Welcome to the MediaTek 2026 Third Quarter Investors Conference Call. Financial results and presentations for today's call are available on the investor section of the company website at www.mediatek.com.
Now, I would like to turn the call over to Ms. Jessie Wang, Deputy Director of Investor Relations. Ms. Wang, please go ahead.
Good afternoon, everyone. Joining us today are Dr. Rick Tsai, MediaTek CEO, and Mr. David Ku, MediaTek CFO. Mr. Ku will report our third quarter results, and then Dr. Tsai will provide our prepared remarks. After that, we will open for Q&A.
As a reminder, today's presentation will provide forward-looking statements based on our current expectations. The statements are subject to various risks and factors which may cause actual results to differ materially from the statements. The presentation material supplement non-TIFRS financial measures. Earnings distribution will be made in accordance with financial statements based on TIFRS. For details, please refer to the safe harbor statement in our presentation slides.
In addition, all contents provided in this teleconference are for your reference only, not intended for investment advice. Neither MediaTek nor any of independent providers is responsible for any actions taken in reliance on contents provided in today's call.
Now, I would like to turn the call to our CFO, Mr. David Ku, for the third quarter financial results.
Thank you, Jessie. Good afternoon, everyone. Now, let's start with the 2026 third quarter financial results. The currency used here is NTD , and the average exchange rate for this quarter was NTD 31.99 to $1. Revenue for the quarter was NTD 168.1 billion, up 10.4% sequentially and up 18.3% year- over- year. Gross margin for the quarter was 46.3%, up 0.1 percentage points from the previous quarter and down 0.2 percentage point from the year-ago quarter.
Operating expense for the quarter were NTD 50.7 billion, compared with NTD 47.4 billion in the previous quarter and NTD 43.9 billion in the year-ago quarter. Operating income for the quarter was NTD 27.1 billion, up 18.5% sequentially and up 22.2% year- over- year. Non-GAAP operating income for this quarter was NTD 27.9 billion.
Operating margin for the quarter was 16.1%, up 1.1 percentage point in the previous quarter and up 0.5 percentage point year- over- year. Non-GAAP operating margin for the quarter was 16.6%. Net income for the quarter was NTD 28.2 billion, up 14.6% sequentially and up 10.8% year- over- year. Non-GAAP net income for the quarter was NTD 28.9 billion. Net profit margin for the quarter was 16.8%, up 0.6 percentage points from the previous quarter and down 1.1 percentage point year- over- year.
Non-GAAP net margin for the quarter was 17.2%. EPS for the quarter was NTD 17.5, up from NTD 15.28 in the previous quarter and up from NTD 15.84 in the year-ago quarter. Non-GAAP EPS for the quarter was NTD 17.92. A reconciliation table for our GAAP and non-GAAP financial measures is attached in our press release for your information.
That concludes my comments. Thank you.
Thank you, David. Now, I would like to turn the call to our CEO, Dr. Rick Tsai, for prepared remarks.
Good afternoon, everyone. Thank you for joining us today. MediaTek third quarter revenue exceeded our guidance range again, achieving NTD 168 billion with an 18% year-over-year growth. This was primarily driven by the better-than-expected customer demand and improving supply. Gross margin for the quarter was in line with our prior expectations.
During the quarter, we successfully completed an overseas convertible bond offering of $3.9 billion, with participation from NVIDIA and Alphabet. This not only strengthened our partnership with key AI infrastructure partners, but also enhanced our ability to secure capacity for critical components for business expansion. In addition, we continue to drive solid progress in our data center and edge device businesses.
For data center, demand for our first AI accelerator remains very strong. We have already commenced initial shipments in September and are confident of delivering $2.5 billion revenue in the fourth quarter. For 2027, we expect this program to achieve the high end of our revenue target range of approximately $16 billion, representing around 20% of the total AI accelerator ASIC market. This confidence is underpinned by our solid supply outlook. We are working closely with our supply chain partners for additional capacity to meet the strong customer demand.
