Earnings call transcript: Chunghwa Telecom Q1 2026 sets revenue record

Chunghwa Telecom reported Q1 2026 revenue of TWD 59.99 billion, up 7.5% year over year and a record first quarter since 2012, with EPS rising to TWD 1.30, the highest in a decade. Operating income increased 4.6% and EBITDA margin held at 38.85%, while management cited continued ICT, AI, and cloud growth and outlined ongoing 5G, AI, and undersea cable investment. The company also declared a 2025 cash dividend of TWD 5.2 per share, underscoring shareholder returns and financial strength.

Analysis

CHT is signaling a rare telecom growth mix: stable core cash flows plus an increasingly monetized enterprise stack. The key second-order effect is that the market is likely underestimating how much AI/data center and undersea-cable spend can re-rate the business from a defensive yield proxy into a quasi-infrastructure compounder, especially if recurring ICT keeps taking share from one-off project work.

The bigger beneficiary set is not just CHT; domestic contractors, power/cooling vendors, and network equipment suppliers tied to IDC and cable buildouts should see a multi-quarter demand tail. The flip side is that this investment cycle raises the bar for execution: if AI infrastructure monetization lags the capex step-up over the next 2-4 quarters, margin expansion could stall even if revenue stays healthy.

The dividend signal is important. A payout above earnings suggests management is prioritizing capital returns, but it also means equity holders are effectively being paid to wait for the AI thesis to prove out. That creates support on pullbacks, yet it leaves less room for any disappointment in 2H26 guidance or a slowdown in handset/ICT recognition.

Consensus seems to be treating this as a high-quality defensive name with modest overvaluation. I think that misses the optionality embedded in the enterprise ICT pipeline and the operating leverage from scaling SA/AI infrastructure, but the stock likely needs a catalyst beyond another solid quarter to break out materially. The cleanest dislocation is in relative value: the story is better than a low-growth utility, but not yet priced like a genuine digital infrastructure platform.

Key Decisions for Investors

• Long CHT on 3-6 month horizon into any post-earnings consolidation; target a re-rating if ICT mix and AI revenue remain on track. Risk/reward is attractive on pullbacks because dividend support limits downside, but trim if non-mobile capex rises without visible recurring revenue conversion.
• Pair trade: long CHT / short a regional low-growth telecom peer basket for 1-2 quarters. The thesis is that CHT's enterprise ICT and AI infrastructure exposure will sustain growth above the sector while pure telecom names remain trapped in yield compression.
• Long MSCI and SPGI only on weakness, not here. This result is positive for ESG credibility and disclosure quality, but the second-order value to ESG index/ratings providers is modest; avoid chasing a sympathy move.
• Watch for a tradeable read-through to network infra and data-center supply chain names over the next 1-2 earnings cycles; buy the laggards on confirmation of follow-through orders, not on the headline alone.
• If CHT trades >5% above fair value again without an upward revision to 2026 guidance, sell covered calls 1-2 quarters out to monetize elevated defensiveness while capping upside from a likely slow-moving re-rate.