All right, want to welcome everyone to Compal's Second Quarter 2025 Results Conference Call. We wanna thank everyone for joining. I am Randy Abrams, Asian TechA analyst for UBS, and I'm pleased to host Compal management joining me today. We have with us Tony Bonadero, CEO; Jack Wang, the CFO; and also Tina Chang, the IR director. The format for the call, we'll start with Tina. She'll give a review of the financials. Then we'll have Tony, the CEO, provide the business update and outlook, and then we can take your questions. We'll show the presentation, but you can also refer to the presentation and the financials released after the Taiwan close today. With that, I'll turn it over to Tina to go through the financial update.
Randy. Hi, everyone. Thank you, everyone, for joining the call. This is Tina. Before we move to the financial result presentation, please help us look at page two of the presentation, the safe harbor notice for today's call. Please be aware and note it. Now let's move to the presentation, page five. Okay, this is for the revenue and the product mix. Overall, at Compal, second quarter revenue was TWD 118.4 billion, maintain a similar product mix as the Q1. 70% of the revenue contribute from PC, the rest of the 30% come from non-PC segment. For the PC side, unit shipments slightly increased quarter-over-quarter to 7.1 million units in second quarter.
However, on a year-over-year basis, shipment showed a decline, primarily due to the impact of a customer performance as well as the market competition. At the non-PC segment, traditional smart devices declined sequentially in second quarter. However, the growth pillar business, like a server, like 5G, increased sequentially in second quarter, so contributed to the better product mix within the non-PC. Okay, so let's move to next page. This is for the second quarter income statement. Despite the top line have a contraction, but in second quarter, you can see the gross margin was at the 5.9%, both improved quarter-over-quarter and year-over-year, thanks to the better product mix, ongoing transformation efforts, as well as the efficiency enhancement. On the operating margin, also slightly recover quarter-over-quarter to 1.5%.
However, compared to a year ago, still a little bit lower due to our ongoing R&D investment in the new business, but relatively low operating leverage. At the non-operating line, we record TWD 1.3 billion losses, mainly from the one-time forex impact. We will share more details on the later session. As a result, the net profit for second quarter was TWD 482 million, with EPS 0.11. Okay, let's turn to next page. For the first half. Overall, for the first half, revenue was a decline 13% year-over-year to TWD 379.5 billion. Gross profit was TWD 21 billion, with gross margin rate improved to 5.5%. Operating profit was TWD 5.3 billion, with operating margin rate at 1.4%.
Net profit is TWD 2.7 billion, and the EPS was 0.61 in first half. Let's turn to next page. This is the detailed breakdown on the non-operating item. Overall second quarter, the total non-operating losses was TWD 1.3 billion, was mainly impacted by the TWD 1.4 billion foreign exchange losses caused by the sharp depreciation of USD against the NT dollar during April and May. However, we see the toughest situation period has been passed. We are seeing the more stable situation right now in June and July. Overall, in the first half, the total non-operating loss was TWD 613 million. Forex losses was TWD 829 million, partially offset by the small gains in the interest income as well as the investment income.
Going forward, how the company to manage the overall currency risk, we will closely monitor the currency trend as well as to actively adjust our dollar position to mitigate the overall risk and to maintain the financial stability. Okay, let's move to next page on the balance sheet. At the end of the second quarter, the total gross cash was at a TWD 65.6 billion level, accounting for 17% of the total assets. On the working capital side, the cash conversion cycle, CCC days, remain stable at 50 days. And the inventory days slightly increased to 41 days. However, the inventory dollars was slightly reduced to TWD 75.8 billion. Overall, we still see the inventory stay at a healthy level.
Thanks to the improved cash flow, Compal second quarter liability ratio further reduced to 65% compared to a quarter ago and also a year ago, and turned to the net cash position already for the two consecutive quarters. Book value per share slightly declined to TWD 27.6 at the end of the Q2, mainly due to some negative impact from the currency. That's overall the presentation at the financial side. Let me hand over to Tony for the business update.
Hello, everyone, and thank you for joining the Compal Q2 earnings call. Next slide, please. Let's go into the business update. Earlier today at Compal's board meeting, the board approved significant investment in North America. We've talked in the past about our progress towards growing our server business, which we view as one of the best and fastest ways to scale our revenue. We announced an investment of $300 million in North America, which we're seeing good traction on the server business, and we're scaling that to a global strategy. A North America presence is absolutely required.