The successful ramp of our first AI accelerator marked an important milestone, demonstrating our ability to integrate industry-leading interconnect IPs, advanced process, and advanced packaging technologies. Together with our capabilities to orchestrate global supply chain, we are now able to deliver a highly competitive custom silicon for data centers.
For our second AI accelerator project, the development is progressing well, and we are on track for high-volume production in the first quarter of 2028. This chip is purpose-built to power our customers' next-generation AI infrastructure. MediaTek incorporates cutting-edge technologies across every critical aspect of the design to deliver multiple times higher performance per watt with significantly lower TCO. We expect this project to further strengthen our market position and contribute substantially to our revenue growth.
Meanwhile, we continue to make solid progress across key enabling technologies, including 448G SerDes, 3.5D advanced packaging, and co-packaged optics. We are also broadening our customer base as we expand our business scope beyond silicon to offer more comprehensive system and rack solutions.
We connect custom XPUs to the NVLink ecosystem through our NVLink Fusion partnership with NVIDIA, and we also support UALink for Ethernet-based rack architecture. This creates significant value to our customers by greatly reducing the complexity of deploying AI infrastructure for different architectures and substantially accelerating customers' time to market and time to revenue.
We continue to expand engagements with several customers and deepen our collaborations with major industry players across the AI ecosystem. With our proven track record and the substantial value we offer, we believe we will be a trusted long-term partner for data center customers in years to come.
On the edge computing side, RTX Spark AI PC, powered by the N1X chip integrating NVIDIA GPUs with MediaTek SoCs, became commercially available in mid-October through major PC OEM partners. RTX Spark brings powerful on-device agentic AI capabilities to users and has received strong market interest. Building on this momentum, development of our second-generation SoC is already underway, further expanding our long-term collaboration with NVIDIA.
In addition, our flagship Dimensity 9500 is featured in the latest Samsung Galaxy Tab S12 series AI tablets. This marks the third consecutive generation of Samsung AI tablets powered by MediaTek flagship SoCs.
All of these developments underscore the strength of MediaTek's comprehensive AI compute stack from edge to cloud. With our established technology portfolio and strong market presence, we aim to capture the exciting growth opportunities across advanced AI compute, physical AI, automotive, and AI infrastructure markets in the future.
With that, I will now talk about the recent business performance for our three revenue groups. In the third quarter, mobile phone declined 1% quarter-over-quarter and declined 17% year-over-year, accounting for 37% of total revenue. Flagship outperformed in the third quarter as our customers began to introduce new AI flagship smartphones powered by MediaTek SoCs, including our first 2-nanometer Dimensity 9600 Pro.
Moving on to smart edge platform. This group grew 20% quarter-over-quarter and grew 63% year-over-year in the third quarter, accounting for 58% of total revenue. The significant year-over-year growth was partially driven by the volume production of several new projects, including 5G thin modem for a new smartphone customer, new AI tablets, AI PCs, and automotive cockpits. Our TV SoC revenue also increased, reflecting higher DRAM content than a year ago.
Moving on to power ICs. This group grew 1% quarter-over-quarter and 18% year-over-year in the third quarter, accounting for 5% of total revenue. The year-over-year growth was mainly driven by share gains in data center-related business.
Moving to guidance. Driven by the ramp of our AI accelerator business, we expect strong sequential revenue growth in the fourth quarter, despite a high base in the third quarter. Our underlying growth would have been even stronger without the seasonal softness in consumer electronics. Quarterly gross margin is expected to be within the current range.
We expect our fourth quarter revenue to be in the range of NTD 210.1 billion-NTD 221.8 billion, grow 25%-32% sequentially, and up 40%-48% year-over-year, at a forecasted exchange rate of NTD 31.7 to $1 . Gross margin is forecasted at 45%, ± 1.5 percentage points. Operating expense ratio is forecasted at 26%, plus or minus two percentage points.
