Key Points
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Himax said on its Thursday earnings call that it expects fourth-quarter revenue to drop 22% to 26% from the third quarter, with its shares down nearly 30% in Thursday trading.
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President and CEO Jordan Wu said on the call that demand fell suddenly after China’s early-October National Day holidays among customers that had bought aggressively in prior quarters.
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Himax still expects full-year automotive chip revenue to grow about 10%, so the question for investors is whether October is a short-term pullback or a lasting problem.
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Himax (NASDAQ:HIMX), the fabless chip designer behind display driver chips for TVs, phones and car screens, expects a steep revenue drop in the final quarter of the year, and investors are punishing the stock amid an already bruising day for the market.
On the company’s earnings call Thursday, President and CEO Jordan Wu blamed “an abrupt and significant correction” in automotive display driver chip orders for the new guidance. Shares had plunged nearly 28% to $7.55 by about 2:30 p.m. ET on Thursday, a steep decline exacerbated by a broader market sell-off targeting AI-linked names.
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What Went Wrong in October
Wu told the call that the year began soft in the first quarter. Panel makers then bought heavily in the second and third quarters to keep up with surging orders from Chinese automakers expanding overseas. “Right after China’s National Day holidays in early October,” he said, the company saw a “sudden and sizable decline in demand among the customers that had purchased aggressively in prior quarters.”
Wu also said the forecast cut partly reflects Chinese automakers’ “earlier, overly aggressive export expectations, along with their growing concerns over inventory levels across distribution channels.” He added that panel makers mostly serving customers outside China have held their forecasts steady, and some have nudged fourth-quarter orders higher.
The damage is concentrated in automotive display drivers. Wu said automotive timing-controller sales should keep growing from quarter to quarter.
That earlier buying spree already showed up in the third quarter. Automotive driver sales rose in solid double digits from the prior quarter, marking the second straight quarter of strong growth, as some panel makers accelerated purchases.
The Numbers Behind the Guidance
Third-quarter revenue rose 8.5% to $246.8 million from the prior quarter, and gross margin improved to 34.2% from 33.1%. Profit came to $18.6 million, or 10.7 cents per diluted ADS (American depositary share), topping the company’s 8 to 10-cent guidance, which Himax attributed to lower-than-expected operating expenses.
For the fourth quarter, management expects gross margin flat to slightly up and profit of 4.5 to 6.5 cents per diluted ADS. That range leaves out an expected after-tax gain of about $19 to $20 million from selling its stake in an equity-method investment, a sale Himax expects to close this quarter.
The Bull Case and the Supply Squeeze
Wu said on the call that automotive chip sales rose a “decent” 16% year over year in the first nine months of 2026, and he still expects about 10% growth for the full year, even with worldwide vehicle production expected to decline. The company also expects automotive timing-controller sales to grow more than 40% this year. Non-driver sales, which include timing controllers, reached $51.0 million in the third quarter, up 11.2% from the prior quarter.
The chief executive framed the slump as “abrupt, short-term order adjustments by certain customers, while our market leader position remains firmly intact.”
Supply is the other theme. Wu said foundries and packaging and testing providers have announced significant price increases for 2027 and that capacity is the company’s top priority because automotive customers demand stricter supply assurance. He added that Himax has secured capacity commitments from key suppliers and is working with customers to share rising costs. However, higher foundry prices will remain a cost to watch, with Himax and across tech stocks that rely on outside chipmakers.
So, Is Now the Time to Buy?
It depends on how you read October. If customers simply over-ordered and are now working through inventory, the full-year automotive growth target suggests the business is intact, and that’s how management describes it. If end demand for Chinese car exports is weaker than implied by those orders, the correction could run longer than a quarter.
With the stock down so steeply in Thursday trading, a lot of bad news may already be priced in, particularly since it appears investors are fearing the worst when it comes to how a newly elected government could interfere with the AI build-out. Even so, a sudden guidance cut does warrant caution. Many long-term investors would likely wait for evidence that the fourth-quarter outlook holds, and anyone interested in these semiconductor stocks might keep a position small.
The next checkpoints are whether fourth-quarter profit lands in the guided 4.5 to 6.5 cent range and whether the stake sale closes as expected.
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Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Himax Technologies. The Motley Fool has a disclosure policy.