We've successfully gained more Tier 2 CSP compute business, and most importantly, we've deployed L10 NVIDIA and AMD GPU systems to both India and U.S. customers, developing our thermal capability, covering all of the three major technologies, air-cooled, direct liquid cooling, and immersion. We have deployed those in three categories, not just in a proof of concept, but beyond that into actual deployments. We continue to make traction with some of the Tier 1s, where we hope to progress our business later this year and certainly in 2026, hence the investments in the North America footprint. On our capability expansion, other than the North America factory build-out, we continue to invest in our Taiwan home base by expanding R&D and lab capability to include L11 in Compal Pingzhen.
These new investments will pave the way for business opportunity from SMT all the way through L11. We go to the next page, please. Some recent corporate events. You know, we've talked in the past about our five plus one business strategy, which has guided really our growth pillars for the future, guiding our growth and innovation roadmap. In addition to our continued push in Edge AI across devices, we are focusing on five high-value growth-driving businesses. We remain committed to investing in R&D and accelerate innovation and maintain our competitive edge. The five are, of course, servers and data center, automotive electronics, Med Tech, 5G, and industrial. The plus one is Compal is now investing more in research to see what is beyond that, what comes next, and make sure that we're on trend.
From an AI applications perspective, in May, Compal launched a series of Edge AI devices, including our latest AI PCs, which were showcased at Computex, partnered with Qualcomm to unveil the world's first AI-powered electronic whiteboard. Additionally, we introduced the 5G with AI smart retail solution designed to enhance industrial applications with intelligent connectivity. From a server solution perspective, Compal continues to work closely with all the leading chipset partners. We introduced an AI server platform powered by AMD MI350 GPUs, followed by MI355X platform in June, and working closely with NVIDIA on the B300 HGX system design, which will ship towards the end of this year. Automotive electronics. At the AutoSens trade show, we showcased our next-generation vehicle safety technologies, reinforcing our commitment to intelligent mobility.
We also completed phase one of our Poland factory, a strategic move to support our European market expansion and meet growing regional demand at the Tier 1 level. Research and emerging technologies. We continue to invest in that area. As I said earlier, we are accelerating development in quantum computing applications, leveraging the NVIDIA CUDA-Q platform. In addition, we signed MOUs with MacKay Memorial Hospital and National Pingtung University to advance precision medicine using AI and quantum technologies. In June, Compal joined the MIT Media Lab jointly to explore the next-gen AI and human machine collaboration. As we move on to ESG, let me share a brief update on Compal's recent progress in our ESG initiatives, reflecting commitment to sustainability, social responsibility, and strong governance.
In environment, in July, we successfully completed the One Plus N carbon reduction program with our supplier base, achieving a 14,000+ tons of carbon dioxide equivalent reduction, well above our original target. In addition, we strengthened our climate governance by formalizing key management documents to ensure our policy engagement aligns with our sustainability values. In social, we continue to contribute to external ESG initiatives, tech collaboration, and talent development with enlarging contribution and showing our growing social impact. We also continued our childbirth subsidies for newborns in the declining birth rate environment here, where we're headquartered here in Taiwan. In governance, in May, Compal was featured in the 2025 S&P Global Sustainability Yearbook as a top 10% CSA scorer and honored as an industry mover.
In June, we made significant progress in CG and ranked in the top 5% of the TWSE corporate governance evaluation. We continue to be recognized in major ESG indices, affirming our long-term sustainability value. From a business outlook and guidance perspective, looking ahead, we expect moderate growth in Q3. PC shipments are expected to grow in the low single digits quarter-over-quarter. Growth pillar businesses, the five plus one that I mentioned earlier, are expected to see a combined high single digit quarter-over-quarter growth, while we see smart devices possibly having a slight decline quarter-over-quarter. We also expect moderate growth in Q4, and based on current visibility, we believe second half 2024 to 2025 will be slightly better than first half, maybe a 51-49 split. However, global trade and tariff policy changes continue to create uncertainties in demand.