Based on our fourth quarter guidance, we now expect our full-year revenue growth to exceed our previous target of high single-digit percentage growth in US dollars. This again showcases the solid foundation MediaTek has built for the AI era, including our diversified edge AI portfolio and our strong capability to deliver value in data centers. We believe our expanding presence across edge and cloud will pave the way for MediaTek's sustainable growth in the era of ubiquitous AI.
This concludes my prepared remarks. Thank you.
Thank you, Rick. Operator, we are now ready for Q&A session. May we please have the first question?
Yes, Jessie. Ladies and gentlemen, we are now in Q&A session. If you would like to ask questions, please press star key and one on your telephone keypad, and please ask your questions after your name is announced. Please limit your question to two at a time to allow more participants to join the discussion. After two questions, we will move to the next caller. Should you have more questions, please press star key and one again to come back to the queue. To cancel your question, please press star key and two.
As a reminder, it is greatly appreciated that you turn off the speakerphone mode of your device to prevent possible echo effect. We thank you for your cooperation. Thank you. Now, please press star key and number one if you would like to ask questions. Thank you.
First one to ask questions, Gokul Hariharan from JP Morgan. Go ahead, please.
Right. Good afternoon. Thanks, Rick, David, and Jessie. Congrats on your start of your data center ASIC shipments as well. My first question is actually on your second generation data center ASIC. There has been a lot of talk in the market about potential delays in design and tape-out. You just reaffirmed your previous guidance that you are ready for HVM in early 2028 or Q1 2028. Could you talk a little bit about any changes in schedule you have seen and what exactly are the potential kind of milestones that you are watching for here? Could you also take a quick stab at what your revenue and market share or TAM and market share potential is going to be in 2028 as you ramp this second generation ASIC, which is definitely higher ASP and higher performance?
Thank you for the question. Let me first address the second ASIC product accelerator. As I said in my remarks, it is on track, on schedule. We understand there is some noise about the tape-out schedule. I say clearly, I cannot say how many dies are on the chip, but for these very, very advanced XPUs, you all know there are multiple dies on the chip. I can say clearly also, a couple dies have been taped out already. A big, obviously much more complex die will tape out also on schedule, which because it is big and complex, it will take a couple or three weeks longer than the other dies.
So, we are very happy with the progress. I think both our partner, our customer, and our team are performing tremendously well, and they have been collaborating tremendously well. So that these tape-outs of such complex dies are very challenging, and those guys, my hat is off for them. They are making their schedules.
About the revenue, the guidance actually for second variant and second project. Maybe I will take it out. Gokul, normally actually, we do not give out the detail for 2028, but I think the better way to think about that actually is, I think we are kind of talking about for 2027, like a rough guidance. Right now, we are aiming for the higher end of the $16 billion range. And for 2028, year 2028, we are looking for another year of strong growth.
I think probably the better way to think about that, because the reason we do not want to give out the detail is actually 2028, there are so many moving pieces on the supply chain situation. We are still in the process of finalizing the supply chain situation. But overall, this one will be another year of strong growth for 2028 versus 2027, based on the demand profile.
Got it. Maybe also on the second generation, I think there have been so many discussions about the packaging choices you are making with the U.S. IDM vendor. How confident are you now in terms of the packaging choice, or do you think that you will still need to hedge your bets a little bit, given the supply chain situation that you mentioned? Do you think that is the primary limiting factor in terms of your ability to service the demand from your customer, given in that second generation chip, you will be the primary vendor for that customer when you need ASIC shipment?
Gokul, right now we are working on this U.S. IDM packaging process. That is our absolute first priority. And we are, actually, we now have a very strong manufacturing team within MediaTek. Well, led by actually some very experienced fab operating executive, I would say retired. We are working very closely with the IDM partner and substrate suppliers.
