Delta Electronics Chairman Zheng Ping said that thanks to the continued growth in demand for artificial intelligence data centers, revenue in the fourth quarter will definitely be higher than in the third quarter, and gross profit margin is expected to be no worse than in the third quarter.
Delta Electronics held a corporate briefing today. Chairman Zheng Ping said that thanks to the continued growth in demand for artificial intelligence (AI) data centers, revenue in the fourth quarter will definitely be higher than in the third quarter, and gross profit margin is not expected to be worse than in the third quarter. With the expansion of AI-related product layout, data center-related business currently accounts for nearly 50% of the overall revenue, and liquid cooling business accounts for 13%. Operations will continue to grow next year.
Regarding the impact of inventory depreciation losses on gross profit margin in the third quarter, Delta Electronics Chief Financial Officer Yu Bowen pointed out that the provision for inventory depreciation losses in the third quarter accounted for approximately 1.7% of revenue. It was mainly affected by factors such as customer order adjustments, changes in product design specifications, supplier delivery delays, and long and short materials, resulting in the accumulation of some inventory. As related problems are resolved and products are shipped one after another, some losses may be offset.
Zheng Ping said that the inventory problem is a phased phenomenon and is expected to be eliminated gradually in the fourth quarter. On the other hand, raw material costs have increased by about 2% since the beginning of this year. The company has negotiated price adjustments with customers. Some products are expected to be reflected in the fourth quarter, while some may be postponed to the first quarter of next year. As for the gross profit margin in the fourth quarter, although it is not expected to be worse than the third quarter, intangible assets and other items still need to be reviewed at the end of the year, and the actual performance is still variable.
In terms of AI business, Zheng Ping pointed out that Delta currently includes power supply, cooling and other related business groups, all of which are actively involved in the construction of AI data centers, and the overall AI-related revenue accounted for nearly 50%. Yu Bowen further stated that the liquid cooling business will be about 25 billion yuan in the third quarter, accounting for about 13% of revenue, and the proportion is expected to remain at a similar level throughout the year.
Regarding the long-term demand for AI data centers, Liu Liangfu, vice president of Delta Electronics' Corporate Investment Department, said that large global cloud service providers continue to expand capital expenditures. It is estimated that global data center capital expenditures may reach US$1.2 trillion to US$1.5 trillion in 2027, and related construction needs are expected to continue until 2030. However, factors such as material supply, insufficient power, shortage of professional and technical manpower, and local policies may still cause fluctuations in construction progress and supply chain shipments.
In response to the power shortage problem in the AI data center, Zheng Ping pointed out that Delta Electronics' solid oxide fuel cells (SOFC) are expected to be mass-produced next year. The initial stage will focus on customer verification, and subsequent production capacity will be expanded based on market demand. In addition, Delta Electronics has passed the investment project for a new production base in Penang, Malaysia, planning to gradually establish a production capacity equivalent to that of its base in Thailand within five years, and is evaluating the expansion of local R&D layout.
As for the patent litigation initiated by Vicor in the United States and the investigation by the U.S. International Trade Commission (ITC), Liu Liangfu emphasized that the relevant procedures will take time and will have no short-term impact on Delta's electronic product shipments and customers. The company has confidence in its intellectual property rights and patented technology and will continue to respond to the litigation.