Compal is working closely with customers to manage risks and adjust supply chains to stay resilient. With trade deals announced, we hope to see the uncertainty calm and consumer confidence to grow. Our new investments, the $300 million in North America and expanded presence there, are expected to open up more growth opportunities, and we will see those as we move into 2026. On the margin side, we remain focused on improving product mix and are starting to see the benefits of our transformation programs, which are helping to boost efficiency, strengthen gross margin, and will enable us competitively to target and win share as we have modernized our operations, R&D, quality, and supply chain with automation, digitalization, and AI capabilities. We will continue to move forward steadily, delivering greater value-added solutions to our customers and investors.
Okay. All right. Thank you for the opening remarks. Now we'll go into the Q&A session. Please raise your hand to ask a question and the moderator can call. We'll also have Jack as well, CFO, on for the Q&A. What I'll do just while we're polling for questions, I'll kick off with a couple here, then we'll go to the moderator for additional questions. The one I wanted to hit on first, the gross margin performance in the quarter was quite solid, 5.9% and up for full first half. You talked in the opening remarks about some of the kind of transformative efforts.
If you could talk kind of sustainability, like using the base of second quarter, how much do you think is the transformation, things you've done on efficiency versus maybe one-time mix benefits? As we look towards second half, should we start to use this higher base? If you could maybe as a second part, if we should use a higher base, but also if you could go through some of a few areas that you're seeing, like operational improvement to drive the better margin.
Gross margin improved thanks to product mix and as you just mentioned, transformation benefits. We've been hard at work for over a year at really looking at every aspect of our company, every aspect of our operations from finance to operations to R&D and are really modernizing the company. We've seen significant productivity gains in our factories. We've seen digitalization capabilities really making a productivity impact on the business. Even on the NTD appreciation pressure environment, you know, we continue to believe that what we're building is a structural better, more modern Compal that will be able to compete in lower costs going forward. Some of it's mix as well.
We've talked a few times in the last several calls about how we are trying to diversify ourselves from EMS-type businesses, lower margin businesses, and move into businesses where we can truly add value and that are higher margin, higher profit opportunity. The portfolio enhancement and margin delivery around that is also sustainable unless we decide to go back into those businesses.
It sounds like some of these are real improvements, so we should bank on some margin improvement looking forward, like with the higher base. I'll ask one more, and then I'll go to the line, 'cause it was quite a big commitment to the U.S., or I should say with the board approval's $300 million investment. If you could talk just about and maybe clarify if all of that investment is really going after the server opportunity, and if that involves kind of putting assembly into and putting a lot of the assembly footprint for servers there.
That's kind of first part, and then you mentioned in the remarks that this should be your fastest way of the growth pillar to really drive growth. If you could give a snapshot where we're at for server revenue and how you see the growth contributing from this business.
Server revenue today is still low single digits. We're still ramping that business. We've been investing in it significantly, both R&D resources and then the announcement we made today, which we would not have done if we didn't feel we were on a positive path and have positive traction towards that end. A vast majority of that $300 million announced today is indeed for servers. There's a small amount of it for some automotive stuff and another small amount of it for some notebook opportunity. Between the U.S. and Mexico, we will invest the vast majority of that $300 million in L10 and L11 capability.
Okay. Actually, a quick follow-up, like the timeline, like if you put the investment in place. Maybe two questions to your CapEx. Is there a change to CapEx? A timeline, putting the money to work, how quick the capacity would come up to be available for customers?
T here'll be some of that money will be spent in the second half of this year, probably vast majority of it in the first half of 2026 or in 2026. We expect to have production facilities ready to qualify and start working in the first half, right towards the end of the first half.
You have the sites, like the location for the factories?
Well, not yet.
Okay.
W e're still.
That's what I was asking.
We do, but n ot supposed to say where they are. We're still working on the lease-to-buy agreements and so forth, U.S. and Mexico.
Okay, great. Okay.
Randy, let me give you some updates on the spending on the CapEx, right? Let me give you some reminder here. Early this year, we guided the CapEx for Compal this year is about TWD 10 billion. Okay, even though right now we announced this $300 million investment, but actually it is already considered in our previous guidance.
