tkal · Phison Q3 FY26: The Cost Layer Caught Price on Schedule, and the CEO Now Says 50% Would Be Excellent

Phison Q3 FY26: The Cost Layer Caught Price on Schedule, and the CEO Now Says 50% Would Be Excellent

Phison's gross margin fell to 59.7% from 65.3% on revenue up 26.8%, because the margin on the extra revenue fell to 38.8% from 71.4%. Our September call held. Our next call: December-quarter gross margin at or below 57.8%, what October's run-rate gives at that same increment; above it, we are wrong.

Published November 6, 2026 · Post-print analysis · Phison Electronics · 8299 · TPEx · quarter ended September 30, 2026 · reported November 6, 2026 · figures from the 3Q26 announcement, results deck and earlier MOPS filings; the Q3 statements are due by November 14 · Committed analyst read, not advice · For analysts covering NAND, storage modules and the working capital that funds them

The setup

Phison sold 26.8% more in the September quarter and its gross margin fell to 59.7% from 65.3%, which is what we said on September 29 it would do if the NAND cost layer had caught price. The call held. The way it held matters more than the grade, because gross profit rose NT$7.05B (about US$0.22B) on NT$18.19B (about US$0.57B) of extra revenue, so the margin on the extra revenue was 38.8%. It was 71.4% in June and 86.0% in March.

Our next call: December-quarter gross margin at or below 57.8%, which is what October's revenue run-rate gives if the increment stays at 38.8%. Above 57.8%, price or mix is outrunning the shelf again and we are wrong. The report should come in early March 2027, going by the 4Q25 deck, which came on March 6, 2026.

The record is real and nobody should argue with it. Net income of NT$30.55B (about US$0.96B) is 3.49 times what Phison earned in all of 2025, and the deck says nine-month EPS of NT$325.49 exceeds the sum of the last decade. The argument is about what happens next, and the CEO has now joined it, telling the call that holding 60% is not reasonable and that keeping above 50% for the next few quarters would be excellent (unverified, press reports of the call). From 59.7%, that is 9.7 points of room by the company's own account. The shares closed at NT$1,500.00 on November 6, before the results came out at the 17:00 Taipei call, so none of this is in the tape yet.

Of NT$86.08B in revenue, NT$34.69B is cost of sales. A 59.70% gross margin leaves NT$51.39B; operating expenses take NT$18.49B, and NT$30.55B reaches the parent. Segment values are the deck's rounded mix percentages times revenue, so they are approximate. Sums may differ by NT$0.01B on rounding.

The numbers

Revenue

NT$86.08B

+374.6% Y/Y · +26.8% Q/Q

Gross margin

59.70%

from 65.31% · 32.41% LY

Margin on extra revenue

38.8%

from 71.4% · 86.0% in March

Operating margin

38.22%

from 38.84%

Basic EPS

NT$138.00

from NT$118.57 · NT$10.75 LY

Inventory

NT$111.77B

+NT$19.98B Q/Q · 274 days

Phison 3Q26 · NT$ billions unless stated · T-IFRS

Line	3Q26	2Q26	3Q25	Y/Y
Sales
Revenue	86.08	67.89	18.14	+374.6%
AI ecosystem modules (about)	49.06	25.80	n/a	+88% Q/Q
All other lines (about)	37.02	42.09	n/a	−12.0% Q/Q
Profit
Gross profit	51.39	44.34	5.88	+774.3%
R&D	15.29	15.10	3.71	+312.4%
Operating income	32.90	26.37	1.42	+2,210.3%
Net income	30.55	26.22	2.23	+1,271.7%
Balance sheet
Inventory	111.77	91.79	31.53	+254.5%
Receivables	60.77	38.77	11.73	+418.2%
Cash + current financial assets	27.71	33.80	13.70	+102.2%
Bonds payable	25.65	25.41	5.68	+351.4%

Source: Phison 3Q26 announcement and results deck, November 6, 2026 (T-IFRS). The Q3 statements are due by November 14, so cash flow, payables and contract liabilities are not yet filed. Notes ↓

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The headline numbers are above. The 12 sections below carry the mechanism, the peer read, the valuation work, and the dated tests that decide it.

