Why is Hua Hong Grace Semiconductor stock rising today?

Hua Hong Grace Semiconductor's stock surged 2.4% to HK$68.9 on Friday, following the semiconductor manufacturer's impressive earnings report for the September quarter. The company reported a record-breaking revenue of $987.1 million, representing a 19.9% increase compared to the previous year, surpassing market expectations. Moreover, Hua Hong's net profit soared by 147.1% to $123.4 million, also exceeding analyst forecasts.

A significant factor behind the strong performance was the company's ability to maintain robust gross margins at 24.6%, an impressive 7.6 percentage points higher than the previous year. This improvement was primarily attributed to the company's higher wafer average selling prices and increased shipment volumes. In addition, management raised revenue guidance for the fourth quarter to $1.08 billion–$1.09 billion, with the gross margin projected to fall between 25%–26%.

A notable aspect of Hua Hong's strong results was the first complete integration of Huali Microelectronics into the company's financial statements during Q3. Although the consolidated figures were boosted by Huali Micro's contribution, the core business still delivered $803.4 million in revenue, surpassing the top end of the previous quarter's guidance.

Furthermore, the core gross margin reached 19.9%, also outperforming the forecasted 16%–18% range. Management expressed optimism that the trend of simultaneous volume and price increases in wafer foundry would continue and hinted at the potential for additional price hikes in 2027. In contrast, the broader Hong Kong market experienced a downturn, with the Hang Seng Index falling 1.06% to 24,533 points and the Hang Seng Tech Index declining 1.75%.

This decline in the overall market was primarily driven by mounting concerns about AI hardware regulation following the Democratic Party's victory in the U.S. Congress.