Okay, if you look at the TWD 10 billion, the CapEx guidance for this year, in the first half, right now we are running at about like a TWD 3 billion. Okay, just as Tony mentioned that right now in the second half, we will have more spending, right, on the overseas operation.
Great. Okay, with that, we can go to the operator to see if some questions on the line.
Okay, thank you, Randy and management. We don't have any raised hand for the moment. Thank you.
Okay. T here are a few questions here, and I know, there are a few calls going on at the same time today. So a few questions. I'm also, if you email me questions, I've received a couple here. So, one kind came back to the from an email I received about, I think in the remarks you had mentioned a comment, just more competitive environment was one of the factors for the down year-over-year notebook. If you could talk kind of the competition, where you're seeing that competition, the impact it's having on this year and, as we look forward and we start to bid for 2026, do you expect competitive pressures to continue, or you could stabilize or even within notebooks, come back to outgrowing the market?
Sure. We've seen a pretty substantial, you know, competitive environment out there for sure, right? We've seen some Chinese ODMs really develop and pursue this business. You know, in our business, the products that we ship today, we were awarded a year ago.
It takes, you know, 10-12 months, a year to develop those platforms, and then we'll ship them for the next year or two. It's a little bit longer cycle. I think what we've seen is that the competitiveness that the transformation efforts that we've done has just made us more competitive and made us more productive across the board, whether it's in our supply chain or R&D organization or operations on quality. We will use that and leverage that to go and win share going forward.
To ask a follow-up on the notebook, I'm curious because there was a lot of worry about tariffs early in the year. One part, how much of your first half do you think actually saw pull in demand for tariffs? It could kind of weigh on second half. That's one, was there any pull forward of demand? The second is, now that we've had maybe pauses, has the outlook actually become a little better? Have you seen any, change in the PC outlook from customers?
I still think we see a, you know, single-digit, maybe low single-digit second half. The pull-in from first half around tariffs really depended on each customer and their business model. We saw a little bit of that, but we don't think inventory levels are so elevated. We remain very conservative about second half just because President Trump the other day announced the 100% tariff on semiconductors.
Everybody's still digesting that, trying to figure that out. It seems, since the many trade deals were announced, it seems to have calmed down a little bit. I think every customer and ourselves, working with those customers, have figured out where you need to be, where you need to build to minimize your exposure to those. We remain cautiously optimistic, but conservative about second half.
Sounds like not much of an inventory issue, but everyone's just staying a little bit cautious to overdo it in terms of buildup. Is there within the market any signs you're seeing difference between commercial consumer or say even the AI models?
I think commercial, I would say, is relatively better than consumer. You know, there's this refresh cycle we keep talking about has been delayed, and so we're starting to see that pick up a little bit. I think on the consumer side of things, you know, the tariff and inflation pressure, consumer confidence hasn't been great. Now that, again, trade deals are done, things are settling in, we'll see how that impacts the second half. We see consumer definitely affected. Gaming is still seeing solid demand. I'll separate that from consumer 'cause it's kind of developed into its own, you know, product segment. There's a lot of competition in that space.
Chromebook, you know, for education, we see a refresh cycle happening this year from all those Chromebooks that were bought during the pandemic.
I f we took a look at, I would say the non-PC business, it sounds like you are guiding incremental growth. Because I think when you gave the remarks, it's moderate growth versus low single digit within the PC space. If you could dive a little bit deeper into the non-PC, kind of where the growth is coming from.
Sure. Th e growth pillars I mentioned approximately account for about 4%-5% of Compal revenue. The rest of it is all in smart devices, whether that be phones or wearables or tablets, if you will. We expect about 20% year-over-year growth rate in 2025 for those growth pillar areas that I mentioned earlier, mainly driven by 5G ramp and server growth. Product mix likely for us will stay 70 to 30 split for PC and non-PC in 2025, and we keep 60-40 as our target for the midterm. I'll say that we're targeting, you know, an exit rate of 2026 to be less than 70, and in 2027 we target that to be at closer to 60.
It sounds like server the biggest way to grow that. If the mix I mean, back to in third quarter, maybe the follow-up on the margin. If the mix grows faster, growth pillars and wearable tablets, like, those areas, how would. Is that accretive to gross margin? J ust wanna see if there's any product mix factor we should factor in, with those growing a little bit faster into second half.
