Strong Performance in AI Server Demand
Foxconn, the world's largest contract electronics manufacturer, recently announced a 6% rise in quarterly net profit, surpassing expectations. This increase is primarily driven by a surge in demand for AI servers, a key area where Foxconn maintains a leading global market share of over 40%.
The company's quarterly net profit reached T$35.05 billion ($1.09 billion) from T$33 billion a year ago, exceeding analysts' predictions of T$34.29 billion. This marks the fourth consecutive quarter of profit growth for the company, demonstrating its robust business strategies and market adaptability.
AI Server Market Growth
Foxconn's Vice President, James Wu, highlighted the company's dominance in the AI server market. He indicated that Foxconn's capacity and technological prowess are formidable, making it difficult for competitors to challenge its position.
Foxconn anticipates the demand for AI servers to continue driving growth into the fourth quarter. The development schedule for Nvidia's GB200 chip is on track, with product deliveries expected to start in the fourth quarter, escalating in early 2025. If these plans proceed as expected, the AI server segment could surpass initial performance estimates.
Expansion into Electric Vehicles
In addition to AI servers, Foxconn is aiming to replicate its success in manufacturing iPhones in the electric vehicle sector. The company is in discussions with two traditional Japanese car manufacturers, with plans to finalize these talks within the year.
James Wu urged observers to "rub your eyes and wait," suggesting significant developments in their EV endeavors. This diversification indicates Foxconn's strategic approach to expanding its business footprint beyond traditional electronics.
Smartphone and Consumer Electronics Outlook
While Foxconn's smartphone business remains "flattish" due to a higher base last year, the outlook for the latter half of this year appears more promising. The company projects significant revenue growth in the third quarter compared to the previous year, despite a flat performance in smart consumer electronics, including smartphones.
Foxconn expects its operations to accelerate in the second half, aligning with the typical release of new electronics products by major vendors like Apple ahead of the holiday season. KGI Securities has adjusted its sales forecast for Foxconn, citing strong demand for new iPhones and AI servers as potential growth drivers for the latter half of the year.
Market Reaction
Following these announcements, Foxconn's shares experienced a 2.5% increase, reflecting investor confidence in the company's strategic direction and growth potential. The consistent rise in profits and planned expansion into emerging markets like AI servers and electric vehicles underscores Foxconn's adaptability and forward-thinking approach to business development.
