Foxconn Q2 Profit Surges 27% as Server Earnings Surpass iPhone Assembly

TradingKey - Foxconn (also known as Hon Hai Precision Industry), the world's largest electronics contract manufacturer, released its second-quarter earnings report on August 14, revealing a 27% year-over-year rise in profit that exceeded expectations. For the first time, quarterly revenue from its cloud computing and networking business, which includes AI servers, surpassed its smart consumer electronics segment, becoming the primary revenue source.

The report indicated that Foxconn's Q2 profit reached NT$44.4 billion, exceeding the anticipated range of NT$36.14-38.8 billion. Revenue grew by 16% year-over-year to NT$1.79 trillion, marking a record high. Moreover, the company anticipates that Q3 revenue from AI servers will surge by over 170%, significantly boosting overall revenue.

Foxconn's gains in the AI server sector are directly linked to the ongoing data center construction boom. As Nvidia's largest AI server manufacturer, Foxconn expanded its server manufacturing operations in response to the soaring demand for Nvidia AI chips.

In March, Bloomberg reported that Foxconn invested $900 million to build the world's largest AI server assembly plant in Jalisco, Mexico. This facility will use Nvidia GB200 AI chips and is expected to be completed within a year.

Last month, Foxconn announced plans to acquire a stake in TECO Electric & Machinery Co. to accelerate its role as a key player in the AI data center construction field. Both parties stated that their business target regions include Taiwan, other parts of Asia, the Middle East, and the United States. They also plan to enhance local manufacturing in the U.S. and reshape the global supply chain. Their first collaborative project could potentially be the AI infrastructure initiative, The Stargate Project.

Kathy Yang, Foxconn's rotating CEO, noted, "AI has been the main growth driver so far this year." On August 14, the company announced that it would increase capital expenditures by at least 20% to enhance server production capacity at its Texas and Wisconsin plants.

Foxconn's strategic shift towards AI server manufacturing, despite being a major player in contract manufacturing and iPhone assembly, is a response to weakened consumer electronics demand due to macroeconomic factors.

Additionally, company executives emphasized the need to closely monitor the impact of tariffs and exchange rate fluctuations. In May, Foxconn lowered its full-year revenue forecast, citing potential impacts from tariff disputes. Taiwan-U.S. tariffs are still under negotiation, with the U.S. currently imposing a 20% duty on Taiwanese imports. President Trump had announced plans for a 100% tariff on semiconductor imports but promised exemptions for companies relocating production to the U.S.

On the currency front, the New Taiwan dollar has appreciated over 10% against the U.S. dollar this year. According to company executives, every NT$1 appreciation against the dollar could reduce Foxconn's revenue by about 3%.

Foxconn's stock on the Taiwan Stock Exchange (2317) has risen 9.32% year-to-date, while its ADR (HNHPF) have climbed 20.64%, both outperforming the broader market. Ahead of Thursday's U.S. market opening, it sees a slight uptick in its stock.