First and foremost, on the yield improvement, I am glad to say that many of you know my background. I came from manufacturing. I have seen the progress. I have witnessed the clear identification of the key difficulties, and also the way people are working together to resolve the problem and implement them in the fab, in the factory. I have confidence, very high confidence that the yield will go up very quickly because once we figure out a couple of two or three key problems, once they are implemented, the yield will go up quite quickly. Then we will continue to explore the next level of sources of defect.
These are the things that we have seen before, we have done before. I am very happy that our own team, we are working with a Japanese supplier, we are working with Taiwanese supplier, and we are going to make this second generation of ASIC a great success. Thank you.
All right. That is very reassuring. Thank you. Thanks, Rick. I will go back to the queue.
Next one to ask questions, Sunny Lin from UBS.
Good afternoon. Thank you very much for taking my questions, and congrats on the very good progress for your key ASIC programs. My first question is on maybe even the third generation ASIC. I know it's a bit far away, but it's also pretty essential for us to think about your ASIC revenue sustainability in the coming few years. For that one, maybe ramping late 2029. Any progress that you could share with us? How is MediaTek positioned against the competition, and how should we think about the overall term? For MediaTek, should you continue to grow into 2029 and 2030?
Oh, we certainly cannot speak for our customer, but we can say we are working very closely with them on the next generation ASIC. Again, our customer is very aggressive in moving forward and upward in the performance downwards for the TCO, I guess. This is a tough. It's going to be another challenging trip. I think it takes some time to define, to finalize the definition.
We are, I think right now, as you said, we are plenty busy in getting our first one right now in mass production, and second one into production. We will happy to discuss with you about the next one when time is right. But as I said, I'd like to remind you, as I said in my remarks, the second generation ASIC is a very powerful chip from both performance per watt point of view and also from the lower TCO point of view. Thank you.
Thank you very much. Very helpful. My second question is, earlier you talk about potential for new clients and several engagement for cloud ASICs. Any color you could share with us in terms of the progress that you are making for new projects, and how should we think about maybe the combined or total market for new projects and the potential sales that you could recognize maybe in 2027?
Sunny, I think we just confirmed we do have the second customer. The new project right now is kicking off and working on right now. We are talking about when to see the first revenue coming in in 2028. Again, normally, actually, we will disclose more detail later on, but this is just confirmed. We do have a second customer, and the MP, the revenue coming in 2028.
Got it. So second customer is different customer from the key project that you are referring to, right?
Yes, second customer, so different customer.
Yeah. Okay, got it. Thank you very much.
Now we have Haas Liu from Bank of America. Go ahead, please.
Hi, Rick, David, and Jessie. Congrats on the great results, and thanks for taking my questions. I would like to start with your near-term ASIC outlook. You provided new $2.5 billion guidance for cloud ASIC contribution for this year, which is better than your previous guidance of slightly higher than $2 billion. I was just wondering, what drives the incremental strength? Is it because the smooth production ramp driving the unit upside or the chipset pricing upside reflecting the cost hike?
Relatedly, with cloud ASIC reaching 30% of your quarterly revenue in fourth quarter this year, I was just wondering, it is, of course, very encouraging to see that your gross margins is still kept at 44%-46% range. But just wondering if you could provide more detail on the factors keeping your margins resilient during the quarter. Thank you.
[inaudible ]. Our latest today's guidance for fourth quarter, $2.5 billion, indeed comes from a very robust customer demand. With the robust customer demand, actually, we have been working very hard with our supply chain partners. I am also very glad to say that although you probably understand how hard nowadays to get the right amount of supply in order to meet the demand.
I am very happy that our team has been successful in rounding up multiple various supplier, such as, for instance, substrate, which is usually one of the most difficult things to do. So, we continue to perform, our team, and I will certainly hope and expect we do that going forward.
Yeah. Okay. For the gross margin, actually, we kind of give out the guidance early on for the blended gross margin on the data center side, currently still below the corporate average. So that is why you see for our guidance, actually, we guide down notch 1 percentage point. On top of that or on side of that, we also have some price adjustment in order to reflect about the cost increase for the whole supply chain. So on a blended basis, actually, that is actually the guidance we give out.
