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Hon Hai Precision Industry Co., also known as Foxconn, reported a stronger-than-expected 15% revenue growth, driven by sustained demand for AI infrastructure, particularly from its role as a server assembly partner to Nvidia Corp.
The company generated NT$2.13 trillion ($64.6 billion) in revenue over the past three months, with December revenue soaring 42%. This performance exceeded analyst expectations, and Foxconn forecasted significant sales growth for the first quarter, causing its shares to rise by up to 3.6% in Taipei, marking its largest intraday gain in two weeks.
Hon Hai and other Taiwanese AI hardware suppliers have benefited from significant investments in servers for data centers by major U.S. tech firms such as Alphabet Inc. and Microsoft Corp. However, investor concerns persist about the lack of a clear, compelling use case for AI, raising questions about the sustainability of this growth.
Goldman Sachs analysts raised their 2024 earnings and revenue estimates by 1%, citing stronger-than-expected December revenue and an anticipated increase in AI server sales. They also noted the positive outlook for cloud and server demand, particularly for AI-driven servers and networking equipment.
Hon Hai anticipates that its cloud business, which includes AI servers, will generate revenue on par with its iPhone business by 2025. However, Citi analyst Carrie Liu cautioned that the company's first-quarter outlook might fall short of market expectations, which could temporarily weigh on its stock.
AI growth is a key part of Hon Hai's strategy to diversify beyond its reliance on Apple, which has historically accounted for more than half of its sales.
The company is also working to break into the electric vehicle market, but its efforts have yet to yield significant financial impact. Foxconn has been in talks with Renault SA about a partnership with Nissan, which Renault owns a stake in, but this initiative is currently paused as Nissan and Honda explore a potential merger.\
Paraphrasing text from "Bloomberg" all rights reserved by the original author