Foxconn Chairman Young Liu delivers a speech during the Hon Hai Tech Day in Taipei on Oct. 18, 2023.
I-hwa Cheng | AFP | Getty Images
Foxconn (2317.TW), the world’s leading electronics contract manufacturer, reported a robust 17% year-over-year surge in third-quarter profits, fueled by escalating demand within its artificial intelligence (AI) server business. The results underscore the company’s successful strategic pivot toward high-growth technology sectors.
Here’s a breakdown of Foxconn’s performance in the September quarter, compared against LSEG SmartEstimates:
- Revenue: NT$2.06 trillion ($66.29 billion) vs. NT$2.06 trillion expected
- Net profit: NT$57.67 billion vs. NT$50.41 billion expected
While primarily known for assembling Apple (AAPL) iPhones, Hon Hai Precision Industry, trading as Foxconn, is aggressively diversifying its portfolio, with AI infrastructure emerging as a key growth driver. The company has established itself as a crucial partner for Nvidia (NVDA), manufacturing high-performance server racks optimized for demanding AI workloads. This collaboration positions Foxconn at the forefront of the AI hardware revolution.
Looking ahead, Foxconn anticipates continued sequential growth throughout the second half of the year, traditionally its peak season. This optimism stems from projected increases in AI server shipments and sustained demand for information and communications technology (ICT) products. The company acknowledges, however, that macroeconomic headwinds and currency risks necessitate careful monitoring of the global landscape.
The ‘Cloud and Networking’ segment delivered exceptional year-on-year growth, directly attributable to the burgeoning demand for AI server racks. This segment’s performance highlights the increasing reliance on robust and scalable infrastructure to support the explosion of AI applications across various industries.
According to Ivan Lam, a senior analyst at Counterpoint Research, Foxconn’s server manufacturing arm is experiencing a period of significant expansion supported by high market demand. Lam emphasized that the company is capitalizing on its existing contract manufacturing prowess to secure both current and future server orders. “It’s a clear ‘follow the cash’ strategy,” Lam noted, indicating a deliberate shift away from certain consumer electronics orders in favor of the more lucrative server market.
Lam further added, “Foxconn’s transition into the high-growth server manufacturing space is undoubtedly yielding positive results, even if it means reallocating resources from its consumer electronics operations for greater long-term value creation.” While macroeconomic factors influencing commodity prices and logistics pose a threat to compress bottom line, it is still expected that Foxconn’s fourth-quarter results will “remain favorable”.
Beyond servers, Foxconn is actively pursuing opportunities in the autonomous vehicle sector, partnering with industry leaders such as Nvidia, Stellantis (STLA), and Uber (UBER) to develop “Level 4” autonomous driving technology. This ambitious initiative aims to create vehicles capable of operating without the need for a human safety driver, representing a significant step towards widespread autonomous transportation.
Adding to its strategic partnerships, Foxconn recently signed a memorandum of understanding with Mitsubishi Electric (6503.T) on November 6th, aiming to jointly deliver energy-efficient AI data center solutions on a global scale. This collaboration extends beyond AI data centers, as Foxconn and Mitsubishi Electric plan to explore new business models and solutions leveraging their respective technological expertise and market insights that they can both contribute.
