the medium- to long-term growth trend in AI and automotive applications remains firmly established.

Based on current order visibility, analysts expect TXC’s Q3 revenue—its traditional peak season—to grow 8–10% sequentially from Q2, outpacing year-on-year growth from the same period last year. On a full-year basis, TXC’s H1 2026 revenue totaled NT$7.038 billion, up 7.7% year-on-year. The projected revenue split between H1 and H2 is estimated at 45% to 55%, indicating stronger performance in the second half. Based on this outlook, TXC is expected to achieve full-year 2026 revenue of NT$15.7 billion, setting a new historical high.

For H1 2026, TXC reported revenue of NT$7.038 billion, gross margin of 32.74% (down 1.73 percentage points YoY), net profit of NT$1.006 billion, and earnings per share of NT$2.96.