Seven quarters: the level before the delta
The grade, in full
What the AI line paid
The line that saved the operating margin
Who paid for the shelf
What is already locked for 2027
Connecting the dots
The December bar
Valuation
The strongest case against this read
What we'd watch
Bottom line

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Sources

Notes. NT$ conversions are approximate at NT$31.74 per US dollar, the deck's 3Q26 average rate; Q3 revenue in dollars per the deck is US$2,693M. Segment NT$ values are the deck's rounded mix percentages times reported revenue, so approximate; growth rates by line are the deck's where given, and embedded −7% and industrial −30% are press reports of the call. Incremental gross margin = change in gross profit / change in revenue, Q/Q. Implied purchases = change in inventory + cost of sales, ignoring write-downs and non-flash cost. The first-in, first-out sequence is our arithmetic, not a stated cost method. The 3Q26 deck p.9 prints 2Q25 gross margin as 29.93%; its own gross profit (5,199) over revenue (17,890) gives 29.06%, the figure in earlier decks, used here. The deck's net income Y/Y of 1,183.7% is computed on a mistyped "2.227"; the announcement's 1,272% and its reconciliation table's 1,271.7% are used. The release words gross margin moves as percent; they are points. 2Q25 R&D of NT$2,249M is 2025's 13,776 less the other three quarters. Valuation uses the TPEx close on November 6, 2026, before the results, and 221,439,247 shares in the TPEx quote file.
Phison, 3Q26 Consolidated Financial Report and October Revenue Announcement, November 6, 2026 — primary source for the quarter (T-IFRS). Revenue NT$86.076 billion, +26.8% QoQ, +374.6% YoY; gross profit NT$51.387 billion, +15.9% QoQ, +774.3% YoY; gross margin 59.7%; operating expenses NT$18.489 billion, 21.5% of revenue (NT$17.964 billion, 26.5%); R&D NT$15.288 billion, 17.8% (NT$15.099 billion, 22.2%; NT$3.707 billion, 20.4%); marketing NT$1.504 billion; G&A NT$1.554 billion; operating income NT$32.898 billion, +24.8% QoQ, +2,210% YoY, margin 38.2% (38.8%, 7.9%); non-operating income NT$3.078 billion, 3.6% of revenue; income tax NT$5.428 billion; net income NT$30.548 billion, +16.5% QoQ, +1,272% YoY, margin 35.5%; EPS NT$138 (NT$118.57, NT$10.75); cash and current financial assets NT$27.707 billion, 11.7% of total assets (NT$33.799 billion, NT$13.703 billion); net receivables NT$60.772 billion, 52 days (44, 54); net inventory NT$111.774 billion, 274 days (297, 224), "mostly applied to the Non-Retail market". October revenue NT$31.530 billion, +3% MoM, +346% YoY; PCIe SSD controller shipments +35% MoM; January to October NT$226.462 billion, +298% YoY. AI Ecosystem Modules exceeded 50% of revenue; six NAND controller IC design service engagements; design-ins at more than 17 financial institutions, 85 SMEs, 10 hospitals, 18 universities and colleges, 9 government entities. Partners named: KIOXIA, Micron, SanDisk, Samsung, SK hynix, YMTC. CEO K.S. Pua's quotes on Phison 3.0 and "sustained growth in revenue, gross profit, and EPS" are from this release. Non-TIFRS EPS NT$136.42.