As we talked earlier about kind of shedding the EMS business, we don't wanna do anything that's gonna dive into margin, you know. That being said, it is a competitive environment out there, and we may decide to get a little bit more aggressive. Our goal is, you know, in the mid to next year, 2026 through 2027, we wanna see our gross margins continue to trend up.
Okay. I'll ask one more, and then we'll kind of survey the line if questions. Because I also got one on the server business. That ties to, as you maybe, the real approach in server, because there's different angles to go. One, how much you want to target some of the general server opportunities where there's still some decent growth or some upgrades to these, like, multi-core servers. How much is kind of the step to do, like, I think you talked B300, MI355X. But how much do you wanna get into the business doing the high ASP, high value racks, like the GB200, GB300?
Is there investment in working capital that you need to do anything from a balance sheet perspective for all the working capital if you move in that direction?
I think, you know, from general servers, we're not shying away from that category either. It's a little easier space for us. Of course, GB200, GB300, we're still not enabled by NVIDIA, although we're working closely with them on B300 and other platforms. We hope that changes soon. We're looking for growth opportunities in both general purpose servers and AI servers as well.
Makes sense. Let's go to the operator, see if there's questions on the line.
Thank you, Randy. There's no question on the line. Thank you.
Okay. I'll ask a few, you know, there's a few more questions we'll make sure we cover. Just a few that have come in. One is a follow-up because it looks like inventory you've kept stable, like, fairly stable and in pretty good shape. But curious if there's any need for strategic inventory in place just to have things ready or contingency plans within the factory network. That's kind of first part. Then the second part within the factory footprint, you're doing the U.S. investment in servers, but do you think the consumer products, the notebooks, the networks kind of in the right place, or you may need to do some investment geographically for those areas?
I think from an inventory perspective, we see, you know, most of what we look at week in, week out is semiconductors, right? We obviously see a pretty healthy environment out there for semiconductor supply. We watch it very closely, and we make sure we have enough DSI on hand to have a good buffer, certainly. To your second question about some of the consumer products. Well, you know, I think the products that will go to North America will start, of course, with the higher value products and then work their way down. Building a consumer notebook in the U.S., unless there's a really good reason t o do so is probably something you don't wanna venture into.
It sounds like some consumer, like if your tablet or some smartphone products could be.
I think there's some smartphone stuff. You know, we saw the Apple announcement, which wasn't a phone, it was kind of cover glass and some other investments they're making there with partners. Again, there has to be some pretty good reasons, right? That you would make that move today. We continue to watch that very carefully.
Okay. If we look at the growth pillars, aside from server, where do you think could be the next areas you think start to move the needle in terms of revenue? I think you talked a bit about 5G, and kind of the area of 5G, because we're kind of mid-cycle in 5G, so where you see additional opportunities as we go through that. Then the other one, there's a ton of automotive electronics. Maybe we can touch on those two.
5G we see as a nice growth area as well. We are building our capabilities at both integrating 5G into notebooks, of course, is one line of business under the 5G umbrella, and the other is to enable industrial devices, whether it be through carriers or whether it be through other solutions. Also looking at those, you know, those solutions themselves. Automotive is an interesting one, right? The industry has kind of been turned on its head the last three or four years with the change. It's the car is basically a software-defined device now, like almost like a phone. That lends itself to our strengths, and so we're carefully looking at what those investments are and looking at the development of control units as the whole industry really kind of rethinks itself.
I think there's a lot of overcapacity in the industry right now in automotive. We're looking for what the right value add is and how we can help maybe eliminate some margin stacking there and do more direct.
For auto, is it, I mean, do you see the opportunity as kind of more the cockpit, the infotainment? And is it, I mean, you have China EV, they continue to gain share and move fast, or do you think it's with the overseas automakers, like the traditional, like U.S., Europe, Japan?
I think it's just definitely control units, right? For safety, also for entertainment. Then there's also some pedestrian detection technologies that we're working on and other things like that I think can bring some real value.
Okay. Do you see much, I mean, within the notebook, you mentioned the competition, you may have to use a bit of price? Is there enough opportunity, like, to target some areas unique, like the industrial PC, where there could be some better margin and business to go after in those areas?