Again, we want to highlight the focus for the new data center business. I think we really see this as a very accretive on the operating margin side. As you can see, starting from fourth quarter and likewise starting from next year, I think that will be the focus.
Okay, got it. Just a quick follow-up on that one, the commentary that your operating margin for the ASIC business is already going to be accretive as compared to your corporate average starting from fourth quarter. Is that the correct understanding?
Yeah. Well, starting from fourth quarter, the operating margin will become accretive to the overall company.
Okay. Okay, got it. My second question is just a follow-up on the second customer for the ASIC business that you mentioned, that the mass production timing or the revenue contribution from this production for that project, new project, new customer, is going to pick up in 2028. Does that suggest that the chip set is already under design milestone, or how should we read it? Thank you.
Yeah. Actually, I think the joint design kickoff already. But again, we will provide more detail later. Yeah.
Got it. Thank you so much. I will be back in the queue.
Next one to ask questions, Charlie Chan from Morgan Stanley.
Hi, Rick. David, thanks for taking my question. I actually have several follow-up, if I may. First of all, on the operating margin implication, right? I mean, the guidance implies first quarter operating margin to be around 19%. If I think about the AI data center revenues, like 30% of your total revenue, then it seems to be like your AI data center operating margin is like 10% above corporate average. Is that a right way to think about it, or it will be even more accretive when the project goes for higher scale?
I am sorry, Charlie, can you repeat? You say, I did not hear you clearly. You say our operating margin for data center was 10% or 10% higher.
10% higher than corporate average, based on your first quarter revenue mix and your first quarter operating margin guidance.
First of all, I think it is higher, but we probably will not be able to quantify that because actually, as I explained, in fourth quarter, we also have the effect about a price adjustment starting from third quarter for non-data center business as well. Yeah. But overall, it is higher. It is higher, but we will not be able to comment the magnitude about the operating margin for the individual other segments.
Thank you. Can I say my next two questions? Because I would love to know the answer for both. One is also a clarification about your second customer. Can we give a little bit color? Is it kind of AI lab type of customer? Is that kind of related to your recent NVLink Fusion progression? Can you give us a little bit more color about this second customer?
Also a question to Rick . I think the recent capital market seems to be very concerned about neocloud financing, ARR deceleration, so there is some concern about AI infrastructure slowdown. I want to get management's view about if CSPs or CapEx will slow down or cut. Do you think customer will prioritize GPU, which is more general purpose, or they should prioritize their own ASIC for the future spending in a bear market? Thank you.
So, Charlie , maybe the first customer. Again, currently, we probably will not be able to provide more detail, but yeah, I think in general, actually, maybe the easy way to think about it, I understand there are some rumors out there. At least one thing we can say, the second customer does not come from China. Okay? Maybe that is-
Okay.
that much we can talk about that. For any more detail, please bear with us. Actually, we will provide more detail later.
Got you. Yeah. Can I get a management view about what would be prioritized? Is it ASIC or GPU if CSP's budget is going to shrink?
Well, Charlie , there is certainly, well, quite a bit of a market movement, there is no question about it, during the last several weeks almost. But my view is, if we look at it one year, two year out, maybe even up to three year out, the demand for AI, the growth, the demand growth for AI, which means the demand growth for compute, will continue, absolutely sure. The rate of which may vary somewhat, but if you look at from the TAM point of view, it is a huge TAM. It is a huge TAM.
And what we definitely focus on is to ensure we are working with the first-class customer, first-class products, that will stand the test, to use this cliché, and the test of time, which is a very accurate cliché. As I said here in my remarks, the chips we are designing together, we are designing and making together with our customers, really powerful chip. Especially during the tough time, those chips will win out.