Phison, 2026 Third Quarter Financial Results & Company Outlook deck, November 6, 2026 (MOPS). Mix p.5: AI ecosystem 57% (88% QoQ), embedded ODM 24%, industrial 9%, controller 5% (0.5% QoQ), retail 2%, others 3%. Revenue NT$M, 1Q25 to 3Q26: 13,839 / 17,890 / 18,137 / 22,799 / 40,967 / 67,888 / 86,076; 2025 NT$72.664 billion; nine months NT$194.935 billion. Gross profit: 4,281 / 5,199 / 5,878 / 9,500 / 25,118 / 44,335 / 51,387. Gross margin 30.93% / 29.93% as printed (see notes) / 32.41% / 41.67% / 61.31% / 65.31% / 59.70%; 2025 34.21%; nine months 61.99%; 3Q26 write-downs about −0.34%. EPS 5.53 / 3.60 / 10.75 / 21.74 / 68.80 / 118.57 / 138.00; 2025 41.98; nine months 325.49, "exceeding the sum of the last decade"; investing gains about +9.70, write-downs about −1.12. Revenue in US$M 2,693 / 2,150 / 609; rate 31.74 / 31.61 / 31.22. Balance sheet NT$M, 3Q26 / 2Q26 / 3Q25: total assets 237,238 / 193,717 / 73,727; cash 27,707 / 33,799 / 13,703; receivables 60,772 / 38,769 / 11,728; inventories 111,774 / 91,792 / 31,527; long-term investments 14,562 / 12,783 / 4,512; net PP&E 11,336 / 9,199 / 8,477; total liabilities 117,719 / 91,645 / 23,648; current liabilities 90,725 / 65,117 / 17,670; bonds payable 25,646 / 25,410 / 5,682; equity 119,519 / 102,072 / 50,079; BVPS 540 / 462 / 241; ROE 106.80 / 102.09 / 11.06. R&D ratio by year 2020 to nine months 2026: 14 / 13 / 14 / 22 / 21 / 19 / 20%; 39B+ NTD nine months.
Phison, 1Q26 deck, May 8, 2026, and 4Q25 deck, March 6, 2026 (MOPS). R&D NT$M 2,566 (1Q25), 3,707 (3Q25), 5,254 (4Q25), 8,671 (1Q26); 2025 13,776; 2025 net income 8,741. Balances NT$M, 1Q25: inventory 28,176, receivables 8,921, cash 18,538, bonds 5,635, net PP&E 7,697; 3Q25 and 4Q25: inventory 31,527 and 35,609, receivables 11,728 and 13,689, cash 13,703 and 17,709, bonds 5,682 and 1,104, net PP&E 8,477 and 8,424, current liabilities 17,670 and 24,191, total assets 73,727 and 85,756; 1Q26: inventory 72,199, receivables 22,750, cash 22,575, bonds 5,135, net PP&E 8,684, current liabilities 61,319, total assets 141,066. 2Q25 from the 2Q26 deck: inventory 29,089, receivables 10,948, cash 14,077, bonds 5,658. 1Q26 mix: AI 38%, embedded 25%, industrial 15%, controller 10%, retail 8%, others 4%.
Phison, 2Q26 deck, August 13, 2026, and tkal — Phison Q2 FY26, the open calls graded here: 2Q26 mix, write-downs about 1.10%, investing gains about +14.21, trade payables NT$13.64B, other payables NT$31.66B, operating cash flow −NT$1.02B, accounts payable −NT$7.01B, July NT$27.16B and August NT$28.28B, the flat-September sum of NT$83.71B, and the third-party transcript quote "We need cash" (unverified).
Cnyes, November 6, 2026 (zero debt, no bank loans, cash over NT$20B; 2,000-lot buyback, NT$1,680 to NT$2,280, NT$4.56B, November 6 to January 5, transfer to employees; 250 engineers); Cnyes, same day (60% not reasonable, 50% over the next few quarters; October AI ecosystem 65%; boot drive nearly 20 times; main-drive wins; Gen6 samples end of November; more than 70% of 2027 NAND; Q4 to Q1 price flat to slightly up); Nextapple, same day (shipment-led growth, ASP roughly flat; Kioxia comment; China AI after Lunar New Year; six projects from three makers; software margin near 100%); Nextapple, same day (embedded −7%, industrial −30%, low-priced orders declined, recovery in 2–4 quarters). Translated third-party reports of the call; unverified pending a transcript.
TPEx daily close quotes — 8299 NT$1,500.00, change −NT$60.00, 221,439,247 shares, November 6, 2026. Wantgoo — July 2026 monthly close NT$2,295.00; unverified market data. UAnalyze — ADATA Q3 EPS NT$38.69; unverified.
Silicon Motion Q3 2026 (53.6%; inventory line $936.1M), Longsys Q3 2026 (44.74% from 61.26%), Biwin Q3 2026 (42.8% from 56.0%), Team Group Q3 2026 (49.27%), Sandisk Q1 FY27 (85.0%), Kioxia Q2 FY26 (¥2,480.0B at 80%) for the rope figures.

Phison Q3 FY26: The Cost Layer Caught Price on Schedule, and the CEO Now Says 50% Would Be Excellent

The setup

The numbers

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