I think industrial is a good opportunity. We have an industrial business that we're continuing to invest in and grow. Ruggedized PC is an interesting space, right? For military and for other types of specialized operations, industrial operations. T hose are nice product segments for us to play in.
There's a couple more we have here, but let me go to the operator. I'll see if. L et's just survey the line, and then there's a couple more we can have from this side.
Okay, thank you. I see Anthony raised his hand. Anthony, please.
Okay. G o ahead, Anthony.
Can you hear me? Hello? Can you hear me?
Yes.
Hello. Thank you for having me. This is Anthony from JP Morgan. I have a couple of separate topics to ask, but might be very quick. Starting from FX impact, is there any colors on the FX impact on the margin level? How is the sensitivity on each 1% NTD appreciation for the 2Q or into 3Q? Thank you. This is my first question.
Hi, Anthony, this is Tina. Let me answer your question. Overall, if you look at company, overall the business model structure, right? Most of our revenue actually is denominated in USD. It's around like, you know, 97% to 98% is all in USD. Then if you look at the cost side, the majority of the cost, the BOM cost, is also denominated in USD. But actually a little bit lower. Overall, we take the natural hedge approach on the operating line. Overall, we have some gap of USD exposure, but not much. It's only like 1% to 2%. That's reason why on operating line, the currency impact is relatively manageable. Okay.
As you can see, like in second quarter, a lot of, you know, appreciation of the NT dollar against the US dollar, but still relatively we manage it well, right? It's offset by the overall company efforts on the product mix enhancement as well as the efficiency. Overall, we have a larger impact on the non-operating line because we need to do the mark-to-market, right? That part is relatively a larger impact. Overall, that's the reason why, in the previous presentation, we mentioned that. Going forward, we'll be more actively to monitor the currency trend and more proactively to adjust the overall dollar position. That will overall mitigate the risk on the currency side. This is the answer to your question. Thank you.
Appreciate your color. J ust want to clarify that, given that.
Overall, the reason why we cannot give you exactly the percentage, because it really depends on the position we have. For example, if you look at our financial report, in the end of the first quarter, overall our dollar asset position is about like $550 million. But actually we actively reduce it to the end of the second quarter is exposure. Right now it's only $150 million. Overall, the impact on the mark-to-market will really depends on how is our exposure on the dollar asset.
T hank you very much, Tina. I just want to clarify, is there any one-off, say, negative impact in the gross margin level, given that some other peers in the industry also have some time lag between the U.S. dollar, say, revenue booking and also the cost occurrence, which is their inventory build in the, say, two to three months ago, which will cause some FX impact in the 2Q? Just want to know if the 5.9% is your most of your core margin or still on one-off.
Right, I think you're right. Overall on the inventory build, we still overall have, like, a one to two months pre-build of the component inventory. There is still some timing difference overall on the, you know, on the currency side. Overall, just as I say, the timing difference is definitely to bring the pressure on the growth margin, but it's still relatively manageable.
Got it. Thank you very much. Last question on the margin side. Given the, say, rising competition from the Chinese peers on the notebook side, is there any, say, margin pressure for your NB business, going forward?
Well, as I mentioned, the products that we ship today we were awarded a year ago. I think in that last year we're seeing already benefits of those transformation efforts, and so we're able to get a whole lot more aggressive in our pricing, and I think that will show. Again, it takes time to win those and then develop those products and ship them. We'll see that, hopefully we'll see that in 2026.
Got it. Very clear. On the OpEx side, given that we are now researching more growth pillar area in the new potential market, what is our view on the future OpEx ratio, especially on R&D ratio side? How do we look at it in 2026 and into 2027? Thank you.
Anthony, this is Tina. Let me give you some color on the OpEx. Overall, we suggest to look at OpEx on the absolute TWD level. It's not the ratio, because ratio will be impacted by the scale, the revenue scale and overall the operating leverage. Give you some details that if you look at the first half, overall the OpEx is about TWD 15.7 billion. Compared to a year ago, first half of 2024 is like TWD 14.7 billion. We increase about roughly close to TWD 1 billion. The OpEx is mainly contributed by the R&D expenses. R&D in the first half actually is TWD 9.9 billion. A year ago it's TWD 9 billion.
