Market Analysis

A profit ahead of estimates is Foxconn, an Apple supplier riding the AI surge

Amos Simanungkalit · 14 Aug6.6K Views

Apple supplier Foxconn reported a 6% increase in quarterly net profit on Wednesday, surpassing expectations. The growth was attributed to a surge in demand for AI servers, and the company reaffirmed its forecast for significant full-year revenue growth.

As the world’s largest contract electronics manufacturer, Foxconn anticipates continued strong demand for AI servers will drive growth into the fourth quarter. The company revealed that Nvidia's GB200 AI semiconductor chip development is on track, with initial deliveries scheduled for the fourth quarter and higher volumes expected in early 2025.

Foxconn's Vice President and Spokesman, James Wu, highlighted the company's dominant position in the AI server market, noting that it holds over 40% of the global market share. Wu emphasized that Foxconn's capacity and technology in this sector are likely to remain unmatched by competitors in the near term.

For the April-June quarter, Foxconn's net profit rose to T$35.05 billion ($1.09 billion), up from T$33 billion in the same period last year, surpassing analysts’ average estimate of T$34.29 billion. This marks the fourth consecutive quarter of profit growth for the company.

AI servers accounted for over 40% of Foxconn’s server business in the second quarter. The company forecasts that AI servers will soon become a major revenue driver, potentially reaching a trillion-dollar milestone in Taiwan dollar terms.

Foxconn is also working to replicate its success in iPhone manufacturing with the electric vehicle (EV) sector. The company is in talks with two Japanese automakers, aiming to finalize agreements by the end of the year.

Regarding its smartphone business, Foxconn expects a flat performance due to a higher base in the first half of the previous year but anticipates a better outlook for the second half of this year compared to 2023.

The company projects significant revenue growth for the third quarter, although revenue from smart consumer electronics, including smartphones, is expected to remain flat. Foxconn's operations are expected to pick up in the latter half of the year, as electronics vendors, including Apple, typically release new products before the holiday season.

Ahead of the earnings announcement, KGI Securities had already revised its sales forecast for Foxconn upwards, driven by strong demand for new iPhones and AI servers. Foxconn's shares closed up 2.5% in anticipation of the results.