Of course, I am absolutely sure also the GPU will, they will also have very great chips too. But I cannot say every other chips will be successful. I am very sure the chips we are making is already very successful and will be very, very competitive in this kind of a rocky market in the next year, maybe. But I have been thinking about that, and I am quite confident that MediaTek will come out better and stronger. Thank you.
Okay, great. Thanks, Rick. Thanks, David.
Next one to ask questions, Robert Sanders from Deutsche Bank. Go ahead, please.
Yeah, thanks for taking my question. I guess, you seem pretty dependent on EMIB-T right now. If I was working at Intel, I would probably tell Google in the future that there are only packaging deals if you use our foundry, which would obviously have implications for you because it would force you to work with Intel's front-end foundry, which is obviously more dangerous given their execution. Would that be something that concerns you about your dependency on EMIB-T?
First of all, we are not dependent on one supplier. It is critical to make it clear. We continue, I mean, TSMC is our most important partner, period. What we are doing is here, the market is expanding so fast, the customer requirement becoming so or they change also so fast. We actually, as a very capable supplier, we are, how should I say, we are adapting those challenges and to make good, powerful chips for our customers, whatever they would like to choose.
I think I would really credit that as a major capability for MediaTek. However, we also understand clearly TSMC is our most important partner, and we are not we or not, we are working with them closely in every part of the, I should say, technology chain. Packaging has become a major redefining technology for this AI era, and MediaTek is investing in money, especially in people, and in our ecosystem partners relationship. Thank you.
Just as a follow-up, in terms of these frontier model custom silicon projects, your major competitor is using financing, very aggressive financing, buy now, pay later type terms. I know you have a small financing, you have raised this debt, but is it worth even engaging with these loss-making frontier model companies, given the sort of scale of the balance sheet support that your competitor is using? Or do you think it is still worth engaging with these companies, given your smaller relative size?
Well, Robert, I think the market is so dynamic right now. You are talking about all of, depends on somebody called about vendor financing or support by the chipset vendors. I think if it is necessary, I think we will consider as well. Yeah. Because actually right now, especially due to the new frontier models, at least one of the new frontier model is actually about to file for IPO. We are going to see more and more public information coming out.
We actually see quite a few sort of positive signal. For example, for the revenue or return versus the CapEx investment, obviously we see quite a bit improvement quarter-over-quarter in the last six quarter. With that trend, I mean, we still strongly believe for the CapEx invest, regardless for CSP or frontier model, you will generate enough revenue and cash flow to fulfill that.
So actually, there is a transition period to support that CapEx spending in order to reach the final stage or stable stage about cash generating. Again, just to go a long way to answer your question is, if the market require, if we have the, but more importantly, if we have the right customer, and actually we will consider as well.
Got it. Thank you.
And right now, we have Arthur Lai from Macquarie. Go ahead, please.
Hi, Rick and David and Jessie. Congrats on strong fourth quarter OP margin beat. Question two, number one is on the OP margin discussion. Number two is on the technology learning curve. So, start from number one, if you look at the Q3 operating margin and Q4 operating margin, can you give us a long-term operating margin guidance? Or how we think of the Q4, the operating margin is sustainable? How should we forecast? Thank you.
Yeah. I think first of all, the long answer short, I think Q4 operating margin, Q4 should be the starting point, people to see of the improving operating margin. Okay? It is not going to be just sustainable. I think we are looking for continuing enhance, okay, given actually we are going to shift more on the top line. Okay? It is sustainable, and also we are looking for continuing improve.
If we talk about to next year guidance for the operating margin, I think overall we are looking for 20%+, okay? If not, slightly higher. Again, the reason would probably want me to give out the detailed guidance, because there are still some moving pieces. But overall, we feel comfortable for the full year basis next year, operating margin should be above 20%. So, from a year-over-year perspective, we are going to see it is a pretty good accretion. That is on the operating margin side.
Again, that is all in line with what we talked about right now, probably almost like 1.5 years ago. We say the business model, or the new business model, if you like, we are adopting right now, is actually the gross margins compared to what we have right now, may be slightly diluted, but operating margin will be accretive. I think that is the strategy of the business model.
