(Bloomberg) — Hon Hai Precision Industry Co.’s revenue growth accelerated last quarter, sustaining a recovery as demand for the servers powering AI development offset weak smartphone sales.
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Apple Inc.’s main manufacturing partner, also known as Foxconn, reported that revenue rose 20.2% to NT$1.85 trillion ($57.9 billion) for the three months ended in September from a year earlier. That compares with the average analyst forecast of NT$1.78 trillion compiled by Bloomberg.
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 sales increase since early 2023.
Foxconn’s sales are helped by a growing company that supplies servers powered by Nvidia Corp.’s AI chips. In August, the company said it expected sales to continue growing for the rest of the year. The company’s shares are up more than 85% through 2024.
What Bloomberg Intelligence Says
Hon Hai’s revenue growth could accelerate in 2024-25 as AI proliferation takes hold as the company’s key growth driver and iPhone demand stabilize. Thanks to its vertical integration and global footprint, the company is well-positioned as the complexity of AI servers increases and demand for local production increases. Even more upside could be unlocked in the coming quarters as Nvidia’s GPU lineup improves and new models like Blackwell GB200 are launched. Smart consumer electronics and computer products, which together accounted for 64% of total sales in the first half of the year, could stabilize as demand for smartphones and PCs declines. Contract EV manufacturing activities could be subdued amid a slowdown in global EV demand, and the contribution to sales could remain marginal.
— Steven Tseng and Sean Chen, analysts
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Hon Hai and other hardware vendors are benefiting from a wave of spending on servers and data centers from major tech companies, including Meta Platforms Inc. and Alphabet’s Google. But questions are being raised about how long the spending will last without a native AI application that can provide the tech companies with a return on the massive infrastructure investments.
As the world’s largest assembler of the iPhone, the Taiwanese company’s operations still remain closely tied to Apple’s. In the second quarter, about 40% of Foxconn’s revenue still came from the Smart Consumer Electronics category, including the iPhone, while cloud and networking products, including AI servers, contributed to about 32%.
Investors had expected a recovery in smartphone demand in 2024, although some analysts warn that early signs suggest the latest iPhone has not stimulated as much demand as expected.
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