Gigabyte Lifts Capital Spending as AI Server Orders Drive Record First Half

Record First Half Signals Accelerating AI Buildout

Gigabyte Technology raised its full-year capital expenditure budget to between $2.5 billion and $3 billion after first-half revenue climbed 48.4 percent year-on-year to a record $7.8 billion. The Taipei-based server and component manufacturer initially planned to spend $2.3 billion in 2026 but increased the allocation as customers accelerate data center deployments for artificial intelligence workloads.

Net profit surged 92.6 percent in the first half to $370 million, the company said on Friday. The second quarter alone delivered $448 million in revenue and $205 million in net profit, both quarterly records. Gigabyte spent $57 million on capital expenditure in the first half, primarily on office expansion and AI server production capacity.

The company expects revenue and earnings in the second half to surpass first-half levels as clients advance AI infrastructure projects and key component availability improves. Ongoing progress in customer buildouts and easing supply constraints for critical parts would provide additional momentum, Gigabyte noted.

Margin Pressure from Product Mix Shift

Gross margin slipped 2.4 percentage points quarter-on-quarter to 9.62 percent in the second quarter, though it remained 0.2 percentage points higher than a year earlier. The sequential decline reflected a shift in product mix as Nvidia's lower-margin GB-series AI servers claimed a larger share of shipments, while graphics card and motherboard businesses entered seasonal lows.

Gigabyte expects gross margin to recover in the third quarter as graphics cards and motherboards enter their peak season. The company also plans to adjust the shipment balance between GB-series and HGX AI servers, which carry different margin profiles. The HGX platform typically commands higher margins due to its modular architecture and integration complexity.

Component Supply and Customer Deployment Pace

Improving availability of high-bandwidth memory, power components, and networking silicon has allowed Gigabyte to meet rising order volumes without significant delivery delays. The company has secured long-term supply agreements with key vendors to ensure production continuity through the end of 2026 and into 2027.

Customer deployment timelines have accelerated in recent months as hyperscalers and enterprise clients move AI projects from pilot phases to production scale. Several North American cloud providers have expanded their server orders to support large language model training and inference workloads, while Asian customers are ramping infrastructure for AI-driven applications in finance, telecommunications, and manufacturing.

Capital Allocation and Capacity Expansion

The increased capital expenditure will fund additional production lines at Gigabyte's existing facilities and support office space expansion to accommodate engineering headcount growth. The company has not disclosed plans for new manufacturing sites but indicated it would continue to optimize capacity at current locations in Taiwan.

Gigabyte's component businesses face different seasonal dynamics than its server division. Motherboards and graphics cards typically see stronger demand in the second half as PC manufacturers prepare for year-end retail cycles and new product launches. The company's diversified portfolio allows it to balance margin pressure from high-volume, lower-margin AI server shipments with higher-margin component sales.

The raised capex budget reflects confidence in sustained AI infrastructure demand through 2027, even as some analysts question whether current order levels can persist beyond the initial deployment wave. Gigabyte's management has signaled it expects multi-year growth in AI server revenues as customers expand from initial clusters to full-scale data center deployments across multiple geographies.