Yeah, that is great. Second question is a follow-up on Rick opening remark, mentioned that we are doing the leading tech. I think the investor actually asking about the EMIB-T technology and also HBM5. If we think about maybe two years later, your company probably will be one and only one who have a track record to handle these two technology with a track record. So, by then, how is the entry barrier investors should think, if you already handle this very tough technology? How many years you will be ahead of your major competitor?
That is a good and a tough question. I want to be careful in responding your question. We are quite excited about our progress in the multiple fronts of the technology capability required for this such complex and dynamic AI era. You mentioned the packaging capability, the HBM5, and I think we have the world-class, state-of-the-art 448G SerDes, a tremendous power consumption, low power consumption capability, for instance.
But I think, on top of those things, the way, the capability to integrate all those technology capabilities and make them into a highly manufacturable, scalable products for our customers, for them to be successful, that is and will continue to be the barrier, the competitive barrier. It is many things together, not just one thing or two things.
We also recognize we have very strong competitive competitors. We will not think that we will be very much ahead of our competitor. We always have a very tough fight against our competitors. I am very sure we will win our part of the business. Thank you.
Thank you, Rick.
Returning to Q&A now, we have Gokul Hariharan from JP Morgan. Go ahead, please.
Yeah. Hi. Thanks for taking my follow-up question. First of all, on the NVLink Fusion partnership, Rick, I know that you cannot talk about the specific ASIC yet, but could you give us a little more pointers in terms of how you are integrating NVLink Fusion, and what are the benefits your customers could be getting?
I think one of the factors that your competitor has is just really their scale-up technology based on Ethernet. That has completely kind of balanced out the potential kind of networking-related edge that your competitor has when it comes to new customer engagement. Maybe also talk a little bit about the customer interest levels for this NVIDIA NVLink Fusion-enabled ASIC offering that you are bringing to the market.
Gokul, first, NVIDIA Fusion model, of course, it is a business model, but with a very, very high and strong technical content. Let us talk about technical content first. I think you mentioned the credentials. I can say, I think clearly that, yeah, with NVIDIA and MediaTek together, I think our credentials can match anybody in the business, in the market. That, I think I can say in confidence.
Technically, I think first, the thing we are doing, the value of the model, such as in the remarks, also actually back in the announcement of the collaboration in one of the interview, I always stress that we can accelerate, we can enable customers' time to market and time to revenue, time to money.
We work together with NVIDIA first to build a chassis with which the customer can really, I wouldn't call that plug in, but it will be much more easily putting their design, be they XPU or CPU or some other use, and putting into a rack and sell the rack, for instance. That is the essence, I think, of this business model. There are a lot of other things we must do together to convince various potential customers to adopt such model. Thank you.
Got it. Any initial feedback that you are hearing from the customers on this model now?
Yeah. Gokul, right now we are in discussion together with NVIDIA with several potential customer. I think overall, some of the customer like it. I think one of the key advantage about having the NVLink Switch or NVIDIA Fusion model is for potential customer, I think their time to computation power is actually much, much faster. Because traditionally, they've been working on the chips at first, worry about the packaging, then talk about the system. So it sometimes take long time to find idea to computation power online.
But with the NVIDIA Fusion, that provide a great advantage for time to computation power. And given the strong demand on the end market side, I think that should provide lots of revenue, lots of opportunity. So we got some pretty good positive feedback. I think it's hopefully in near term, we can officially announce some case.
Got it. That's very good. Maybe second question, just wanted to address, again, the second generation ASIC. It's a much more powerful, much better TCO kind of chip. What does it do to your competitive position within this customer? Do you think that you will kind of become the majority source when it comes to 2028? Because there's a lot of discussions around this, as you can imagine. This generation, obviously, you've proven with the ramp in Q4, but could you talk a little bit about your competitive position within this lead customer when it comes to the second generation?