That is what we mentioned, that a lot of the investment going into the new business, especially on server, on auto and as well as on 5G. Overall, how to look at the OpEx ratio, OpEx dollar going forward. OpEx year-over-year growth actually is about 7% in the first half. We're still expanding about some single-digit year-over-year growth on OpEx dollar for the rest of the year. The major many investments still go to the R&D.
Got it. Very clear. M y last question from me is for the growth pillar. We just talked about the B300 and MI series potential project instead say targeting L10 or L11 system level or still starting from the board level. Second question for the growth pillar, is there any mid to longer term CAGR for the like 2026 and 2027 the growth rate for our reference? Thank you very much.
For the server, the B300 and the AMD platforms that you mentioned, we are targeting L10, L11, and hence the investment in the North American facilities to do so. We'll continue to do that here. Do you want to take the second part of that?
The growth pillar over the growth target? Right. We already say like a 20%, roughly combined altogether is about 20% growth for this year, right? Afterwards, definitely if the server will be having more contribution, that definitely would be bringing out the more opportunity into next year. So far, we don't have exact number can give for 2026. Right.
Okay. Back to queue now. Thank you very much.
T hank you, Anthony, for the questions. O perator, we can see if other questions on the line.
W e have no more questions on the line. Back to you, Randy.
Okay, I'll just ask a couple last questions here, then we'll just survey one more time for questions. Actually, one clarification on the notebook mix. In Q2, the unit growth actually outpaced. It grew slightly versus the revenue. I think one factor was you had the NT dollar impact. Was there mix effects too for notebook? Then when you guided the third quarter, just maybe to clarify if your guidance was a unit or it was a revenue growth, if there's any mix factors for second half.
I think the Q2 you get a little more seasonality for Chromebook, right? Definitely somewhat of a mix issue in addition to the FX impact. I'm sorry, the second-
Maybe it's a flip. Okay, third quarter, if there's less seasonality, your guidance statement is, to clarify, if your guidance was a unit forecast for notebook, and then if there's any mix on top of that you expect. Like in terms of ASP on top of units.
The guidance is units guidance.
Unit guidance.
We said the low single-digit growth quarter-over-quarter for PC is a unit shipment.
Not an absolute number, but low single-digit growth. We accept it. You know, the mix will change. You'll get less Chromebook in Q3. You'll get a lot more commercial demand as people come back from holiday, and they start continuing with the refresh. As you get later into Q3 and of course into Q4, you'll get the seasonality for consumer.
That's amazing. One final one from here, it's on the dividend, because now with announcing the U.S. expansion, you did just have the board meeting. I know it comes up early in the year, but the view for payouts, just with the amount you've paid, if that looks sustainable or is kind of a percent payout or a dollar payout, just kind of framework how you're thinking about cash returns.
Overall the dividend policy not change, right? The board actually is targeting about, like, over 60% payout. That is the policy that we maintain for the past few years. Right, that would be really depends on the board decision, right? Into the next year. Overall, when you mention about the new investment, right? As you can see that overall the cash flow situation has been improved, right? For Compal for the past few quarter. The $300 million investment, that will be mainly funding the, fully supported by the internal funding cash. Okay.
Okay. That's just one final check to the line if any other questions? Okay. S urvey to the operator if any final questions?
No, we don't have any. Thank you.
I think now let's see if any closing comments from Tony and close with that.
Again, I think we maintain our strategy of trying to transform our mix, get away from EMS business, add grow these growth pillars by the investment we announced today, a step in that direction. As I mentioned, I think server is our fastest way to scale revenue. You know, again, we remain pretty conservative about the second half of this year, but we're in a transformation period. As I mentioned, the last year we've been transforming things. Really in the last six months, we started seeing those things be implemented. 2025, 2026 is really a transformative period for us, and we expect in the second half of 2026, we'll start to see you know some benefits of those growth pillars and also of our core business.
Okay. Great. N o, thanks. Appreciate the remarks and also the update today on everything. L ook forward to seeing the progress with the server and also transformation and leading the core business. You know, with that, I'll turn it back to the operator. I think, thanks everyone for joining and reach out also to the Compal offices.
Thank you.
Thank you. Thanks everybody.