(Bloomberg) — Hon Hai Precision Industry Co.’s revenue growth accelerated last quarter, maintaining a rebound as demand for servers that drive AI development offsets weak smartphone sales.
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Apple Inc.’s main manufacturing partner, also known as Foxconn, said its sales rose 20.2 percent to NT$1.85 trillion ($57.9 billion) for the quarter closed in September compared to the previous year. That compares to Bloomberg’s average analyst forecast of NT$1.78 trillion.
The company said third-quarter revenue was a record for the period and exceeded its own growth expectations, without specifying an estimate. Sales rose 19% in the June quarter, the Taiwanese company’s first revenue increase since early 2023.
Foxconn’s sales are supported by a growing business supplying servers containing Nvidia Corp.’s AI chips. In August, it said it expected revenue to rise for the rest of the year. The company’s shares are up more than 85% in 2024.
What Bloomberg Intelligence says
Hon Hai’s sales growth may accelerate in 2024-2025, as the proliferation of AI emerges, while the company’s main growth driver and iPhone demand stabilizes. Its vertical integration and global footprint puts it in a favorable position as the complexity of AI servers increases and demand for local production increases. Further upside prospects may emerge in the coming quarters as Nvidia GPU supply improves and new models such as the Blackwell GB200 are launched. Smart consumer electronics and IT products, which together accounted for 64% of total sales in the first half, may stabilize as demand for smartphones and PCs bottoms out. Its electric vehicle contract manufacturing business may be lackluster amid slowing global demand for electric vehicles, and sales contribution may remain marginal.
— Steven Tseng and Sean Chen, analysts
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Hon Hai and other hardware vendors are riding a wave of spending on servers and data centers from big tech companies, including Meta Platforms Inc. and Alphabet’s Google. But questions are bubbling over how long the spending will last without an at-home AI application that can provide tech companies with a return on the massive investment in infrastructure.
As the world’s largest iPhone assembler, the Taiwanese company’s business remains closely linked to that of Apple. In the second quarter, about 40% of Foxconn’s revenue still came from the smart consumer electronics category, including iPhone, while cloud and networking products, including AI servers, contributed nearly ‘around 32%.
Investors had expected smartphone demand to rebound in 2024, although some analysts warn that early signs suggest the latest iPhone has not spurred as much demand as expected.
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