Yeah, sure. Gokul, I think the key is really just like Rick talked about during the opening remark. For the second generation or the second project, I think the performance is multiple time betters on the performance per watt, and also which will also mean much better TCO. And to be honest, actually, it's based on what we see on the so-called competing projects, they're actually not even close from the overall performance perspective.
On that one, actually, we feel fairly comfortable, fairly comfortable. Because by end of the day, the market is looking for the performance and TCO. And as long as our product can win from that front, I think we feel comfortable.
Okay. That's very clear. Thank you very much.
With the interest of time, we are going to take the last question. Also returning to Q&A, Charlie Chan, Morgan Stanley.
Thanks for taking my follow-up question. I want to ask you about the 448G SerDes. We know is that for the third generation project with major customer, or it will be applied soon for this so-called second customer? Can we clarify your progress for 448G SerDes adoption? Oh, gigabit, I am sorry.
Yeah. Well, first of all, we certainly serve our current customer first, and the 448G SerDes is a must. Going forward with a very stringent, or it is a [audio distortion] with a very stringent power consumption requirements that we have taped out already. We are quite, after the silicon takes measurement, verification, all those things.
But yeah, our team, our SerDes team is very, very capable, and they have done this multiple generations. They know what they are doing, and I am very confident that we will deliver 448G SerDes [audio distortion]. It will not be on the critical path. In addition, we will use this IP to put in some extra work so that it has the right interoperability for the broader customer base going forward. Thank you.
Yeah. We are also looking forward to your more projects and not just the NVLink Fusion that David just mentioned, but we believe you will have a great opportunity with other U.S. CSP or Alphabet customers. For this already, so good to announce the second customer win.
Maybe get a rough kind of revenue size or margin profile. For example, compared to your AI accelerator this year is around $2 billion in the first year, right? If you think about the second customer in 2028, would that be a bigger revenue size and would the margin profile be similar? Thank you.
Richard, right now it's a little bit too early to talk about detail, but in general, I guess actually the demand the customer would like actually is pretty strong. But again, for 2028, we're still in the process about finalizing the supply. We probably would provide some more detail later. But so far, as you can see from the marketplace, everyone is talking about further increase the CapEx and demand. If we only judge it from demand side, that looks good, but we also need to take into consideration about the other side as well. So, give us some more time, we will come back with some more clarification.
But right now, the key is really 2026, we deliver a great result for $2.5 billion mainly for fourth quarter. Next year, actually, we actually talking about the high end of the guidance. Once we can deliver that, we're going to be based on pretty solid ground to deliver the new revenue for 2028 and beyond.
Yeah. David, you mentioned about substrates several times that it's a key factor, right? Just in case, if EMIB-T supply cannot fulfill customers' demand, do you think your current ASIC first generation project will extend the life cycle, or that demand will goes to your competitor in the U.S. by using TSMC CoWoS?
I think for current generation, the demand looks good, and also, like with our guidance give out, actually we should feel fairly comfortable to deliver what the customer want for generation one. For gen 2, based on the current yield profile and also tight market, I think we still feel comfortable to deliver what the customer want basically. In the meantime, as you can guess, the customers actually for the second generation, they're looking for some upside, and so we are still working with our supply chain partner to provide upside.
But, I think overall, the key is really go back to my earlier comment, the performance we can deliver together with our customer right now, you can't really find so-called replacement or the substitute of it. I think that's the key.
All right. Thank you. Thanks, gentlemen. Super helpful.
Okay, ladies and gentlemen, we thank you for all your questions. Now I will hand it over to Ms. Jessie Wang for closing comment. Ms. Wang, please proceed.
Ladies and gentlemen, this concludes MediaTek 2026 third quarter conference call, and the audio replay will be available in one hour after the call at the investor section of MediaTek website. We would like to thank you for your participation, and you may now disconnect.
Yes. We thank you again for your participation in today's conference. You may disconnect now. Thank you and goodbye.