Foxconn Stock: Nvidia Partnership Fuels Record Quarter

TLDR

• Foxconn reported Q3 profit of $1.89 billion, up 17% year-over-year, beating analyst forecasts by $330 million.
• AI server manufacturing now generates 42% of total revenue, overtaking iPhone assembly for the second quarter in a row.
• The company has secured $31 billion in total AI server revenue and expects continued growth through Q4.
• New factories in Mexico and Texas will produce AI servers for Nvidia as part of geographic expansion.
• Recent partnerships with Nvidia, Stellantis, Uber, and Mitsubishi Electric focus on autonomous vehicles and AI data centers.

Foxconn posted third-quarter profit of $1.89 billion on Wednesday. The 17% year-over-year increase crushed Wall Street estimates.

Analysts had expected profit around $1.56 billion. The company beat that forecast by roughly $330 million.

Revenue climbed 11% to $63.5 billion for the July to September period. The cloud and networking division led the gains.

AI servers have become Foxconn’s biggest revenue source. They now represent 42% of the company’s total sales.

This is the second consecutive quarter where AI servers outpaced smart consumer electronics. The electronics category includes iPhone manufacturing, historically Foxconn’s bread and butter.

The company has racked up $31 billion in AI server revenue. Major clients include Amazon and Nvidia.

Foxconn’s chairman met with OpenAI’s CEO in October. While no deal was announced, the stock jumped to a record high after the meeting.

New Manufacturing Facilities

Foxconn is constructing factories in Mexico and Texas dedicated to AI server production. These plants will supply Nvidia with server hardware.

The geographic spread aims to reduce delivery times and production risks. Most iPhone assembly still occurs in China, but Indian facilities now produce the bulk of iPhones bound for U.S. markets.

Strategic Partnerships

The company joined forces with Nvidia, Stellantis, and Uber to develop Level 4 autonomous vehicles. These cars operate without a human safety driver present.

A November 6 agreement with Mitsubishi Electric established a joint venture for AI data center solutions. The partnership targets energy-efficient systems for global deployment.

Both companies will pool technological resources to explore new business opportunities. The focus extends beyond data centers to other collaborative solutions.

Ivan Lam from Counterpoint Research called Foxconn’s approach a “follow the cash” strategy. The company is letting go of some consumer electronics work to chase higher-margin server contracts.

Lam noted the shift is “clearly paying off” despite the trade-offs in traditional business lines.

Management expects second-half operations to show continuous quarterly growth. AI server shipments and information technology product demand are the primary drivers.

The company warned about global economic uncertainty and currency fluctuations. These factors will require ongoing attention through the remainder of the year.

Fourth-quarter results should stay strong according to Lam. Component pricing and logistics issues could squeeze margins, but overall trends remain positive.

Foxconn sold an Ohio car plant in August for $375 million. The company had bought the facility in 2022 for electric vehicle production but shifted priorities.

HNHPF stock dropped 0.95% to $15.98 on Tuesday. Analysts give the stock a Moderate Buy rating with a $20 average price target, suggesting 25% upside potential.

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